As part of the fight against the underground economy, the Portuguese government has introduced several tax incentives to encourage consumers to ask for invoices, thereby assuring that VAT is paid and income tax reported.
Starting in 2013, the AT (Autoridade Tributária) began offering partial VAT refunds for certain high profile services. Since then, new measures have been introduced each year. Parallel to these measures, traditional tax credits such as health care, education, housing and insurance have stagnated or suffered net decreases.
The overall results are plain to see. According to Finanças, between January and October 2014, over 4,000,000,000 invoices were issued and communicated, a 10% increase over the same period one year previously.
Here are three tax advantages resulting from asking for an invoice with your fiscal number when making normal purchases:
1. VAT benefit: up to €250 per household
In 2013, the first fiscal break – however modest – from requesting invoices was implemented. This incentive currently consists of deducting 15% from the VAT paid to certain businesses such as hairdressers, beauticians, restaurants, hotels and car repair services. The maximum tax credit is €250 per household and is only valid for invoices with a fiscal number. To achieve the upper limit of the credit, you currently need to spend almost €9,000. Initially only 5% of VAT was considered, which meant consumers had to make expenditures totalling €26,600 to attain the upper limit. Needless to say, the 15% benefit proves a more attractive stimulus.
2. “Lucky Invoice” lottery: an Audi every week for a lucky taxpayer
To further strengthen incentives, in 2014 the government introduced a new measure called the “Lucky Invoice lottery” (Fatura da Sorte). The weekly prize is an Audi A4. To be eligible to win, you need only to request an invoice with your fiscal number. Finanças automatically assigns a “Lucky Invoice” coupon for every €10 invoiced. The drawings are weekly plus two special semi-annual sweepstakes in June and December.
3. General family expenses: up to €250 per person
This year, there is a broad, new category for requesting invoices: general family expenses. Under this programme, you can deduct 35% of reported purchases of goods and services. In accordance with e-invoice rules, general everyday outlays qualify, such as groceries, travel, electricity, water, telephone, etc. The maximum credit is €250 per person (€500 per couple). To obtain the full benefit requires an annual consumption of €714 per person or €1,528 per couple. Note that only invoices that include your fiscal number are eligible for the tax credit. These invoices also remain eligible for the “Lucky Invoice” drawing.
To simplify matters, Finanças has made available online a personalised, printable “e-fatura” card with your fiscal number and a bar code for quick and accurate reading. Showing the card sorts out the difficulties cashiers often have with foreign names and helps to avoid long, frustrating queues at the checkout in supermarkets. To receive these credits, taxpayers must validate invoices online at https://faturas.portaldasfinancas.gov.pt/home.action. Unfortunately, to date, there is only a Portuguese language version of the web page available.
While we all enjoy tax savings, there is a darker side. Although the tax man still needs our cooperation from time to time, there is little doubt what direction information sharing is taking. More and more data is collected about us by government and business alike: how we earn our money, where we keep it and how we spend it. Not only has confidentiality vanished, privacy is disappearing along with it.
By Dennis Swing Greene
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Dennis Swing Greene is Chairman and International Tax Consultant for euroFINESCO s.a.