T06E - IVA

Note: These guidelines are intended only as a summary. Tax laws and regulations change frequently and sometimes unexpectedly. It is strongly recommended that you seek professional advice.  

In 2026 reduced IVA/VAT of 6% rate continues to apply to food products intended for infants and young children, including follow-on formulas, foods for special medical purposes and complete diet substitutes for weight control.

The law that gives a temporary VAT exemption (with the right to deduct input VAT) on the products below now runs until 31 December 2026. The temporary VAT exemption that applies to:

• Fertilisers and products used to improve or condition soil

• Flour, cereals and seeds, including mixtures and by‑products from the food industry, as well as any products suitable for feeding livestock, poultry, other animals and farmed fish for human consumption

• Glass bottles normally used in farming activities

There is also a temporary VAT exemption for:

• Any dry or wet pet food supplied to legally recognised animal‑protection associations

Also reduced in VAT are now:

a) Olive‑to‑olive‑oil processing

• Services that convert olives into olive oil (e.g., by lagares) now explicitly qualify for the reduced VAT rate. 

b) Game meat (caça maior e menor)

• Fresh or frozen edible meat and offal from legally hunted species now fall under the reduced VAT rate. 

c) Art objects sold by registered art dealers

• Registered art dealers now benefit from the reduced VAT rate when selling artworks, except when the second‑hand goods regime applies.

Expanded VAT exemption for vehicles for people with disabilities

• The exemption for wheelchairs, tricycles and adapted cars is widened.

• It now also covers purchases by:

  • public‑interest organisations

  • non‑profit sports associations

  • social‑solidarity institutions

  • cooperatives

  • associations for and of people with disabilities

VALUE ADDED TAX (“IVA”) is levied on: 

Taxable entities: 

• All individuals and entities exercising an 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 transaction is in connection with the exercise of such activities, wherever it takes place (i.e. a foreign enterprise supplying goods within Portuguese territory)

• Those who carry out, on an occasional basis, a transaction liable to income taxation (Personal Income Tax-IRS or Corporate Income Tax-IRC)

• The beneficiary of certain services as expressly laid down by law and under the conditions therein provided for, when the supplier of such services is a foreign taxable entity not established in Portuguese territory

• All individual and legal entities who, under the customs laws, import goods 

• All individual and legal entities who, on an invoice or any other similar document, mention VAT/IVA. 

Since 2023, small producers of electricity (for example, people with solar panels who sell surplus energy back to the grid) were placed under the normal IVA/VAT regime, but only for the activity of selling electricity. 

We will not give specific information in this bulletin. Please get advice from your accountant.

Taxable transactions: 
The following continue to be subject to VAT/IVA: 

1) the supply of goods

2) the supplies of services

3) imports of goods from outside the European Community and 

4) certain transactions between members of the European Community where the vendor is equally a taxable person duly identified for VAT/IVA purposes in another Member State. 

Rates 
The tax rates in Portugal Mainland are as follows: a reduced rate of 6%; an intermediate rate of 13%; and a standard rate of 23%. 

• The reduced rate shall apply, in particular, to essential foods (like rice, cereals, and bread), water, pharmaceuticals, passengers transport, shows and public entertainment, accommodation in hotel units and also for respiratory protection masks and skin disinfectant gel. You can find the full list here:

  https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/civa_rep/Pages/c-iva-listas.aspx
  
  The intermediate rateshall apply to other products for human consumption (like canned meat and fish, dried fruit and coffee. You can find the full list here:

  https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/civa_rep/Pages/c-iva-listas.aspx#L2

• The standard rateshall apply to all supplies of goods and services not covered by the reduced or intermediate rates. 

The above-mentioned rates for those transactions that are deemed to take place in the Autonomous Region of Azores are 4%, 9% and 16% respectively and in the Autonomous Region of Madeira 5%, 12% and 22%.

Electricity
The reduced rate applicable to the supply of electricity continues in 2026 (this is is different for Azores and Madeira*) 

1. The reduced VAT/IVA rate (6%) is applied:

a. The fixed (power) component of the network access tariff, for consumers with a contracted power of up to 3.45 kVA.

b. Contribution to Audiovisual (CAV).

2. The intermediate VAT/IVA rate has been reduced from 13% to 6% and is applied to:

a. Electricity consumption not exceeding 200 kWh, in a period of 30 days, for consumers with contracted power up to 6.9 kVA.

b. To families with 5 or more persons, to the consumption of electricity that does not exceed 300 kWh.

3. The standard VAT/IVA rate (23%) is applied:

a. Electricity consumption exceeding 200 kWh in 2025 (or 300 kWh, in the case of families with 5 or more members).

b. At the remaining value of the contracted power.

c. Supplies to customers with contracted power greater than or equal to 10.35 kVA.

d. Electricity taxes and fees, namely the Special Consumption Tax (IEC) and the DGEG fee.

*In the Autonomous Region of the Azores the reduced VAT/IVA rate is 4% and in the Autonomous Region of Madeira the reduced VAT/IVA rate is 5%. The standard VAT/IVA rates are 16% and 22%, respectively.

Deductions - Right to Tax Deduction 
The tax liability of a taxable entity is the difference between the amount resulting from the application of the tax rate to the value of sales or services rendered, during a given period of time, and the amount of tax borne on the acquisitions made in the same period. 

Portugal rolled out several VAT/IVA reforms effective 1^st of July 2025 and they’re especially relevant if you're self-employed or run a small business.

VAT (IVA) Exemption Businesses

• The general VAT exemption for small self‑employed workers (regime de isenção – Art. 53 CIVA) remains at €15,000 in 2026.

• From 1 January 2026: If you exceed €15,000, you must register for VAT and you have 15 days to communicate this to the Finanças

• Businesses with turnover below €650,000 will be required to file monthly VAT/IVA returns from 2026.

The exemption regime allows you not to charge tax, but you are also unable to deduct it. Consider the best situation for your activity. There is no answer that applies to all situations. Check with an accountant first before you request the exemption.

If you’ve had no taxable operations, the system will auto-file your VAT/IVA return—no manual submission needed.

Your declared VAT income will now automatically sync with Social Security systems, streamlining your contributions and compliance.

From July 2025 non‑residents can no longer use the small‑business VAT exemption, regardless of turnover.

• Alojamento Local holders in Portugal that are non‑residents can no longer use the small‑business VAT/IVA exemption, regardless of turnover Under Decree-Law No. 35/2025:

  • Register for VAT/IVA in Portugal.

  • Charge VAT/IVA at 6% on all bookings (5% Madeira and 4% Azores).

  • Appoint a fiscal representative in Portugal (if you are non-EU/EEA).

  • Submit periodic VAT/IVA returns.

  These changes align with EU directives to harmonise VAT/IVA rules and enforce compliance for non-residents engaged in economic activity within EU member state.

• For other SME schemes, please contact your accountant.

Payment
After the deductions and assessment of tax payable, payment is made to the VAT/IVA Authority by cheque, postal order or bank transfer.

Self-employed individuals under the simplified regime must now submit quarterly VAT/IVA declarations rather than annually. 

VAT taxpayers can apply for flexibility in the payment of VAT/IVA in the monthly and quarterly regime for delivering the periodic CIVA return.

Flexibility Measures for VAT/IVA Taxpayers

• Payment Deferral Options: Taxpayers experiencing temporary cash flow issues can request payment deferral for VAT/IVA obligations. These are reviewed case-by-case by the Autoridade Tributária and often require justification of hardship or delayed client payments.

• Split Payment Arrangements: In certain cases, taxpayers may apply to pay VAT in installments, especially if the amount due is substantial or if unexpected expenses disrupted normal operations.

• Waiver of Penalties for First-Time Errors: The new rules introduce leniency for minor filing or payment delays, especially for those filing returns for the first time under the monthly regime.

• Transitional Assistance for New Monthly Filers: Businesses shifting from quarterly to monthly returns in 2026 (due to surpassing turnover thresholds) may receive transitional support and extended deadlines during their adjustment phase.

• Digital Reminders & Alerts: Registered taxpayers using certified invoicing platforms now receive automated alerts about upcoming deadlines, reducing accidental late submissions.

TAXPAYERS' OBLIGATIONS

Declarative obligations
Any taxable person must notify the tax authority when they:

• start a business

• change relevant business details

• cease activity

The deadline remains 30 days, and the declaration must be submitted to the tax office (usually done online through the Portal das Finanças.

Obligation to issue an invoice
An invoice must be issued no later than the 5th working day after the taxable event (sale or service). Invoices must be:

• produced by certified software, or
• printed and numbered by an authorised printer (rare nowadays).

Invoices must include:

• Name, address, and tax number of both seller and buyer
• “PT” prefix before the VAT number when the buyer is an EU taxable person
• Description of goods or services
• Net price, VAT rate, VAT amount
• Reason for VAT exemption, if applicable
• Sequential numbering and date
• “Processed by computer” if issued via software

All self‑employed workers must now issue invoices using certified invoicing software approved by the Portuguese Tax Authority. This requirement is permanent and continues in 2026.
Manual paper invoices are no longer allowed except in very specific emergency situations.
Until 31 December 2026, invoices issued in PDF format are legally accepted as electronic invoices.

Fiscal Representative 
Non-resident taxable entities without a permanent establishment within Portuguese territory must designate a representative. The representative is jointly liable for VAT compliance, including registration, filings and payments.  

In the absence of such a representative, those obligations are to be complied with by the domestic purchaser or customer. 

EU/EEA‑resident businesses and individuals do not need a fiscal representative, even if they are not resident in Portugal.
They must still register for VAT if they carry out taxable transactions in Portugal — but they do so directly, without a representative (see for further information our Factsheet FS 36)

Source: ERSE and OE2026.