VAT rates in Portugal
Portuguese VAT (Imposto sobre o Valor Acrescentado) applies at three rates depending on the category of goods and services. The standard rate is 23% in mainland Portugal, one of the highest in the European Union.
There are two reduced rates for essential products and services. The islands of Madeira and the Azores have their own rates, slightly lower than those of the mainland.
Key points
- Standard rate: 23% (mainland)
- Intermediate rate: 13% (food, beverages and some services)
- Reduced rate: 6% (basic necessities, medicines, transport)
- Madeira and Azores: 22% / 12% / 5%
How to register for VAT in Portugal
To operate with VAT in Portugal you first need your NIF (Número de Identificação Fiscal). If you set up a company, such as an LDA Unipessoal, the company is automatically registered as a VAT taxable person at the time of incorporation.
In the case of self-employed individuals, VAT registration is requested from the Autoridade Tributária through the declaration of commencement of activity, indicating the applicable regime: normal, simplified or exempt depending on turnover.
There is no minimum turnover threshold for registration if you are going to carry out VAT-liable activities: the obligation arises from the activity, not from the volume.
The intra-community VAT number
Your intra-community VAT number in Portugal is your own NIF preceded by the prefix PT (for example, PT 123456789). You need it to operate with clients or suppliers in other EU countries.
With it you can issue VAT-free invoices on B2B intra-community supplies and deduct the VAT paid on your European purchases. Before invoicing, it is advisable to validate your client's number in the VIES system to ensure the exemption.
If your activity involves intra-community trade above the thresholds, you will also have Intrastat statistical reporting obligations.
SAF-T: mandatory electronic invoicing
SAF-T (Standard Audit File for Tax) is the standard electronic invoicing format required by the Portuguese Tax Authority. It is not a program, but an XML file that your invoicing software must generate and report.
Portugal has moved towards mandatory electronic invoicing: companies are required to use invoicing software certified by the AT, which reports the data of each invoice in real time or within the established deadlines.
In addition, taxable persons must submit the invoicing SAF-T monthly with the details of all documents issued. Having certified software from day one avoids penalties and delays in VAT deduction.
VAT return and periodic obligations
VAT is settled by filing a periodic return with the AT, on a monthly or quarterly basis depending on the regime and turnover. In practice, most SMEs file quarterly returns.
The VAT paid on your purchases and expenses is deducted from the VAT charged on your sales. If the balance is in your favour, you can request a refund or offset it in subsequent periods.
Portugal also provides for the cash accounting VAT regime, which allows the tax to be settled only when the invoice is paid, useful for businesses with customers who pay late.
