VAT (IVA — Imposto sobre o Valor Acrescentado) is an indirect tax on consumption. It is ultimately paid by the final consumer, but it is charged and remitted to the State by professionals and companies (including TI and ENI).
How does VAT work?
The system typically follows three steps:
The TI/ENI adds VAT to the invoice amount (if not exempt);
The customer pays the VAT together with the price of the service/goods;
The TI/ENI pays that VAT to the State, after deducting input VAT on business purchases (when deductible).
Who is subject to VAT?
They must charge and report VAT:
Self-employed workers and ENI outside the exemption regimes;
Companies (Lda, SA, cooperatives, etc.);
Any taxable person carrying out non-exempt activity under the VAT Code (CIVA).
Who is exempt from VAT?
There are two main types of exemption:
1) Turnover-based exemption — CIVA Article 53
Applies when annual turnover from transactions located in Portugal is ≤ €15,000 (2025).
Transactions located outside Portugal (e.g., services to EU business clients with a valid VAT number, extra-EU exports) do not count towards this threshold.
👉 In these cases, the TI/ENI does not charge VAT and does not file the Periodic VAT Return (Modelo 300).
⚠️ They must still issue invoices and report them to the Tax Authority (AT).
2) Activity-based exemption — CIVA Article 9
Applies to specific activities such as:
Healthcare (doctors, therapists);
Education (teachers, trainers);
Residential rent.
👉 In these cases, VAT is not charged regardless of turnover.
What are the VAT rates in Portugal?
Portugal has three VAT rates, and the percentages vary by territory:
Rate type | Mainland | Madeira | Azores | Examples |
Standard rate | 23% | 22% | 16% | General services, retail, consulting |
Intermediate rate | 13% | 12% | 9% | Prepared foods, beverages |
Reduced rate | 6% | 4% | 4% | Basic food, medicines, books |
The applicable rate depends on where the goods are delivered or where the service is considered consumed.
Which operations are subject to VAT?
Sales of goods (in-store or online);
Provision of services (consulting, design, etc.);
Imports of goods from outside the EU;
Intra-Community acquisitions (purchases within the EU).
VAT in international transactions (TI/ENI overview)
Sales to the EU (intra-Community supplies): generally exempt in Portugal if the customer has a valid VAT number in VIES → the customer applies reverse charge in their country.
Exports (outside the EU): VAT-exempt in Portugal, provided you have documentary proof of export.
Imports: VAT is paid in Portugal at customs clearance; it may be deductible if related to the business.
Services to foreign customers: depends on the type of service and on whether the client is a business or a private consumer, with different rules for EU vs non-EU.
How do you report VAT?
If you are in the standard regime, you must:
Issue invoices with VAT (or with the correct exemption reference);
Calculate output VAT (VAT charged on sales) and input VAT (VAT on purchases) if deductible;
Submit the Periodic VAT Return (Modelo 300) monthly or quarterly;
Pay the VAT due within the legal deadlines.
⚠️ Additionally, if you carry out EU transactions with customers that have a valid VAT number, you must also submit the Recapitulative Statement (Modelo 349).
Consequences of non-compliance
Fines and late-payment interest;
Loss of the right to deductions;
Audits and additional penalties.
Conclusion
For TI and ENI, correct VAT treatment depends on turnover, the nature of the activity, and where the customer is located. Knowing when to charge VAT, when an exemption applies, and which returns must be filed is essential to stay compliant.