May 26, 2021 Portugal clarifies VAT rules related to nonresident taxable persons Executive summary On 27 April 2021, the Portuguese Tax Authorities published Administrative Ordinance nº. 30235, to clarify the rights and obligations, for Value Added Tax (VAT) purposes, of nonresident taxable persons performing taxable operations located within the Portuguese territory. It is important to emphasize that the instructions identified within the aforementioned Ordinance took effect as of 27 April. However, the guidelines under previous ordinances, supporting the current administrative instructions now published must also be complied with. This Alert summarizes the key clarifications. Detailed discussion Nonresident VAT taxable entities Obligation to register and appoint a fiscal representative Taxable persons carrying out taxable operations in Portugal, except when they are not subject to VAT, due to the reverse charge rules as set forth under Article 2 (1) (e), (g) or (h) of the Portuguese VAT Code, are required to register for VAT purposes in Portugal. This obligation requires an application for a Portuguese VAT number. Under Article 30 of the Portuguese VAT Code, nonresident taxpayers without a head office, permanent establishment or domicile in another European Union (EU) Member State, which carry out taxable operations in the territory, are required to appoint a fiscal representative in Portugal. However, in the remaining cases this requirement has an optional nature. Additionally, it should be highlighted that taxable operations performed by a nonresident VAT taxable entity, without a fiscal representative in Portugal but with a Portuguese VAT registration, are subject to the general obligations of the Portuguese VAT Code, including invoicing requirements, VAT payment obligations and the filing of the periodic VAT returns, as set forth under Article 41 of the Portuguese VAT Code. In light of the above, nonresident VAT taxable entities who only carry out operations subject to the reverse charge mechanism further to the domestic rules set forth in Article 2 (1) (e), (g) and (h) of the Portuguese VAT Code, should not have a VAT registration within the national territory. Non-application of the invoicing requirements1 to nonresident VAT taxable entities When the obligation to assess the VAT falls upon the acquirer of the goods or services, through the application of the reverse charge rules, the issuance of the invoices by nonresident VAT taxable entities shall not be subject to the rules set forth under the VAT Code, in accordance with Article 35-A (3) of the Portuguese VAT Code. Notwithstanding the above, invoices subject to the provision of Article 36 (11) of the aforementioned VAT Code (self-billing procedure) raised by Portuguese resident or established acquirers for operations carried out herein are subject to the rules set forth within the Portuguese VAT Code. Right to VAT deduction and VAT refund for nonresident taxable persons Nonresident taxpayers may request a refund of the VAT levied on operations carried out in Portugal, with certain exceptions. Also, VAT taxable entities established in another EU Member State, who do not have their head office, permanent establishment or domicile in Portugal and who have not performed any taxable operations in Portugal during same period, are also entitled to a refund of the VAT effectively incurred within the national territory, with the exception of the following:
VAT taxable entities established outside of the EU are also entitled to a VAT refund, under the conditions mentioned above, provided there is reciprocity treatment by the States where they are established. For this purpose, they must appoint a Portuguese fiscal representative. In this regard, it should be noted that the latter is appointed merely for the purposes of the VAT refund regime for nonresidents and this implies the non-existence of a VAT registration in Portugal. Reverse charge The reverse charge rules transfer the VAT assessment and payment to the sphere of the acquirer. By doing so, this regime eliminates the obligation to register for VAT purposes in Portugal for nonresident taxpayers who only carry out operations subject to the reverse charge mechanism and rules provided under Article 2 (1) (e), (g) or (h) of the Portuguese VAT Code. Article 2 (1) (g) This rule transfers the obligation of assessment and payment of the VAT due to the taxable person who has its head office, permanent establishment or domicile in the national territory or, that has appointed a fiscal representative herein, under the terms of article 30 of the Portuguese VAT Code, when acquiring goods or services from a nonresident VAT taxable entity which has its head office, permanent establishment or domicile in another EU Member State, and which does not have a fiscal representative in Portugal. In this context, it is important to highlight that, the nonresident supplier of goods or renderer of services that has a fiscal representative in Portugal is required to communicate this fact to the acquirer, prior to the completion of the operations. If there is no such communication, the acquirer becomes liable for the payment of the VAT herein due. The correct way to proceed with such communication was not detailed by the Portuguese Tax and Customs Authorities in the current Administrative Ordinance. Article 2 (1) (e) and (h) In what concerns to these provisions, due to the fact that they do not provide, as a condition for their application, the non-appointment of a fiscal representative under the terms of Article 30 of the Portuguese VAT Code, the reverse charge rule occurs whenever the supplier of the goods or the services provider is a nonresident taxpayer. Scope of the taxable person's concept for purposes of the reverse charge rules' applicability The reverse charge is applicable in the following cases:
_________________________________________ For additional information with respect to this Alert, please contact the following: Ernst & Young, S.A., Lisbon
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