VAT and the sole trader
AS IS the norm throughout the European Union, all business transactions are potentially subject to IVA (value added tax). The key points relevant to the self-employed in Portugal are:
Taxable entities
• All individuals exercising a business 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 a transaction is in connection with a business activity, wherever it takes place.
Taxable transactions
• The supply of goods.
• The supply of services.
• Imports of goods from outside the European Community.
• Many transactions between members of the EU.
Exemptions
When annual turnover does not exceed 9,975.96 euros, the sole trader is exempt from collecting and reporting VAT.
Rates
The tax rates are as follows:
• A reduced rate of five per cent.
• An intermediate rate of 12 per cent.
• A standard rate of 21 per cent.
In the Azores and Madeira Islands, the rates are four per cent, eight per cent and 15 per cent.
Deductions
Right to tax deduction
The tax liability is the difference between the amount of tax that you collect and the amount that you paid in the course of necessary business expenditures in the same period.
Payment
After the deductions and assessment of tax payable, payment is made to the VAT authority by cheque, postal order or bank transfer by day 15 of the second month following the quarter to which the transactions relate.
The same rules apply to intra-community activities. VAT is paid together with the transactions for the period.
Taxpayers’ obligations
Declarative obligations
A taxable entity is required to declare the start and close of the business activity as well as to give notification of any changes within 30 days.These declarations are lodged with the local tax office.
Obligation to issue an invoice
It is mandatory to issue invoices no later than five working days following the taxable event.In addition to numbering and dating, invoices must include the name, business name, the head-office or domicile of the vendor and the purchaser, as well as their respective fiscal identification numbers. This fiscal identification number as shown on an invoice issued to a taxable person of another Member State, should be preceded by the prefix PT – the detailed statement of goods or the nature of the services rendered, the price net of VAT, the applicable rate and the amount of VAT due; the justification for non-application of tax, where appropriate.
Filing over the internet
Since May 2005, it is mandatory for all IVA declarations to be submitted via the internet. Consult the following website: http://www.e-financas.gov.pt/de/jsp-dgci/main.jsp
• Dennis Swing Greene is Senior Partner and International Fiscal Consultant for euroFINESCO. Private consultations can be scheduled at our offices in Guia (Albufeira) and Lisbon (Chiado). In the Algarve, call 289 561 333 or in Lisbon, 213 424 210 or e-mail: [email protected], or on the internet at www.eurofinesco.com
