A Quick Guide to VAT in Portugal
Understanding VAT doesn’t have to be complicated — especially when the goal is to keep business simple, compliant, and efficient.
What VAT Means in Portugal
VAT (known locally as IVA — Imposto sobre o Valor Acrescentado) is a consumption tax applied to most goods and services in Portugal.
It’s collected at every stage of the supply chain and ultimately paid by the end consumer — but for businesses, VAT is something to manage, reclaim, and plan for.
Whether you’re running a local company or expanding operations into Portugal, understanding how VAT works can make a big difference in cash flow, compliance, and pricing.
Standard VAT Rates in Portugal
Portugal applies a tiered VAT system, with different rates depending on the type of goods or services and where in the country they are sold.
| Region | Standard Rate | Intermediate Rate | Reduced Rate |
|---|---|---|---|
| Mainland Portugal | 23% | 13% | 6% |
| Madeira | 22% | 12% | 5% |
| Azores | 16% | 9% | 4% |
The standard rate (23%) applies to most products and professional services.
Reduced rates cover essential goods such as food, public transport, and some healthcare or cultural activities.
When to Register for VAT
Businesses must register for VAT in Portugal if:
- They’re established in Portugal and perform taxable activities.
- They’re a foreign company providing goods or services within Portuguese territory.
- Their annual turnover exceeds €12,500 (for small domestic operators).
Once registered, businesses receive a VAT number, which must be displayed on all invoices and official documentation.
If you’re a foreign company, you may also need to appoint a fiscal representative — OnCorporate can handle this process to ensure full compliance with local law.
How VAT Works for Businesses
VAT operates under a simple principle:
👉 You collect VAT on sales (output VAT) and
👉 Reclaim VAT on purchases (input VAT).
Every quarter (or month, depending on your business size), you report the difference to the Portuguese Tax Authority (Autoridade Tributária e Aduaneira).
If your input VAT exceeds output VAT, you can request a refund or carry the balance forward.
VAT Filing and Deadlines
VAT returns in Portugal must be submitted electronically through the government’s online portal, Portal das Finanças.
- Quarterly submissions — for most small and medium-sized companies.
- Monthly submissions — for larger businesses (annual turnover over €650,000).
Deadlines:
- Monthly VAT returns: by the 10th of the second month following the tax period.
- Quarterly VAT returns: by the 15th of the second month following the end of the quarter.
Payments must be made by the 20th of that same month.
Common VAT Exemptions
Certain goods and services are exempt from VAT under Portuguese and EU law, including:
- Medical and healthcare services.
- Financial and insurance operations.
- Education and training.
- Property leases and residential rents.
- Postal services and cultural activities under public institutions.
Businesses dealing mainly in exempt services may not be able to reclaim input VAT, so understanding your exemption category is essential for accurate financial planning.
Invoicing and Record-Keeping
Invoices in Portugal must follow strict compliance rules:
- Include the supplier and client’s VAT number.
- Indicate the VAT rate applied (and any exemptions).
- Be issued within 5 working days of the transaction.
- Be stored for 10 years for audit purposes.
Electronic invoicing is mandatory for most companies and must comply with Portuguese certified invoicing software standards.
VAT Refunds for Non-Residents
If you’re a foreign company or professional doing business in Portugal but not established here, you may still reclaim VAT on eligible expenses such as accommodation, transport, or trade-related costs.
Refunds are available under EU Directive 2008/9/EC (for EU companies) or under 13th Directive procedures (for non-EU entities).
The process requires detailed documentation, proper invoice validation, and adherence to strict deadlines — another area where having a trusted tax representative makes the difference.
Why It Matters
VAT may not be glamorous, but it’s one of the most visible indicators of whether a business is financially structured and compliant.
Understanding it means avoiding penalties, improving cash flow, and building credibility with partners and regulators alike.
How OnCorporate Can Help
At OnCorporate, we support local and international clients with:
- VAT registration and representation.
- Periodic filings and payment management.
- Compliance with invoicing and record-keeping rules.
- VAT refund requests for EU and non-EU companies.
- Strategic tax and accounting advisory.
From setup to submission, we make sure your VAT works as efficiently as your business does.
📞 Get started today → oncorporate.com/contact
VAT in Portugal doesn’t have to feel like a maze.
With the right structure — and the right partner — your business can stay compliant, efficient, and focused on growth.
Because clarity, after all, is good for business.
