Portugal budget VAT announcements

Thu 31st Oct 2013

The draft 2014 VAT Bill contains a range of amendments to the Portuguese VAT rules.

Portuguese VAT updates

The amendments to the VAT code include:

  • VAT on irrecoverable debts may only be refunded within two years starting the beginning of the fiscal year after the bad debt
  • The supply of exempt financial services to businesses which are also VAT exempt still require the issuance of a full VAT invoice
  • All exporters are entitled to the same VAT exemption as officially nominated national export organizations
  • A provision for the right-to-VAT on otherwise exempt property transactions is to be introduced
  • Improved conditions for the application of the reduced VAT rate for agricultural organizations.

Portuguese VAT rates

The current Portuguese VAT rate is 23%.  The average EU VAT rate is over 21%.  Portugal makes extensive use of reduced VAT rates.  There are currently six VAT rates in Portugal.  The EU VAT Directive only permits two reduced rates in addition to the regular, standard VAT rate.  But Portugal has a derogation for some of its dependencies, including: Madeira 12% and 4%; and Azores 9% and 4%.

Portugal also uses a zero VAT rate on supplies such as international travel, financial services and intra-community supplies.