VAT in Portugal

The Value Added Tax (VAT) is a type of indirect tax levied in Portugal on the supply of goods and services. Implementing this tax is based on several EU directives, and Portuguese companies must comply with the taxation regulations enforced in the country. Both a standard rate and a reduced VAT rate are applicable in Portugal. Foreign investors interested in doing business in one of Portugal’s most significant cities can request the services of a law firm in Portugal and those provided by local tax experts.

The VAT rate in Portugal

The value-added tax is imposed on providing services, goods and imports. A standard rate of 23% applies, with an intermediate rate of 13% and a reduced rate of 6%. Different rates apply in the autonomous regions of Portugal: 22%, 12% and a lower rate of 5% in Madeira and rates of 18%, 9% and 4% in the Azores.

Service providers and suppliers are required to register for VAT purposes in Portugal. Monthly returns are required when the annual turnover exceeds a certain amount, and the VAT returns have a filing deadline. Monthly and quarterly VAT returns are applicable in Portugal.

Certain VAT refunds may apply for non-resident companies providing services in the country but cannot register for a Portuguese VAT number. You can talk to an expert in tax laws, like one of our lawyers in Portugal, to learn more about the requirements for foreign companies operating in the country.

How do I register for VAT in Portugal?

The registration for VAT in Portugal is not subject to a specific threshold. It is imposed on companies having import and export activities, supplying and installing services, organizing live events, selling goods to EU countries, internet retailing and many more. The company’s documents are needed for  VAT registration in Portugal, and the entire process takes around 14 days, depending on the entitled authorities and if the documents are correctly drafted. It is essential to know that non-EU companies must have a VAT fiscal representative in charge of tax registration. Such a condition does not apply to companies with establishments and origins in EU countries. The legal aspects of VAT registration in Portugal can be explained by one of our Portuguese lawyers, who can also assist investors in setting up their companies in Portugal.

Some companies are not registered for VAT in Portugal, but in this situation, such companies sell and deliver products from another member state to clients and firms. If the value of these sales surpasses a threshold of EUR 35,000, it is compulsory to register for VAT in Portugal. Ensure you understand all the conditions of VAT registration in Portugal and request professional help from our lawyers in Portugal. Also, the following example regards  VAT registration in Portugal:

• companies selling products to EU countries from Portugal must register for VAT;
• the import of products into Portugal is subject to VAT;
• internet retailing or online product sales of companies with establishments in Portugal must register for VAT;
• companies that organise conferences, events or anything related have the obligation of registering the firm for VAT;
• companies that deal with supply and install services for over a year are subject to VAT.

VAT returns in Portugal

Companies subject to VAT in Portugal must submit regular returns with information about the taxable sales and costs. If the turnover equals or exceeds EUR 650,000, the VAT returns are offered monthly, as stated by the VAT Directive and Articles 170-171. Some companies might need to submit the Portuguese Intrastat return, a document comprising additional statistical information. Non-EU companies presenting VAT refunds must offer details of each invoice connected to VAT, the summary of the refund request and claimant details. Our lawyers in Portugal can provide extra information on this matter and all the legal aspects.

Who must register for VAT in Portugal?

Any company from abroad looking for a business in Portugal must register for VAT as soon as the firm is incorporated. This isn’t a complex process, but instead of facing problems with the authorities, it is best to have the support of a local team of lawyers in Portugal. Companies dealing with trading activities, supply, installation, events and warehouse owners must pay attention to a VAT registration in Portugal. If you are looking for support in terms of VAT registration, you can rely on the assistance offered by our team of advisors.

VAT implementation in Portugal

Portugal implemented the VAT in 1986 as an alternative to the transaction tax code imposed for goods and services meant for sale purposes. This tax was also applied in Madeira and Azores, the autonomous regions of Portugal. All the EU directives regarding the VAT have been implemented in Portuguese laws since this tax was used in Portugal. The scope of the VAT in Portugal involves varied transactions of companies in this country, and the tax applies to the supplies of goods and services, intra-community acquisitions of goods, the imports of goods, etc. 

Short details about the corporate tax in Portugal

The standard corporate tax rate in Portugal is set at 21% and applies to the profits of the companies established in Portugal, except that small firms are subject to a different tax regime. For example, for the first Eur 15,000 taxable income, a corporate tax rate of 21% applies. It is essential to know the rules referring to the taxation regime in Portugal and to ask for complete legal advice if you intend to start a business in Portugal. In this matter, one of our Portuguese attorneys can stand at your disposal with assistance and legal support. They can also give you information and guidance about the incorporation process of a company, how to register a trademark or how you can obtain the EORI number.

Double tax treaties in Portugal

Avoiding double taxation and fiscal evasion is made with the help of the double taxation agreements signed by Portugal with countries worldwide. Algeria, Barbados, Austria, Brazil, Bulgaria, Belgium, Chile, Canada, Colombia, Cyprus, the Czech Republic, Cuba, China, Cape Verde, Denmark, Estonia, France, Finland, Greece, Hungary, Hong Kong, Iceland, Israel, Ireland, Italy, Guinea-Bissau, Lithuania, Luxembourg, Latvia, Kuwait, Malta, Macau, Morocco, Mozambique, Mexico, Norway, the Netherlands, Pakistan, Panama, Poland, Peru, Russia, Romania, Uruguay, Ukraine, Slovakia, Slovenia, Sweden Singapore, Switzerland, Venezuela, Turkey, and Tunisia are only a few of the countries that signed a double taxation agreement with Portugal. As for the provisions involved, we mention that the incomes are levied only in one of the states that marked such a treaty. Also, a credit applies to revenues assessed in both Portugal and the signatory country. You should talk to one of our specialists and ask for complete information about the taxes you must pay in Portugal and the double taxation agreements signed by this country.  

Registration of a company in Portugal

The limited liability company, or LDA as it is known in Portugal, is this country's most common business structure. Such an entity can be established by at least two partners or shareholders and a minimum capital of EUR 5,000 for a private LDA in Portugal. The minimum share capital of EUR 50,000 is needed for opening a public limited liability company in Portugal. The Articles of Incorporation comprise information about the owners, the company's name, the activities, the company representative's name, the general rules, the date of formation, the voting rights and how a company can be closed. Registration for tax purposes and social contributions is mandatory after the company is registered in Portugal. One of our lawyers in Portugal can give complete assistance and support for foreign investors interested in opening companies in this country, by providing legal advice.

Tax minimisation tools in Portugal

Avoiding the overpayment of fees in a company can be done with the help of a proper tax plan created by an experienced accountant or advisor. In this sense, a tax minimisation tool can be a suitable option, where all the taxes in the firm can be adequately verified. Paying in advance is a valuable tool for those wanting to cut fees by a serious per cent, and that is because creditors can offer different advantages. Some entrepreneurs might be interested in opening charities in Portugal to benefit from several tax deductions. Office supplies, bonuses, and gifts can be used as tax minimisation tools for companies in Portugal. The amount of money saved can be used by business persons for future investments in the company or any other project. It is essential to pay attention to the tax minimisation methods available for your company and solicit the assistance of a specialised consultant in this area.

Why make investments in Portugal

Portugal benefits from an excellent geographic location in Western Europe, having complete connections with all continents regarding business and trading. Import and export companies, tourist agencies, agriculture, fishery, IT, and energy companies are only a few business examples that already thrive in Portugal. International investors have numerous business opportunities in Portugal. They can benefit from an appealing and solid business climate encouraged by the Portuguese government interested in attracting more investments in all sectors of interest and placing FDI as a top priority. The Netherlands, Spain, and Luxembourg are the leading investors in Portugal, and below you can find exciting information and facts about the investment direction in Portugal:

• Around USD 4.9 billion was the FDI flow in Portugal in 2017;
• USD 135.8 billion was the total FDI stock registered in Portugal last year;
• Around 24.6% of the total FDI in Portugal came from the Netherlands;
• the technology-driven investments are sustained by several free trade zones in Portugal;
• the Golden Visa Program in Portugal grants citizenship to entrepreneurs making investments of at least EUR 250,000;
• Portugal ranks 34th out of 190 economies in the world, as stated by the "2019 Doing Business" report by World Bank.

It is needed and recommended to have the legal support of an advisor in a matter of business and taxation.

Taxation in Portugal 

Companies in Portugal are taxed on their profits which include business income, passive income, and any capital gains. Resident companies are taxed on their worldwide profits, whereas non-resident companies are only on their profits derived from the country. The corporate income tax in Portugal is 21%, and a reduced rate applies for the first 15,000 EUR for small and medium-sized companies. Apart from VAT other taxes like e real property tax, the stamp duty, or the transfer tax apply to corporations. A withholding tax on dividends, interest, and royalties also applies. Portugal has more than 60 double tax treaties in force that allow for the avoidance of double taxation in case of companies or individuals that derive income from both a foreign source and a Portuguese one.

For more information about tax laws and various tax provisions, please contact our law firm in Portugal. One of our experts will be able to answer your questions.