Indirect tax ebook - Portugal

Other local requirements 

Recovery of input tax

Recovery of tax is based on holding a valid VAT invoice.

The tax shown on the invoice is recovered in the VAT period that it is received and accounted for.

If an invoice is not received in time it can be included in a later return period, until a maximum period of 2 years.

Restrictions
VAT is not recoverable when incurred on: 

• Acquisition or rental of cars used for business purposes and related costs;
• Travel, accommodation and entertainment costs (unless these are in respect of organization of congresses, fairs and exhibitions).
  
  

Partial exemption
Businesses that carry out only exempt operations cannot recover any VAT incurred. If a business makes both taxable and exempt operations it is required to calculate how much VAT it can recover. The method used to calculate the restriction is known as a partial exemption method (“pro-rata”). A different method (direct allocation) may also be used upon agreement of the VAT authorities.

Penalties
Penalties for tax not paid on time or recovered in excess, if deemed to be by negligence, may arise between 10% and 50% of the tax due when the taxpayer is an individual or between 20% and 50% of the tax due if the taxpayer is a company. 

Import of goods
Goods imported into Portugal will require VAT to be paid by the importer at the time they are cleared through Customs.

VAT charged at import can only be recovered where an import certificate is held.

If the goods are entered under a suspension regime VAT is due at the time they enter for free circulation.

Bad debts
Entrepreneurs cannot normally recover VAT on invoices remaining unpaid, unless legal actions are taken to claim payments or when the customer has failed to pay by reason of bankruptcy or insolvency.

Other issues

Services/Supply and installation of goods
Foreign businesses supplying and installing goods in Portugal are liable to register for VAT unless reverse charge is applied by the acquirer.

For EU traders, registration can be avoided if the customer is an entrepreneur and pays the Portuguese VAT.

Services related to land
Services connected with real estate are deemed to be supplied at the place where the property is situated. The reverse charge system may be applied.

Consignment/call-off stock
EU-businesses that own stock in Portugal are required to register and account for Portuguese VAT on sales.

• Introduction
• Scope
• Registration
• Tax rates
• Reporting & filing
• General tax application/Time of supply
• Other local requirements