Portugal extends VAT reverse charge

The Portuguese Autoridade Tributária e Aduaneira tax office has extended the application of the Value Added Tax domestic reverse charge for non-resident businesses and B2B supplies of goods or services. This significantly reduces the use cases where foreign suppliers have to charge Portuguese VAT – instead leaving the reporting to their customer. This came into effect on 27 April 2021.

The outcome is that non-residents will no longer charge VAT when their customer is Portuguese VAT registered. Previously, if the foreign supplier was Portuguese VAT registered, they would be responsible for charging and collecting VAT from their business customer. The exception is where a Fiscal Representative for the supplier is in place to ensure proper calculation, charging and remittance of the VAT.

Where this means that the foreign business is not charging VAT on any transactions, it should deregister for VAT.

How the reverse charge works

The reverse charge is a method used to switch VAT reporting from a supplier to its business customer. In the case of non-residents, it can reduce the risks of fraud but also reduce the occasions where it may require a VAT registration. The reverse charge was originally introduced as a VAT simplification tool. If has since been adopted on domestic supplies of goods prone to VAT fraud, including: laptops; mobile phones; previous metals; carbon trading; electricity and gas.

Make accurate Portuguese VAT calculations on individual or batch transactions with our Advisor and Auditor services.

EU VAT General and Domestic Reverse Charge rule by country