Insights

VAT DEDUCTION

27/08/2012

Decree-Law 198/2012 of 24 August, regards to the creation of measures to control the issuance of invoices and create tax incentives to taxpayers requiring the invoices issuance. 

As part of the measures adopted to combat tax evasion emphasizes the creation of a system of electronic transmission of invoices' data and other tax relevant documents to which taxpayers with head office, permanent establishment or tax residence in Portugal are subject provided they practice local transactions subject to VAT. 

It creates a deduction on the Individual Income Tax (IRS) equal to 5% of the VAT incurred by any member of the household, with an overall limit of € 250.00, provided such VAT is included in invoices related to the rendering of services in the following industry sectors: 

- Maintenance and repair of motor vehicles;

- Maintenance and repair of motorcycles, spare parts and accessories;

- Accommodation and food service; and

- Activities of hairdressing salons and beauty institutes. 

The tax benefit is granted provided that (i) the annual IRS return of the household is filed within the statutory period, (ii) the invoice states the tax identification number of the taxpayer, and (iii) the invoices are kept in the possession of taxpayer for a period of four years. 

The value of the incentive is assessed by the Tax Authority on the basis of invoices submitted until January 31 of the year following its issuance and the amount is made available on the Tax Authority website (Portal das Finanças) until the 10th of February of the year following the issuing invoices. 

It is also created and made available free to taxpayers a software application designed to extract from SAF-T (PT) files of the companies, the relevant data  related to the invoices to be sent to the AT, as well as the necessary means to enable direct submission of data from invoices through "Portal das Finanças". 

Individuals who are registered for VAT can only benefit from incentives regarding invoices from operations performed outside the scope of their business or professional activity. 

The Decree-Law amends the Tax Benefits Statute and amends and republishes the regime applicable to the circulating of goods object of transactions subject to VAT. 

Amendments shall enter into force on 1 January 2013.

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