T06E - IVA

Note: These guidelines are intended only as a summary. Tax laws and regulations change frequently and sometimes unexpectedly. It is strongly recommended that you seek professional advice.  

In 2025 food products intended for infants and young children, including follow-on formulas, foods for special medical purposes and complete diet substitutes for weight control will be in the list of products with reduced IVA rates (6%).

VALUE ADDED TAX (“IVA”) is levied on: 

Taxable entities: 

• All individuals and entities exercising an activity of producer, trader or supplier of services on a continuous and independent basis

• Those who independently carry out a single taxable transaction, provided that such transaction is in connection with the exercise of such activities, wherever it takes place (i.e. a foreign enterprise supplying goods within Portuguese territory)

• Those who carry out, on an occasional basis, a transaction liable to income taxation (Personal Income Tax-IRS or Corporate Income Tax-IRC)

• The beneficiary of certain services as expressly laid down by law and under the conditions therein provided for, when the supplier of such services is a foreign taxable entity not established in Portuguese territory

• All individual and legal entities who, under the customs laws, import goods 

• All individual and legal entities who, on an invoice or any other similar document, mention VAT. 

Since 2023 the regulations have changed for micro-production of electricity, who come under the normal VAT regime solely for the practice of these electricity transmissions. We will not give specific information in this bulletin. Please get advice from your accountant.

Taxable transactions: 
There shall be liable to tax 1) the supply of goods, 2) the supplies of services, 3) imports of goods from outside the European Community and 4) certain transactions between members of the European Community where the vendor is equally a taxable person duly identified for VAT purposes in another Member State. 

Rates 
The tax rates in Portugal Mainland are as follows: a reduced rate of 6%; an intermediate rate of 13%; and a standard rate of 23%. 

The reduced rate shall apply, in particular, to essential foods (like rice, cereals, and bread), water, pharmaceuticals, transport of passengers, shows and public entertainment, accommodation in hotel units and also for respiratory protection masks and skin disinfectant gel. You can find the full list here.

The intermediate rate shall apply to other products for human consumption (like canned meat and fish, dried fruit and coffee. The full list you can find here.

The standard rate shall apply to all supplies of goods and services not covered by the reduced or intermediate rates. 

The above-mentioned rates are 4%, 9% and 16% respectively, for those transactions that are deemed to take place in the Autonomous Regions of Azores and 4%*, 12% and 22% to Madeira. 

Electricity
There will be an extension in 2025 of the reduced rate applicable to the supply of electricity (this is is different for Azores and Madeira*) 

1. The reduced VAT rate (6%) is applied:

   1. The fixed (power) component of the network access tariff, for consumers with a contracted power of up to 3.45 kVA.

   2. Contribution to Audiovisual (CAV).

2. The intermediate VAT rate has been reduced from 13% to 6% in 2025 and is applied to:

   1. Electricity consumption not exceeding  200 kWh in 2025, in a period of 30 days, for consumers with contracted power up to 6.9 kVA.

   2. To families with 5 or more persons, to the consumption of electricity that does not exceed 300 kWh in 2025.

3. The standard VAT rate (23%) is applied:

   1. Electricity consumption exceeding 200 kWh in 2025 (or 300 kWh, in the case of families with 5 or more members).

   2. At the remaining value of the contracted power.

   3. Supplies to customers with contracted power greater than or equal to 10.35 kVA.

   4. Electricity taxes and fees, namely the Special Consumption Tax (IEC) and the DGEG fee.

*In the Autonomous Regions of the Azores and Madeira the reduced VAT rate is 4% and the standard VAT rate is 16% and 22%, respectively.

Deductions - Right to Tax Deduction 
The tax liability of a taxable entity is the difference between the amount resulting from the application of the tax rate to the value of sales or services rendered, during a given period of time, and the amount of tax borne on the acquisitions made in the same period. 

• VAT Exemption
  The VAT exemption for self-employed workers has risen to 14,500 in 2024 and 15,000 in 2025.

  The exemption regime allows you not to charge tax, but you are also unable to deduct it. Consider the best situation for your activity. There is no answer that applies to all situations. Check with an accountant first before you request the exemption.

• For other SME schemes, please contact your accountant

Payment 
After the deductions and assessment of tax payable, payment is made to the VAT Authority by cheque, postal order or bank transfer.

VAT taxpayers can apply for flexibility in the payment of VAT in the monthly and quarterly regime for delivering the periodic CIVA return.

For VAT payments in the 2nd semester, the number of installments cannot exceed the number of months remaining until the end of the year in question.

The monthly installments relating to the installment plans are due as follows:

1. The first installment, on the date of fulfillment of the payment obligation in question (the 25th of the 2nd month following the month or quarter to which the operations relate); and

2. The remaining monthly installments, on the same date of the subsequent months.

Requests for flexibility must be made by the deadline for payment of the 1st instalment.

Taxable persons can only request this flexibility if they have their tax and contributory situation in order.

TAXPAYERS' OBLIGATIONS 

Declarative obligations 
A taxable entity is required to decree the commencement or the cessation of business as well as to give notification of any change within 30 days. These statements shall be lodged with the competent tax office, at the local level. 

Obligation to issue an invoice 
This procedure provides for a basic obligation concerning the issuance of an invoice or an equivalent document, which must be issued no later than the fifth working day following that of the taxable event. 

For the purposes of tax control, any invoice or other document serving as invoice must be processed by computer or printed and numbered at an authorised printer; each invoice shall contain the expression "processed by computer", if this is the case, or the name of the printer and date of authorisation. 

In addition to numeration and dating, invoices or equivalent documents shall include the following information: the name, business name, the head-office or domicile of the vendor and the purchaser, as well as their fiscal identification numbers. This fiscal identification number as shown on an invoice issued to a taxable person of another Member State shall be preceded by the prefix PT (for identification of Portugal as the country attributing such number); the detailed statement of goods to which the transactions relate or the nature of the services rendered; the price net of tax, the applicable rate and the amount of tax due; the justification for non-application of tax, where appropriate.  

Fiscal Representative 
Non-resident taxable entities without a permanent establishment within Portuguese territory shall designate a representative (jointly liable with the entity he represents) in order to comply with the obligations resulting from the carrying out in Portugal of transactions chargeable to VAT, including registration for the purposes of this tax. 

In the absence of such a representative, those obligations are to be complied with by the domestic purchaser or customer. 

Sources: 
ERSE and OE2025.