IVA (Imposto sobre o Valor Acrescentado) is Portugal's value-added tax, charged on most sales of goods and services. Mainland Portugal applies three rates — a 23% standard rate, a 13% intermediate rate, and a 6% reduced rate — while the Autonomous Regions of Madeira and the Azores apply their own lower regional rates. Small businesses and independent workers with a low turnover can benefit from a VAT exemption regime (Article 53 of the CIVA) rather than registering for and charging VAT.
Anyone starting a business or freelancing in Portugal needs to know which VAT rate applies to what they sell, whether they qualify for the small-business exemption, and how often they must file VAT returns — getting registration or invoicing wrong (e.g., charging the wrong rate, or invoicing without VAT above the exemption threshold) creates compliance problems with the Autoridade Tributária (AT).
Key Facts
Mainland Portugal VAT rates: standard 23%, intermediate 13%, reduced 6%.
Which rate applies to a specific good or service is determined by consulting Lists I (reduced rate) and II (intermediate rate) annexed to the CIVA (VAT Code) via the Portal das Finanças; anything not listed defaults to the standard rate.
Small-business VAT exemption (Regime de Isenção, Article 53 of the CIVA): applies to taxpayers based in Portugal whose turnover in national territory did not exceed €15,000 in the prior calendar year (threshold in force since 2025 and maintained in 2026, per Decreto-Lei n.º 35/2025, which also extended eligibility to independent workers with organized accounting and to certain importers).
Exiting the exemption regime: if prior-year turnover exceeds €15,000, the taxpayer must file a declaração de alterações within 15 business days of year-end and is enrolled in the normal VAT regime from January 1 of the following year; if turnover exceeds €18,750 (the €15,000 threshold plus 25%) during the year itself, the taxpayer moves immediately to the normal regime and must charge VAT on the excess and notify the Portal das Finanças within 15 business days.
Filing frequency: quarterly VAT returns apply to businesses with turnover under €650,000 in the prior calendar year, due by the 15th of the second month following each quarter; monthly returns are required above that turnover threshold, due by the 10th of the second month following each month. Businesses below the quarterly threshold may opt into monthly filing, with a minimum 3-year commitment.
An isolated/one-off transaction under €25,000 in annual terms does not require a formal declaração de início de atividade with the tax authority, per gov.pt.
Steps
1. Determine whether you must register for VAT — If projected or prior-year turnover exceeds €15,000, or you choose not to use the small-business exemption, you must register for VAT (submit a declaração de início de atividade or declaração de alterações via the Portal das Finanças).
2. Identify the correct VAT rate for your goods/services — Check Lists I and II annexed to the CIVA on the Portal das Finanças to confirm whether your goods/services qualify for the reduced (6%/5%/4%) or intermediate (13%/12%/9%) rate, or default to the standard rate (23%/22%/16%) depending on whether you operate in mainland Portugal, Madeira, or the Azores.
3. Issue compliant invoices — Charge VAT at the applicable rate on invoices, and use certified invoicing software where required.
4. File periodic VAT returns — File quarterly (by the 15th of the second month after the quarter) or monthly (by the 10th of the second month after the month) returns via the Portal das Finanças, depending on your turnover-based filing frequency, and pay any VAT due.
5. Monitor turnover against the exemption threshold — If under the €15,000 exemption, track turnover through the year — crossing €18,750 mid-year triggers immediate registration obligations, not just a year-end one.
Timelines
Quarterly VAT filers: return due by the 15th of the second month following the end of each quarter.
Monthly VAT filers (turnover over €650,000 in prior year): return due by the 10th of the second month following each month.
Small-business exemption exit (annual threshold breach): declaração de alterações due within 15 business days of year-end.
Small-business exemption exit (mid-year 25% buffer breach, i.e., over €18,750): must notify Portal das Finanças within 15 business days of the breach.
Common Mistakes
Applying mainland VAT rates to sales made in Madeira or the Azores, where lower regional rates apply.
Assuming the small-business exemption is permanent — exceeding €15,000 (or the €18,750 mid-year buffer) triggers mandatory registration and VAT charging.
Filing quarterly when turnover has crossed the €650,000 threshold requiring monthly filing (or vice versa without meeting the 3-year opt-in commitment).
Not checking the official Lists I and II on the Portal das Finanças and instead guessing which reduced/intermediate rate applies to a specific product or service.