VAT Registration in Portugal
VAT Registration in PortugalUpdated on Tuesday 28th April 2020
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The Value Added Tax (VAT) is a type of indirect tax levied in Portugal on the supply of goods and services. The implementation of 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 who are interested in doing business in one of Portugal’s largest 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 the provision of services, goods and also on imports. A standard rate of 23% applies, together with an intermediate rate of 13% and a reduced one 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 that are providing services in the country but are unable to register for a Portuguese VAT number. You can talk to an expert in tax laws, like one of our lawyers in Portugal, to find out 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 and it is imposed on companies having import and export activities, supply and install services, organizing live events, selling goods to EU countries, internet retailing and many more. The company’s documents are needed for the VAT registration in Portugal, and the entire process takes around 14 days, depending on the entitled authorities and if the documents are properly drafted. It is important 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 set up their companies in Portugal.
There are cases of companies that are not registered for VAT in Portugal but, in this situation, such companies sell and also deliver products from another member state to clients and/or firms. If the value of these sales surpasses a threshold of EUR 35,000 it is compulsory to register for VAT in Portugal. Make sure you understand all the conditions of VAT registration in Portugal and request professional help from our lawyers in Portugal. Also, the following example regards the 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 organize conferences, events or anything related have the obligation of registering the firm for VAT;
- companies that deal with supply and install services for more than just a year are subject to VAT.
VAT returns in Portugal
Companies that are subject to VAT in Portugal need to submit regular returns with information about the taxable sales and costs. If the turnover is equal or higher than EUR 650,000, the VAT returns are submitted on a monthly basis, as stated by the VAT Directive and Articles 170-171. Some companies might need to submit the Portuguese Intrastat return which is a document that comprises additional statistical information. Non-EU companies submitting VAT refunds must offer details of each invoice connected to VAT, the summary of the refund request and claimant details. Extra details in this matter and all the legal aspects can be offered by our lawyers in Portugal.
Who must register for VAT in Portugal?
Any company from abroad looking for a business in Portugal must register for VAT purposes as soon as the firm is incorporated in the country. This isn’t a difficult 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, and install, events and warehouse owners must pay attention to the 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 the 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 the Portuguese laws since this tax was applied 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 it is applicable to the profits of the companies established in Portugal, with the exception 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 important 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, about how to register a trademark or about how you can obtain the EORI number.
Double tax treaties in Portugal
The avoidance of 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 signed such a treaty. Also, a credit is applicable to revenues levied in both Portugal and the signatory country. You should talk to one of our specialists and ask for complete information about the taxes you need to pay in Portugal and about 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 the most common business structure in this country. 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 comprising information about the owners, the name of the company, the activities, the name of the company representative, the general rules, the date of formation, the voting rights and the ways in which a company can be closed. The registration for tax purposes and social contributions is mandatory right 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 minimization tools in Portugal
Avoiding the overpayment of fees in a company can be done with the help of a proper tax plan which can be created by an experienced accountant or advisor. In this sense, a tax minimization tool can be a suitable option, where all the taxes in the firm can be properly verified. Paying in advance is a useful tool for those wanting to cut the fees in a serious percent and that because creditors can offer different advantages. Some entrepreneurs might be interested in opening charities in Portugal in order to benefit from several tax deductions. Office supply, bonuses, and gifts can be used as tax minimization 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 important to pay attention to the tax minimization methods available for your company and solicit the assistance of a specialized consultant in this area.
Why make investments in Portugal
Portugal benefits from an excellent geographic location in the western part of Europe, having complete connections with all continents in terms of business and trading. Import and export companies, touristic agencies, agriculture companies, fishery businesses, IT enterprises and energy companies are only a few business examples that already thrive in Portugal. International investors have numerous business opportunities in Portugal and 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 main investors in Portugal and below you can find interesting 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 for 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 provided 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 the business income, the passive income, and any capital gains. Resident companies are taxed on their worldwide profits whereas non-resident companies 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 both from a foreign source and from 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.