English speaking accountants in Portugal

Value Added Tax (IVA)

Value Added Tax (IVA)

 

In Portugal, Value Added Tax (IVA) is generally charged on the supply of goods and services made by businesses and other taxable persons in the course of their economic activities. VAT is also applicable to imports and certain intra-EU acquisitions.

The standard rates of VAT in mainland Portugal are:

• 23% – standard rate;
• 13% – intermediate rate; and
• 6% – reduced rate.

 

The intermediate and reduced rates apply only to the specific goods and services listed in the Portuguese VAT legislation.

In the Autonomous Region of Madeira, the rates are:

• 22% – standard rate;
• 12% – intermediate rate; and
• 4% – reduced rate.

 

In the Autonomous Region of the Azores, the rates are:

• 16% – standard rate;
• 9% – intermediate rate; and
• 4% – reduced rate.

 

The reduced VAT rate in Madeira was reduced from 5% to 4% with effect from 1 October 2024 and therefore the 4% rate applies in 2026.

 

VAT Returns

 

VAT returns are generally submitted on a monthly or quarterly basis, depending on the taxpayer's turnover.

Where the taxpayer's annual turnover in the preceding calendar year was €650,000 or more, the taxpayer is required to submit VAT returns on a monthly basis.

Where the turnover was less than €650,000, the taxpayer will generally submit VAT returns quarterly. A taxpayer in the quarterly regime may elect to submit monthly returns.

For taxpayers in the monthly regime, the VAT return must generally be submitted by the 20th day of the second month following the month to which the transactions relate.

For taxpayers in the quarterly regime, the VAT return must generally be submitted by the 20th day of the second month following the end of the relevant quarter.

The deadline for the June monthly return and the second-quarter return is extended to 20 September.

 

Payment of VAT

Any VAT payable must generally be paid by the 25th day of the second month following the relevant month or quarter.

Consequently, the payment deadline is normally five days after the deadline for submitting the corresponding VAT return. The deadline for VAT relating to June and the second quarter is extended to 25 September.

 

Small Business VAT Exemption

A special VAT exemption is available to qualifying small businesses under Article 53 of the Portuguese VAT Code.

From 2025 onwards, the annual turnover threshold is €15,000. Accordingly, a taxpayer established or domiciled in Portugal may generally qualify for the exemption where its annual turnover in Portugal did not exceed €15,000 in the preceding calendar year and the other statutory conditions are satisfied.

This replaces the previous €10,000 threshold referred to in the original version.

Where a business benefiting from the exemption exceeds €15,000 during the current calendar year by more than 25%, i.e. exceeds €18,750, it is immediately excluded from the exemption regime and must begin charging VAT from the transaction which causes the €18,750 threshold to be exceeded. The appropriate change-of-activity declaration must also be submitted within the prescribed period.