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VAT in Portugal – The Lowdown

By April 25, 2022Blog, expat business, UK, US
VAT in Portugal: What you need to know

If you’re living in Portugal, you will need to deal with the tax authority at some point or another.

The name of this organisation may seem strange as it doesn’t follow the format of most government agencies. It’s called the Serviço de Finanças and its initials are VAT, which stands for Imposto sobre o Valor Acrescentado, this translates to Value Added Tax (VAT).

Here’s what you need to know about VAT in Portugal…

 

What is value added tax (VAT)?

Value added tax is a tax on consumption of goods and services. It is typically an indirect tax; meaning that it is collected from companies and passed along as part of their prices for consumers to pay.

The purpose of value added tax is to ensure that all parties involved in providing a good or service are taxed for its final sale price.

 

How is VAT in Portugal calculated?

VAT in Portugal is calculated on the sum of the final cost (or Gross Selling Price – GSP) plus the shipping charges. A value-added tax is a consumption tax which is levied not only on the product, but also on any products used in its manufacture or promotion.

Are there any exemptions?

Under current law, there are only three exemptions to VAT in Portugal. They include:

  • Provision of services by health professionals
  • Provision of services by kindergartens, free-time activity centres, residential homes and day care centres for the elderly
  • Supply of services by non-profit-making organisations operating establishments or facilities for artistic, sporting or entertainment activities

 

Other things you should know about VAT in Portugal

To start trading in Portugal you need to register with both Portuguese Customs and Excise as well as with Social Security. Before starting work you will need to submit a declaration of commencement of activity. This is declared and paid by filling out an Imposto do Selo form at a post office (caixas gerais).

Your fiscal representative can assist you with these registrations.

Every trader needs to submit a monthly declaration for their taxes, which include but are not limited to:

  • Income tax (IRC)
  • Social security contributions (SNS)
  • Universal social contribution (CSU)

If you are part of a business partnership you will also have to declare your capital gains and losses.

 

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.

Get in touch with us today to find out more, or to make use of our services.

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