Portugal: New VAT payment regime on import of goods

Isabel Reis

The budget law for 2017 (Law No. 42/2016 of December 28 2016) introduced a new VAT regime that provides rules for the payment of VAT due on the import of goods by self-assessment through the corresponding periodic return. The procedure to follow for its application is established in Ordinance 215/2017, of July 20.

This regime intends to relieve importing companies from the financial costs associated with the immediate VAT payment (upon customs clearance) or, when deferred, by the provision of the corresponding guarantee. To circumvent this burden, taxpayers often import goods into another member state under a VAT suspension regime to be subsequently dispatched to the national territory. Accordingly, VAT due is self-assessed in Portugal by the relevant intra-community acquisition of goods and immediately offset (assuming that the taxpayer is entitled to deduct input VAT) with no financial impact, resulting on a clear cash-flow advantage to such taxpayers as long as transport costs do not exceed the said fiscal advantage.

VAT taxpayers may opt to implement the new regime when the following conditions are met:

• The monthly regime is applied;

• Their tax situation is regularised;

• They perform, exclusively, transactions subject and not exempt from VAT, or exempt with the right to deduction, without prejudice of executing accessory real estate or financial transactions; and

• They do not benefit from the deferral on the payment of the VAT corresponding to previous imports on the date the option takes effect.

This regime is applicable from March 1 2018. To comply, taxpayers should submit electronically a request through the Portuguese tax authority's (PTA) website (Portal das Finanças), by the 15th of the month previous to which they intend to start using this method of payment. The PTA shall attest the fulfilment of the required conditions communicating its validation (or lack of conditions) through the website within five days of the request date.

However, a transitional period from September 1 2017 was approved in the law, which is applicable to imports of the goods detailed in Annex C of the VAT Code, which include, among others, minerals, cereals, coffee, tea and sugar, but exclude mineral oils. To benefit from this provision taxpayers will have to submit the electronic request by August 16.

Once the option for the regime is selected, it must be maintained for a six-month period. The effects will only cease:

• By communication of the taxpayer through the PTA's website by the 15th of the month previous to which he intends to apply the general imports VAT payment regime; or

• When any of the conditions required for its application are no longer met. Taxpayers must communicate this fact to the PTA by the 15th of the month following the occurrence and the effects of the option shall cease on the 1st of the subsequent month.

Failure to comply with this obligation will entail immediate termination of the regime ensuing notification by the PTA (when aware), and further subjection to the general imports VAT payment regime on the 1st of the month following the notification date.

When its application ceases, the taxpayer will only be able to apply for a new one a year after the termination date.

Isabel Reis (isabel.vieira.reis@garrigues.com), Lisbon

Garrigues

Tel: +351 213 821 200

Webiste: www.garrigues.com