Portugal – Comprehensive VAT Guide (2026)

Country Overview

Local VAT Term

VAT Rates in Portugal

• Madeira Super-Reduced Rate: The lowest VAT rate in Madeira was reduced from 5% to 4% as of 1 October 2024, aligning it with the Azores’ 4%. [taxsummaries.pwc.com]
• 2023–2024 Temporary 0% Foods: As noted, a temporary 0% VAT on essential food items was in place through 2023, which expired in early 2024.
• 2026 State Budget Measures: Beginning Jan 2026, the government will broaden the application of the 6% reduced rate to certain additional items. Notably, the processing of olives into olive oil will drop from 23% to 6% VAT, aligning it with the reduced rate already applicable to edible olive oil. Artwork sold by art galleries will also qualify for the 6% VAT rate (previously 23%), expanding the tax incentive beyond sales by artists themselves. Additionally, game meat (wild game) will be taxed at 6% instead of 23%, similar to other meats, from January 2026. Meanwhile, certain agricultural inputs (like fertilizers and animal feed for agricultural use) continue to enjoy a VAT exemption through the end of 2026, an extension of relief introduced in 2022. An ongoing VAT exemption on pet food purchased by animal welfare charities is also extended through 2026. These targeted changes reflect policy efforts to support specific sectors (agriculture, culture, social welfare) through the VAT system. No changes to the standard VAT rate are proposed, which remains at 23%. [vatcalc.com], [vatcalc.com] [vatcalc.com] [pwc.pt], [vatcalc.com]

VAT Number Format

Registration Requirements

VAT Grouping Rules

VAT Recovery for Foreign Businesses

• EU-based companies can use the EU 8th Directive refund procedure (also called the EU VAT refund system) by submitting an electronic claim through their home country’s tax portal. The claim for Portuguese VAT of a given calendar year must be submitted by September 30 of the following year. Minimum claim amounts apply: typically €400 for quarterly claims or €50 for annual claims. The Portuguese tax authority (AT) will process the claim and refund the VAT directly to the claimant if approved. [vatcalc.com], [vatcalc.com]
• Non-EU companies (e.g. businesses established in the US, Canada, etc.) can use the 13th Directive refund process. These businesses must send a paper application to the Portuguese tax authority by June 30 of the following year. Importantly, Portugal requires reciprocity for 13th Directive refunds – the claimant’s home country must allow Portuguese businesses to get VAT or similar tax refunds on their expenditures there. Portugal doesn’t have a blanket list of “approved” countries, but in practice has recognized reciprocity with countries like Switzerland and Liechtenstein. Applicants from other non-EU countries need a certificate from their tax authority stating that Portuguese businesses can claim refunds in that country. A fiscal representative in Portugal is mandatory for non-EU claimants under the 13th Directive. The refund claim must include original invoices and a certificate of business status from the home country tax authority. The Portuguese tax authorities aim to refund within six months of receiving a complete claim. (Notably, if a non-EU company has a permanent establishment in the EU, it might be eligible to use the 8th Directive procedure via an EU branch, otherwise the 13th Directive route applies.) [taxation-c….europa.eu] [taxation-c….europa.eu], [taxation-c….europa.eu]

Fiscal Representative Requirements

• EU-established businesses: If a company or sole trader is established in another EU member state, they may register for Portuguese VAT directly without a fiscal representative. EU businesses benefit from mutual assistance agreements, so appointing a local tax representative is not required for EU/EEA businesses (including those in Norway or Iceland, which have special agreements) when registering for VAT. The Portuguese tax authorities will correspond directly with the business or its chosen contact.
• Non-EU businesses: Any company established outside the EU must appoint a Portuguese fiscal representative to register for VAT in Portugal. The fiscal representative must be a person or entity domiciled in Portugal and themselves registered for VAT. The representative acts as the local liaison with the tax office and is jointly liable for the VAT obligations of the non-EU business. This means the representative can be held responsible for any unpaid VAT or penalties of the non-EU taxpayer, so typically professional firms (accounting/tax firms) serve in this role for a fee. Even businesses from countries with fiscal cooperation agreements (e.g. UK, after Brexit) are not exempt – Portugal has not waived the fiscal rep requirement for any non-EU countries, unlike some other EU jurisdictions. The only exception is if a non-EU company’s activities are exclusively in a VAT warehouse (bonded warehouse) in Portugal, in which case a fiscal rep may not be required until goods are removed for local sale. [vatcalc.com], [vatcalc.com] [vatcalc.com]
• Role of the Representative: The fiscal rep is responsible for ensuring the non-EU business’s compliance with Portuguese VAT law – this includes filing VAT returns and other declarations on time, paying VAT dues, maintaining VAT records, and acting as a contact point for audits or communication from the tax authority. The representative’s VAT number is often included on registration forms and sometimes on invoices (especially if they are handling the invoicing). [taxation-c….europa.eu], [taxation-c….europa.eu]

Currency and Foreign Exchange (FX) Rules

• Introduction of VAT: The current VAT system was introduced on 1 January 1986, replacing the former “Imposto de Transacções” (transactions tax). This coincided with Portugal’s accession to the EEC. Over the years, the law has been amended to stay aligned with EU changes (for example, adopting the 1993 single market rules, the 2010 “VAT package” changes for services, and the 2021 e-commerce package). [vatcalc.com]
• Secondary Legislation: Portugal also issues Decree-Laws and Ministerial Orders that provide more detailed rules and updates to the VAT system. For instance, Decree-Law 28/2019 introduced rules on invoice processing and archiving (mandating certified invoicing software and digital signatures), and Decree-Law 71/2013 established the Cash Accounting Scheme. Decree-Law 34/2025 (March 2025) notably amended the VAT Code to raise the cash accounting turnover threshold from €500,000 to €2,000,000. Annual state budget laws (Lei do Orçamento do Estado) often contain VAT amendments – e.g., the 2024 Budget Law authorized the 2026 VAT group regime and sector-specific rate changes. [pwc.pt] [taxsummaries.pwc.com]
• Interpretative Rulings: The Tax Authority (AT) and the Ministry of Finance periodically publish binding rulings (ofícios circulados) and guidance clarifying gray areas of VAT law, such as the application of exemptions or place-of-supply rules. Taxpayers can request private rulings on VAT matters for certainty in complex transactions.
• Other Relevant Laws: Portugal’s participation in EU-wide initiatives means that regulations like the OSS/IOSS rules and the Council Implementing Regulations on VAT are directly applicable. Additionally, administrative obligations (e.g. SAF-T requirements, invoicing rules) may be spelled out in separate legislation.

Tax Authorities

Scope of VAT

• Supplies of Goods: The sale or transfer of the right to dispose of tangible property is subject to VAT if the goods are located in Portugal and delivered to a customer in Portugal (or if dispatch or transport of the goods begins in Portugal when sold to another country). This includes local sales of goods and certain deemed supplies (for example, giving away business assets may be taxed if above certain low thresholds). Intra-Community acquisitions of goods (goods brought into Portugal from another EU member state by a VAT-registered business) are also taxed as goods supplies in Portugal, via the reverse charge mechanism. [taxsummaries.pwc.com] [pwc.pt]
• Supplies of Services: Any transaction that is not a good is a service for VAT. The general rule is B2B services are taxed where the customer is established, and B2C services are taxed where the supplier is established. However, many exceptions apply. Portugal follows the EU’s standard place-of-supply exceptions: e.g., services connected to immovable property (land/buildings) are taxed where the property is located (thus Portuguese VAT applies to services related to Portuguese land); passenger transport is taxed where the transport occurs (Portuguese VAT on the portion of travel within Portugal); cultural, educational, sporting, or entertainment events are taxed where the event takes place for ticket buyers; restaurant and catering services are taxed where they are performed (so meals served in Portugal have Portuguese VAT); and short-term vehicle hires are taxed where the vehicle is placed at the customer’s disposal (if in Portugal, then Portuguese VAT). [taxsummaries.pwc.com]
  Additionally, if certain services are performed in Portugal for a non-taxable customer, Portuguese VAT may apply: for example, transport of goods (not intra-EU transport) for a non-business customer is taxed by proportion in Portugal for distances on Portuguese soil. The same is true for services such as work on movable goods (repair or valuation of tangible items) carried out in Portugal for a private customer. Long-term hiring of means of transport to a non-business customer is taxed in Portugal if the customer is established here (even if the provider is foreign). [taxsummaries.pwc.com]
• Imports of Goods: Importing goods from outside the EU into Portugal is subject to VAT at the point of importation (customs clearance). The import VAT is levied by Portuguese Customs (also part of AT) at the same rates applicable to similar goods sold domestically. However, as discussed under Import VAT deferment (see Compliance and Deductions section), VAT-registered importers may postpone accounting for import VAT to their VAT return (subject to approval) instead of paying it in cash at the border. [avalara.com]
• Distance Sales to consumers: Before July 2021, if a foreign EU business sold goods online to Portuguese consumers and exceeded a yearly threshold (formerly €35,000), it had to register in Portugal and charge Portuguese VAT. Since 1 July 2021, that country-specific threshold has been abolished in favor of a €10,000 EU-wide threshold for all B2C distance sales of goods and TBE (telecom, broadcasting, electronic) services. Above this low threshold, foreign sellers are required to charge VAT in the customer’s country (Portugal) – typically done via the OSS central return. Effectively, Portugal now requires VAT on all distance sales of goods to Portuguese consumers from the first euro, unless the seller is small EU-wide (under €10k) or uses the OSS. Non-EU suppliers shipping goods to Portugal use the IOSS (for consignments ≤ €150) or else the buyer pays import VAT on delivery. [euvat.org] [taxdo.com]
• Other Taxable Activities: The scope of VAT also includes less common scenarios like self-supplies (when a business uses goods for itself that it would have taxed if sold) and certain transactions treated as supplies (such as moving one’s own goods into Portugal from another EU state triggers a deemed supply and acquisition for VAT). Generally, indemnities and pure compensation payments are outside the scope of VAT (as they are not consideration for a supply). Also outside the scope are transactions like wages, donations, and most grants/subsidies, as these are not payments for a specific good or service. [pwc.pt]

Time of Supply (Tax Point) Rules

• Goods (one-time supply): VAT is triggered when goods are delivered to the buyer or made available to them (i.e. when the customer gains the right to dispose of the goods). If goods are shipped, the tax point is when dispatch or transport begins in Portugal. For example, if a Portuguese company sells and ships machinery on March 10, 2026, that is the tax point for VAT. If an invoice is required, it must be issued no later than 5 business days after delivery, and VAT becomes chargeable by that deadline at the latest. (In practice, issuing the invoice on the day of supply locks in the tax point on that date; otherwise, the fifth working day after becomes the tax point even if no invoice yet.) [pwc.pt] [taxsummaries.pwc.com] [pwc.pt], [taxation-c….europa.eu]
• Services (one-time supply): VAT on services generally becomes chargeable when the service is completed or performed (the date of completion). For instance, a consulting service provided on April 15, 2026 has its tax point on that date (unless an invoice is issued or payment made earlier). As with goods, if an invoice is required for the service, the VAT becomes due no later than 5 business days after the service is rendered, even if the invoice is issued on that fifth day. If the customer pays in advance (either fully or part), any advance payments create a tax point at the date of payment to the extent of the amount paid. For example, a 50% deposit received before a service is completed triggers VAT on that deposit at payment time, with the rest due when the service is finished and invoiced. [pwc.pt] [taxation-c….europa.eu]
• Continuous supplies of services: For services rendered continuously over a period (e.g. long-term rentals, maintenance contracts, utilities), Portuguese law follows the EU rule: the service is deemed supplied at the end of each billing period or at least on a 12-month interval if no shorter billing periods are specified. This means if a service is provided without interruption for more than a year without interim billing, a tax point is forced at each 12-month anniversary. In practice, most continuous services (electricity, phone, leases, etc.) have monthly or quarterly billing, so VAT is due at each invoice interval. [taxation-c….europa.eu]
• Imports: The time of supply for imports of goods is when goods clear customs into free circulation in Portugal (the date of importation). At that point, import VAT is payable to Customs, unless the importer is approved for deferred accounting. Under the deferred import VAT payment scheme, an importer in Portugal can postpone the VAT to their periodic return (self-accounting via reverse charge) – in such case, the tax point remains the import date, but the VAT is declared on the return covering that period rather than paid immediately at customs. For example, goods imported on July 5, 2026 would have a tax point in July, meaning they’d be included in the July VAT return (filed by September 20) if deferred accounting is used. [avalara.com]
• Goods on approval/consignment: If goods are supplied on a sale-or-return basis (goods sent on approval or consignment stock in Portugal), the tax becomes due when the customer indicates acceptance/purchase of the goods. If the goods are not physically returned, there is a time limit of 12 months, after which the transfer is deemed a sale and VAT is chargeable at that 12-month point (from when the goods were first sent). This rule aligns with the EU “call-off stock” simplification introduced in 2020, which Portugal has implemented: under the call-off stock rules, a foreign supplier can bring goods into Portugal without immediate VAT if they register the movement, but if no actual sale occurs within 12 months, a deemed supply arises and VAT must be accounted for at that time. [vatcalc.com], [vatcalc.com]

VAT Invoicing Requirements

• When to Issue an Invoice: A VAT invoice must be issued for virtually all taxable supplies of goods or services, whether to businesses or consumers (some exceptions exist for very small amounts and certain B2C services). The general rule is that an invoice (or simplified invoice for small sales) must be issued by the 5th working day after the month in which the taxable supply occurs. In practice, most businesses issue invoices at the time of supply. For cross-border intra-EU supplies, invoices should be issued by the 15th day of the month following the supply (per EU Directive requirements). If a payment is received in advance of a supply, an invoice or receipt documenting that payment should be issued at the time of payment. [taxation-c….europa.eu]
• Invoice Content: Portuguese VAT invoices must contain all information required by the EU Directive and some additional details. Each invoice (or document treated as invoice) must include at least:
  • Issue date of the invoice. [taxation-c….europa.eu]
  • A sequential, unique invoice number (typically a series per year). [pwc.pt]
  • The supplier’s name, address, and Portuguese VAT number (NIF). [taxation-c….europa.eu]
  • The customer’s name, address, and VAT number – note, for sales to consumers (B2C) under €1,000, a simplified invoice can omit the customer’s name and VAT number. [taxation-c….europa.eu]
  • The quantity and description of the goods delivered or services rendered (with sufficient detail to determine the applicable VAT rate). [taxation-c….europa.eu]
  • The date of the supply (if different from the invoice date, e.g. if billing after month-end) or the date of any payment received in advance. [taxation-c….europa.eu]
  • The net amount (taxable amount) for each distinct rate or category of goods/services (exclusive of VAT).
  • The unit price (optional for services, but required for goods) and any discounts or rebates not included in the unit price.
  • The VAT rate(s) applied and the corresponding VAT amount in euros for each rate. [taxation-c….europa.eu]
  • The total amount payable including VAT.
  • If an exemption or reverse charge applies, a reference stating so and citing the applicable article of law (for example, “IVA – isento art.14 do CIVA” for a VAT-exempt supply under Article 14) is required.
  All invoices must be in Portuguese or English (translation to Portuguese may be requested if audited), and amounts should be in Euro (a secondary currency amount can be shown, but VAT must be shown in €). Invoices to Portuguese customers should typically be in Portuguese language or include a translation upon request. [taxation-c….europa.eu] [vatcalc.com]
• E-invoicing and Digital Signatures: Portugal is at the forefront of e-invoicing. Electronic invoices are allowed, subject to the customer’s acceptance and provided authenticity and integrity of the invoice are guaranteed. Acceptable methods include using an advanced electronic signature or sending through EDI (Electronic Data Interchange) with a business controls audit trail. PDF invoices are currently accepted as electronic invoices (treated as original invoices) through December 31, 2025. After that, stricter e-invoicing standards (likely involving structured XML format under upcoming EU “ViDA” regulations) may come into effect. Notably, since January 2023, invoices to public sector entities in Portugal (B2G supplies) must be electronic (submitted through the public e-invoicing platform). [pwc.pt]
• Certified Invoicing Software & QR Codes: All invoices, whether paper or electronic, must be generated by invoicing software certified by the Portuguese tax authority (AT) (unless an exemption applies, e.g. for non-established businesses issuing very few invoices, who then must follow specific rules). The law also requires that each invoice include a special QR code and an ATCUD code. The ATCUD is an 8-character alphanumeric code that combines the software certification ID and the document’s internal number; it’s provided by the software and printed typically near the top of invoices. The QR code encoding key invoice data is usually printed on the bottom of invoices. These measures aim to combat fraud by allowing easy verification of invoices by customers and the tax office. As of 2023, virtually all businesses must comply with these requirements – the transition period for QR codes and ATCUD ended in 2022, so they are now mandatory on all fiscally relevant documents. [pwc.pt]
• Simplified Invoices: For low-value sales, Portugal permits a simplified invoice that contains fewer particulars. A simplified invoice can be used if the total value does not exceed €100 (for any type of sale) or up to €1,000 for sales to a non-taxable person (B2C retail sales). Simplified invoices need not include the customer’s name, address or tax ID, which makes them convenient for cash sales to consumers. They must still include the date, identification of the seller, description of goods/services, total amount, and VAT breakdown. Retail receipts from certified cash registers often serve as simplified invoices. [vatcalc.com], [taxation-c….europa.eu]
• Self-Billing: Self-billing (customer issues the invoice on behalf of the supplier) is permitted under Portuguese VAT rules, but only if there is a prior written agreement between the parties and a procedure for the supplier to accept each invoice issued by the customer. Each self-issued invoice must explicitly mention it’s issued under a self-billing arrangement (e.g. marked “Autofaturação”). The customer must have a method to ensure the supplier has approved the invoice details to maintain the right to deduct VAT. [pwc.pt]
• Invoice Archiving: Invoices (including electronic invoices) and all related VAT records must be preserved for 10 years in a manner that guarantees their integrity and readability over time. Paper invoices should be kept within Portugal, whereas electronic archives must be accessible from Portugal (electronic storage outside Portugal is allowed if certain conditions are met, typically if within the EU). The records should include not just invoices but also accounting books, contracts, and digital records necessary to verify VAT calculations. [pwc.pt] [vatcalc.com]
• Credit Notes and Invoice Corrections: If an invoice has an error or a price is adjusted (e.g. goods returned, discount given after invoicing, or mistakes found), the correction must be made by issuing an appropriate amending document – usually a credit note or debit note. The adjustment note must reference the original invoice being corrected (by its number and date) and indicate the change (amount being credited or debited and the reason). Credit notes that reduce the taxable amount allow the supplier to adjust (reduce) the VAT originally declared, provided they properly document the customer’s acknowledgment of the change. [vatcalc.com]

Compliance and Deductions

• Deduction of Input VAT (Right to deduct): Like all EU VAT systems, Portuguese VAT allows businesses to deduct input VAT on purchases of goods and services that are used for making taxable or zero-rated outputs. Input tax can be subtracted on the periodic VAT return, offsetting output VAT. However, input VAT cannot be recovered on exempt activities that do not give deduction right (e.g., inputs used solely for financial or healthcare services). If a business has mixed activities (taxable and exempt without credit), it must prorate input VAT or directly attribute costs to taxable use to determine the deductible portion. [vatcalc.com] [pwc.pt]
  Certain expenses are wholly or partially blocked from VAT deduction even if incurred by a taxable business. In Portugal, VAT on passenger cars (purchase, lease, running costs) is generally not deductible, except for certain less polluting vehicles or large passenger transport vehicles. For example, VAT on regular gasoline for company cars is non-recoverable, while VAT on diesel for commercial vehicles is 50% deductible (and 100% if the vehicle is certain categories like tractors or trucks). VAT on fuel for passenger cars is similarly blocked except for 50% deduction on diesel, LPG, natural gas and biofuel for business cars (and full deduction for some commercial/industrial vehicles); petrol (gasoline) for regular cars is completely non-deductible. Entertainment expenses (e.g. client meals, hospitality, receptions) are non-deductible. VAT on accommodation, meals and drinks (e.g. employee travel meals, hotels) is ordinarily non-deductible, unless incurred for certain large promotional events – in which case 50% can be deducted (or 25% if the company is merely participating rather than organizing). Tobacco and alcohol, and luxury or recreational expenditures (e.g. yachts, golf club fees) are generally not deductible either. One notable allowance: electricity used for charging electric or plug-in hybrid vehicles is deductible in full, reflecting Portugal’s eco-friendly incentives. [pwc.pt] [pwc.pt], [pwc.pt]
  To exercise the right of deduction, the business must hold a proper VAT invoice or import document showing VAT charged. Invalid invoices (missing required details or not issued by certified software) could jeopardize the deduction. Deductions are typically claimed in the VAT return period when the invoice is received (if it arrived on time) or the next one, and no later than four years after the invoice date, in line with the statute of limitations. [pwc.pt]
• Call-Off Stock Arrangements: Under the EU “quick fixes” effective 2020, a foreign supplier can move goods to a warehouse in Portugal under a call-off stock arrangement without triggering a VAT registration, as long as the goods are intended for a specific known customer who will call them off within 12 months. In such cases, the foreign supplier does not have to account for a transfer or a local supply upon arrival of goods. Instead, when the Portuguese customer “calls off” (withdraws) the goods from the stock, the transaction is treated as an intra-Community supply (0% VAT) by the supplier and an intra-Community acquisition by the customer, who then accounts for Portuguese VAT. If goods aren’t taken by the customer within 12 months, the arrangement fails and a deemed supply occurs (as noted under Time of Supply). Portugal has incorporated these harmonized rules, reducing VAT registration obligations for cross-border inventory transfers. [vatcalc.com], [vatcalc.com]
• Reverse Charge Mechanism (Cross-Border): Portugal applies the standard EU reverse charge for cross-border B2B services. This means if a non-resident supplier with no Portuguese establishment provides services to a Portuguese VAT-registered business, the Portuguese customer must self-account for the VAT (no VAT is charged by the supplier). The Portuguese customer will calculate the VAT on the supply (at the relevant Portuguese rate) and simultaneously claim it back as input VAT on the same return, if it relates to taxable business activities – making it a wash transaction for fully taxable businesses. This relieves foreign service providers from needing to register in Portugal for B2B services. Similarly, for intra-EU acquisitions of goods, Portuguese businesses use a reverse charge: the buyer reports acquisition VAT in Portugal on the EU goods purchased and deducts it in the same return (if entitled), again resulting in no net tax if fully deductible. Also, since July 2022, Portugal applies a general reverse charge for goods supplied by a non-established seller to a Portuguese taxable person – i.e. if a foreign company without Portuguese establishment sells goods locally to a Portuguese VAT-registered business, the buyer can reverse-charge the VAT (this aims to simplify compliance for foreign suppliers). [taxually.com] [vatcalc.com]
• Reverse Charge (Domestic specific cases): In addition to the general non-resident scenarios above, Portuguese law designates certain domestic sectors or transactions for reverse charge to prevent fraud or ease tax collection. The buyer must apply a domestic reverse charge in cases such as: supplies of construction services (where the contractor is a VAT-registered business subcontracting to another VAT-registered business), certain sales of real estate or property rights (where the seller is a VAT-able person but opts to tax the sale of immovable property), supplies of industrial scrap, waste and recyclable materials, transactions in gold and other precious metals, transfers of greenhouse gas emission allowances, and supplies of specific goods like natural gas and electricity in Portugal. In these cases, the supplier does not charge VAT; the customer, if VAT-registered, must account for output VAT and simultaneously can deduct it if eligible (again achieving a no-net-tax result when both parties are compliant). These rules are meant to combat missing-trader fraud and simplify taxation in high-risk sectors. [vatcalc.com]
• Treatment of Discounts: Cash discounts or rebates affect the taxable amount. If a discount is agreed at the time of sale (e.g. early payment discount), the VAT can be calculated on the reduced price upfront. If a discount or rebate is granted after the invoice (for example, an annual volume rebate or a post-sale discount for prompt payment that was not certain initially), the supplier should issue a credit note adjusting the original invoice’s taxable amount and VAT. Portuguese law explicitly states that the taxable amount excludes discounts and rebates granted to the customer and duly reflected in the documentation. Therefore, suppliers should ensure any price reductions are documented via credit notes to adjust the VAT accordingly. [pwc.pt], [pwc.pt]
• Bad Debt Relief: If a customer fails to pay, Portuguese VAT law allows the supplier to adjust (recover) the output VAT on a bad debt, but under strict conditions. Generally, no VAT adjustment is allowed for debts less than 6 months overdue or below a certain small amount (to prevent trivial claims). For larger debts, relief is possible if the debt is over 6 months past due and exceeds a threshold (approximately €750 including VAT), or if the debt is older than 24 months regardless of amount with demonstrable attempts at collection and evidence of impairment. In cases of formal insolvency or bankruptcy of the customer (or other uncollectible scenarios defined by law), VAT can be recovered sooner, but typically requires court confirmation of the insolvency. To claim bad debt relief, the supplier must often obtain a certificate from a certified accountant (ROC) confirming the write-off and compliance with legal requirements, and in some cases must notify the tax office or obtain its approval via an electronic request. Only after completing these steps can the irrecoverable VAT be deducted on a current VAT return or via an amended return. For example, if a Portuguese company has an unpaid invoice from a customer that went bankrupt, and a court declares the debt uncollectible, the company can then adjust the VAT output tax that it had originally paid on that invoice, by meeting the documentation rules. Bad debt relief rules in Portugal are more restrictive than in some countries – they aim to prevent abuse while still offering relief in genuine cases of non-payment. [taxation-c….europa.eu] [taxation-c….europa.eu], [taxation-c….europa.eu]
• Import VAT Deferment Scheme: Since 2018, Portugal permits approved importers to defer import VAT and account for it on their periodic VAT return via a reverse charge, rather than paying VAT in cash upon import. To use postponed accounting, the importer must be a VAT-registered business in Portugal (or its fiscal rep) and typically must be on monthly filing status with a record of compliance (e.g., no outstanding tax debts). When authorized, the imported goods are still released by customs without paying VAT, and the importer simply includes the import VAT as output tax in their next VAT return and simultaneously claims it as input tax (if fully deductible), resulting in a nil net effect – essentially an import VAT credit mechanism. This improves cash flow for businesses that import goods. If an importer does not have deferred status, they must pay VAT at customs and later claim it back on their return like any input VAT. Certain imports that are immediately re-exported or moved to another EU country can be exempt from Portuguese VAT altogether (e.g., entering a customs warehouse or using the “42 procedure” for onward EU supply). [vatcalc.com], [vatcalc.com] [vatcalc.com]
• VAT Warehousing: Portugal operates VAT warehousing regimes consistent with EU law (sometimes called “customs and VAT bonded warehouses”). Under these schemes, certain goods can be imported, stored, and traded within a tax warehouse in Portugal without triggering VAT until they are removed for local use. Typically, goods under a customs duty suspension (like those in a bonded warehouse or free zone) are also not subject to VAT until they exit the regime. Additionally, Annex V of the EU VAT Directive allows specific goods (like certain works of art, telecommunications equipment, etc.) to be traded untaxed in VAT warehouses – Portugal permits those treatments as well. Services related to goods in a customs/VAT warehouse are generally exempt from VAT too. This regime facilitates trade by removing the upfront VAT cost when goods are stored or traded under suspension in Portugal. [vatcalc.com], [vatcalc.com] [vatcalc.com]
• Supply-and-Install Projects: If a non-resident company supplies goods with installation or assembly in Portugal, historically this could create a tax presence and VAT registration requirement. However, Portugal has simplified the treatment: in many cases, a foreign supplier of goods that are assembled or installed in Portugal can avoid needing to register, by having the Portuguese business customer self-account for the VAT under a reverse charge. Essentially, if a foreign company sells machinery and sends a team to install it in Portugal, and the buyer is a VAT-registered Portuguese company, the buyer will apply the reverse charge (declare the output and input VAT) so that the foreign supplier doesn’t charge Portuguese VAT or register locally. This ease-of-compliance measure aligns with Article 194 of the EU Directive and is commonly used for cross-border projects. (If the customer were not VAT-registered – e.g. an installation for a private individual – then the foreign supplier might still need to register and charge Portuguese VAT.) [vatcalc.com], [vatcalc.com]
• Use and Enjoyment Provisions: Under Article 59a of the EU VAT Directive, Portugal has opted to use certain use-and-enjoyment rules for specific services. In practice, Portugal imposes VAT on some services performed by Portuguese suppliers outside the EU if they are used and enjoyed in Portugal, and conversely may not tax certain services that would be taxable in Portugal if they are effectively used outside the EU. A key example: Telecommunication, broadcasting, and electronic (TBE) services supplied by a provider established in Portugal to a non-EU customer are normally outside EU VAT scope (B2C rule would tax where supplier is, but if customer is outside EU it could be outside scope). However, Portugal’s law states that if those digital services are used or enjoyed in Portugal, Portuguese VAT is due despite the customer being outside the EU. This prevents, for instance, a Portuguese company from selling digital services to a non-EU tourist physically in Portugal tax-free. Another example: the long-term hiring of means of transport to a non-EU resident might normally be outside scope if the customer is outside the EU, but Portugal can tax it if the vehicle is used in Portugal (specific local rules apply). On the flip side, Portugal can exempt certain services that would otherwise be taxed in Portugal if they are used entirely outside the EU. These use-and-enjoyment adjustments are relatively narrow and mostly affect B2C services like TBE services, leasing of transportation, etc., to prevent double non-taxation or double taxation. Businesses engaged in such activities should consult the Portuguese VAT code (Article 6(12)) for details on which services have these special place of supply overrides. [taxation-c….europa.eu]
• Capital Goods Adjustment Period: If a business purchases capital assets and deducts input VAT, Portuguese law provides for an adjustment period during which the deduction may be adjusted if the use of the asset changes. For movable capital goods (e.g. machinery, equipment, vehicles), the adjustment period is 5 years, and for immovable property (real estate) it is 20 years. If in any of those years the proportion of taxable (deductible) use changes – for example, a building initially used 100% for taxable sales is later partly used for VAT-exempt activities – the business must recalculate and adjust the VAT originally deducted, on a pro-rated basis over the remaining adjustment period. This ensures the initial deduction reflects the asset’s actual use over time. If a capital good is sold before the end of its adjustment period, a final adjustment is made in that year. The requirement to maintain a capital asset register for VAT purposes is in place to track these potential adjustments. [pwc.pt] [pwc.pt], [pwc.pt]

VAT Recovery for Non-Residents (Refunds)

VAT on Digital Services

Cash Accounting Scheme

• It is optional – businesses must apply to opt into it, and they can also opt out if they no longer wish to use it. There are specific eligibility criteria, primarily an annual turnover cap. Originally the threshold was €500,000, but effective 1 July 2025, the turnover limit for the Cash Accounting Scheme will increase to €2,000,000 per year. This expansion means many more SMEs can use cash accounting. (This change was introduced by Decree-Law 34/2025 as part of economic recovery measures.) [pwc.pt]
• If a business is under the threshold and opts in, all its taxable activities in Portugal follow the cash scheme. Under the scheme, when issuing invoices, one must still do so within the normal deadlines, but mark them accordingly. The invoice should state that it’s under the cash accounting regime (so customers know the supplier will only declare VAT upon receipt).
• Exceptions: The scheme cannot be used for certain transactions. Notably, it does not apply to VAT on telecommunications, broadcasting, or electronic services supplied to non-taxable persons (those remain taxed on accrual basis), and it doesn’t apply to imports or exports. Also, if a cash-accounting business doesn’t receive payment within 12 months of an invoice, the VAT becomes due at that 12-month point (a built-in limit to prevent indefinite deferral). [taxation-c….europa.eu]
• Under cash accounting, the customer’s input VAT is also deferred until payment. If both supplier and customer are under the cash scheme, VAT can only be reclaimed by the customer when payment is made to the supplier (ensuring symmetry).
• Administrative Requirements: Businesses must inform the tax office of opting in. They must keep additional records of payments received and made, to substantiate when VAT became chargeable and deductible. The tax authority provides guidance on how to report under this scheme in the VAT return (there are special fields to indicate you’re on cash accounting). If a business exceeds the turnover threshold or opts out, it must revert to the normal accrual system (with some transitional rules to handle any invoices still unpaid at that time).

VAT-Registered Cash Tills (Point-of-Sale Requirements)

Statute of Limitations

VAT Return Filing

Other Filings and Digital Reporting

• EU Sales List (ESL or “VAT Information Exchange System – VIES Declaration”): If a Portuguese business supplies goods or certain services to other EU VAT-registered customers (intra-Community supplies), it must file an EC Sales List return (Declaração Recapitulativa) detailing those zero-rated sales. The ESL is typically filed monthly by the 20th of the month following the supply (or quarterly if the business only files VAT quarterly, provided their intra-EU sales are below certain limits). The ESL can be submitted through the same online tax portal. Failing to submit or late submitting an EC Sales List can result in fines. [pwc.pt]
• Intrastat Declarations: Intrastat is required for businesses that exceed annual thresholds for trading goods with other EU countries. For 2025, the Intrastat threshold is €650,000 for arrivals (imports) and €600,000 for dispatches (exports) of goods. Once a business exceeds these amounts in a year, it must start filing monthly Intrastat reports of the physical movement of goods. These reports are due by the 15th of the month following the reporting month. Simplified reporting thresholds (lower values for partial reporting) exist, but larger traders must provide the full data set (commodity codes, values, weights, etc.). Intrastat is filed online via the tax/customs portal or via special software. Penalties for missing or incorrect Intrastat can range from €500 up to €50,000, as it’s a legal obligation separate from VAT (though administered by the same authority). [avalara.com] [euvat.org]
• SAF-T (PT) and Digital Reporting: Portugal was a pioneer in adopting the Standard Audit File for Tax (SAF-T) framework. SAF-T (PT) is an XML-based standardized format for accounting data extraction. Portuguese taxpayers have two main SAF-T obligations:
  1. SAF-T for Invoices (SAF-T de faturação): Enterprises must either transmit invoicing data in real-time via certified software or submit a monthly SAF-T file of all issued invoices by the 5th of the following month. Most businesses use their certified invoicing system to generate this file automatically (it contains details of each invoice issued, credit notes, customers, etc.). The requirement for this “SAF-T billing” file is longstanding – previously due by the 12th of the month, now the 5th as of 2023. This data is used by the tax authority to pre-fill certain fields in the draft annual sales tax summary and to cross-check compliance. [pwc.pt] [vatcalc.com]
  2. SAF-T for Accounting: A more comprehensive annual SAF-T file (covering general ledger accounts, trial balance, and entries) was slated to become mandatory for all resident companies from fiscal year 2025 (with first submission in 2026). However, the government postponed this Accounting SAF-T requirement by one year, in the 2026 State Budget. Now, the first annual accounting SAF-T will be for fiscal year 2026, to be filed in early 2028. Once in force, this annual SAF-T will feed into the annual IES return and allow the tax authorities to pre-complete parts of the VAT return and other tax filings. [vatcalc.com] [vatcalc.com], [vatcalc.com]
• Annual “IES” Return: Portuguese companies (those with a tax presence in Portugal) must file an annual return known as the IES (Informação Empresarial Simplificada) by July 15 each year, which consolidates financial statements and tax information including a recap of VAT for the year. It serves in part as an annual VAT summary return. Non-resident VAT traders without a PE in Portugal are not required to file the IES for VAT. [pwc.pt] [vatcalc.com]
• Other reports: If operating under special regimes, there may be additional filings – for instance, companies in the OSS scheme file quarterly OSS returns (due by the end of the month following each quarter) with the Member State of identification (not necessarily Portugal). Businesses selling certain goods like tobacco or alcohol, or providing digital services, need to comply with any excise or digital reporting, but those are separate from VAT.

Penalties and Interest

• Late Filing of VAT Return: A penalty from €250 up to €2,500 (typically €300 minimum for businesses) can apply for failing to submit a return on time, even if no tax is due. If a return is not filed and the tax authorities issue an assessed assessment, higher penalties can be imposed. Repeated failures or filing false information can lead to increased fines. (Note: Individuals face slightly lower minimum fines, around €150.) [avalara.com]
• Late Payment of VAT: In addition to having to pay the overdue VAT, a penalty ranging from 30% to 100% of the unpaid VAT may be levied for late payment, with a maximum of €165,000 in the most serious cases. The law differentiates between negligence vs. willful evasion: negligent late payment might incur 30%–50% of the tax, whereas intentional tax evasion can trigger the higher end (100% of tax due, capped at €165k, as an additional fine). Furthermore, interest on late payments accrues at an annual rate (currently 4% per annum on the overdue tax). Portugal updates its statutory interest rate periodically (it was ~4% in recent years), and a higher rate may apply in certain cases (one source cites 5.47% for late payment interest). [avalara.com] [euvat.org]
• Errors/Inaccuracies: If a VAT return is submitted with errors or omissions that result in an underpayment of tax, penalties can range from around €375 up to €45,000 for companies, depending on the magnitude and nature of the discrepancy. If the error is deemed to be due to negligence, lower penalties apply; if due to fraud, higher penalties and possibly criminal charges can ensue. [avalara.com]
• Failure to register for VAT: Not registering on time when required can lead to penalties and the assessment of any VAT due retroactively. The fines for late registration can be a few hundred euros, and the business will still owe any VAT that should have been collected, plus potential interest and late payment penalties.
• Invoice & Record-Keeping Violations: Using non-certified invoicing software, failing to include required information on invoices, or not retaining records for the full 10-year period can each lead to fines. For instance, not using certified billing software or not communicating invoice data to the tax authorities on time could incur fines in the hundreds or thousands of euros per infraction. Serious fraud (like issuing fake invoices or concealing sales) carries heavier penalties, including possible criminal prosecution under Portuguese law.
• Intrastat/ESL violations: As noted, missing Intrastat declarations can incur fines from €500 up to €50,000 depending on the severity. Failure to submit EC Sales Lists or submission with errors can similarly result in penalties (often a few hundred euros for late ESL, increasing if compliance is repeatedly poor or data is falsified). [euvat.org]

• First EU VAT Implementation: Portugal was among the early adopters of modern VAT, implementing it in January 1986 as part of its EEC accession. Over the decades, the standard rate has fluctuated (for example, rising from 21% to 23% in 2011 during the financial crisis), and the current rate of 23% has been in place since 2011. The country’s approach to VAT has often balanced fiscal needs with social policies (e.g., using reduced rates for essential goods and cultural items). [vatcalc.com]
• Economic Recovery Measures: In recent years, Portugal has used VAT adjustments as part of economic relief. Aside from the temporary 0% essential food VAT in 2023–24 to combat inflation, Portugal also reduced VAT on electricity in 2022 for certain consumption brackets, and as of 2024 made electricity at low voltage (up to 6.9 kVA supply) partly eligible for the 6% rate to reduce energy bills. [taxsummaries.pwc.com]
• Digital Tax Compliance Leadership: Portugal’s tax authority is highly digitalized. It was the first country in the world to adopt SAF-T for tax in 2008–2009. Today, the Portuguese VAT system features near-real-time reporting of invoices and a push towards e-invoicing nationwide. These efforts position Portugal ahead of many EU peers in readiness for upcoming digital reporting mandates. [vatcalc.com], [vatcalc.com]
• Toursim & VAT Refunds for Tourists: Portugal participates in the VAT refund for tourists scheme. Visitors from non-EU countries can claim back Portuguese IVA on goods purchased for export (subject to a minimum purchase amount, e.g. currently around €50, and certain procedures). This is separate from the business 13th Directive refunds discussed earlier. Retailers in Portugal often partner with global refund operators (like Global Blue or Planet) to provide this service in-shop for foreign tourists.
• Upcoming Changes to Watch: Aside from the 2026 changes already discussed (VAT grouping, rate tweaks, cash accounting expansion), taxpayers should watch for potential implementation of EU proposals, such as real-time digital reporting (which may become mandatory by 2028) and possibly further VAT rate adjustments as EU rules now give members more flexibility in setting reduced rates (e.g. Portugal could choose to expand 0% VAT to more items in future under the amended Annex III of the EU Directive). Staying informed through official channels or professional advisories is recommended, as VAT legislation can change with each year’s state budget. [vatcalc.com]