VAT Regime in Portugal

IVA stands for Imposto sobre o Valor Acrescentado, which translates to Value Added Tax in English. It is a tax that is applied to most goods and services in accordance with the standards established by the European Union. It's important to apply the correct VAT rate to avoid penalties and ensure compliance with Portuguese tax laws. If you're unsure of which VAT rate to select when issuing an invoice, we recommend that you seek advice from an accountant or check for more information here.

VAT Rates

There are three VAT rates in Portugal: the standard rate of 23% (22% in the Autonomous Region of Madeira; 18% in the Autonomous Region of the Azores), the intermediate rate of 13% (12% in Madeira; 9% in the Azores), and the reduced rate of 6% (5% in Madeira; 4% in the Azores).

The intermediate rate is applicable to the supply of some food products, some food and beverage services, musical instruments, agricultural tools or ornamental flowers.

The reduced rate is applicable, among others, to the supply of some essential food products, periodic publications, books, pharmaceutical products, hotel accommodation, agricultural products, passenger transport, supply and installation of solar thermal and photovoltaic panels, as well as respiratory protective masks and disinfectant gel.

Exports and intra-EU supplies of goods are zero-rated.

Exemption for low turnover

Companies or self-employed persons are exempt from the payment of Value Added Tax (VAT) when they have a turnover of less than:

• EUR 10 000 if activity started before 31 March 2020.
• EUR 11 000 if activity started after 1 April 2020.
• EUR 12 500 if activity starts as of 2021.

To be exempt from paying VAT under Article 53 of the Value Added Tax Code, taxable persons must not have a turnover of more than:

• 13 500 thousand euros in 2023.
• 14 500 thousand euros in 2024.
• 15 000 thousand euros in 2025.

If you meet the requirements for inclusion in the small retailers' scheme, in order to be entitled to VAT exemption, you must have a turnover of more than 10.000 euros but less than 15.000 euros.

In addition to the turnover limit, companies and self-employed persons must:

• not have, and not be required to have organised accounts for personal income tax purposes
• not import or export products
• not market or provide services in the waste, scrap and recycling sector.

For more information, please refer to Article 53 of the Value Added Tax (VAT) Code.