In Portugal, companies are responsible for paying VAT and making any applicable declarations to the Portuguese Tax Authority (Autoridade Tributária). If you run or plan on starting a business in Portugal, you’ll need to understand how the VAT system works to ensure you remain compliant with tax laws.
This guide covers everything from VAT rates to consequences of not paying VAT in Portugal.
What is VAT?
Value Added Tax (VAT) is an indirect tax that is applied to goods and services at every point of sale. VAT is collected by the seller and remitted to the government. In Portugal, companies that make taxable supplies must register for VAT with the Portuguese Tax Authority. Also, companies should charge the applicable rate when selling their products and services. Companies must declare their turnover to the Portuguese Tax Authority. Plus they must pay any due VAT quarterly or monthly; depending on their status.
In addition, companies must issue invoices or receipts to their customers for all taxable transactions. As well as keep detailed records of all their income and expenditure for at least 10 years. It is also important to be aware of any new VAT regulations and any changes in rates that may come into effect. Plus, VAT can be reclaimed if expenses relating to the activity are presented.
In summary, companies in Portugal must ensure they are registered for VAT and comply with all relevant regulations to avoid any penalties or fines. Staying up-to-date with any changes in rates or rules, and keeping detailed records ensures errors don’t occur. By doing this, companies can stay on top of paying their VAT in Portugal.
What are the rates in Portugal?
In Portugal, the value added tax (VAT) is administered by the Portuguese Tax Authority (PTA). The standard VAT rate in Portugal is 23%. Although, some products and services can be taxed at reduced or zero rates. The standard VAT rate applies to most goods and services sold in Portugal. In certain circumstances, some goods and services can be subject to a VAT rate of 13%, reduced VAT rate of 6% or even excempt from VAT. This includes some food items, books, magazines, newspapers, tickets to cultural events and health products.
VAT rates may also differ depending on the location of the sale. For instance, sales made within the European Union (EU) are subject to a different set of rules to those outside of the EU. Furthermore, intra-EU purchases may be subjected to a different rate than those applied to domestic purchases.
It’s important for businesses operating in Portugal to stay on top of their VAT obligations. Not only can it lead to penalties or fines if non-compliant; but businesses may also lose out on potential revenue by failing to properly collect taxes on sales. We have expert accountants in Portugal who can help you understand VAT. Schedule a free consultation with our team to talk about it.
What are the rules for businesses?
Businesses in Portugal are subject to Value Added Tax (VAT). The current, standard, VAT rate is 23%. It is important for businesses to understand the rules and regulations around VAT to ensure they remain compliant. Businesses must register with the Portuguese tax authority and depending on their situation they might be subjected to VAT. Businesses that do not comply with these rules may face financial penalties.
The most common VAT rules for businesses in Portugal include:
- All businesses that are registered for VAT are required to charge customers the applicable VAT on goods and services provided.
- Businesses must report their turnover on a regular basis and pay any VAT due within specified deadlines.
- Businesses must provide customers with a valid receipt for all goods and services purchased. This receipt must include all relevant information such: as the date of purchase, the amount of money paid, the type and amount of goods purchased, and the amount and rate of VAT charged, the name and VAT number of the client and supplier; including addresses of both entities.
- Businesses must keep accurate and up-to-date records of all transactions.
Fortunately, all businesses in Portugal must have a certified accountant anyway, so you won’t be alone trying to figure out the rules for VAT. Make use of your accountant and their knowledge to avoid any fines or other penalties that could arise from non-compliance. Get in touch with our team if you are just starting out in Portugal and need an accountant to help manage your accounts.
What are the consequences of not paying VAT?
For businesses operating in Portugal, Value-Added Tax (VAT) is an important factor to consider. Failure to pay the necessary VAT amounts can lead to serious penalties and fines. If you do not pay the necessary VAT, the Portuguese Tax Authority (Autoridade Tributária e Aduaneira) will issue you a penalty, plus any interest accrued since the payment was due. This penalty can be up to 165,000 euros. Furthermore, the authorities may also choose to impose additional fines and sanctions if it deems appropriate.
In addition, the ATA can take legal action if it suspects that non-payment of VAT is intentional or deliberate. This can include closing your company’s business operations and/or shutting down any accounts until the taxes are paid in full. This type of penalty is known as ‘sanctioning’ and can result in your company facing hefty fines.
Fortunately, there are ways to avoid the consequences of not paying VAT in Portugal. Firstly, you should ensure that you have accurate records of all sales and invoices so that you can calculate and pay the correct amounts of VAT on time. You should also consider utilising the knowledge of your accountant to ensure that you are compliant with Portuguese tax law. Finally, if you do find yourself unable to pay your VAT on time, contact the ATA immediately to arrange an alternative payment plan. This could help you avoid penalties and other legal actions.
By staying on top of your VAT obligations and being proactive in seeking help when needed, you can ensure that your business remains compliant with Portuguese tax law and does not fall foul of any penalties for late or non-payment.
How can you stay on top of your VAT obligations?
To ensure that your business meets its obligations, you need to hire an expert accountant in Portugal; it’s mandatory. Here at RHJ Accountants, we can help you manage your VAT payments and ensure you are compliant with the applicable rules.
When you work with us, we’ll provide you with a personal accountant who will manage all aspects of your VAT payments. Your accountant will be responsible for filing all necessary returns and submitting payment on time. They will also be able to help answer any questions you may have and provide guidance on how to best manage your VAT obligations.
It’s important to make sure our accountants have all the information they need to file your returns. This includes providing accurate and up-to-date details about your business activities and sales. If you don’t provide the necessary information, it could lead to fines or other penalties from the Portuguese tax authorities. So make sure that our accountants can easily contact you for extra information or clarification of anything if need be.
By hiring an expert accountant in Portugal, you can rest assured that your VAT obligations will be taken care of quickly and efficiently. RHJ Accountants will provide you with the professional support you need to remain compliant and avoid any unnecessary penalties. Contact us today to find out more about how we can help you stay on top of your VAT obligations.
How RHJ Accountants can help
We recognise more than ever that individuals and businesses from the UK and other countries may be globally mobile. We aim to make you aware of the tax-efficient opportunities, available tax relief and structure finances for life at home and abroad.
Our international team of specialists operate from offices in the UK and Portugal. We work together synergistically to provide tax efficient solutions to our clients to help them grow their business whilst keeping tax liabilities to a minimum.