Portugal adopts transitional tax measures to manage COVID-19
Ana Helena Farinha and André Caetano Ferreira of Cuatrecasas discuss how the Portuguese government has moved to assist businesses and taxpayers affected by the coronavirus outbreak.
Bracing itself for the negative impact that COVID-19 will have on economic activity, Portugal’s government has taken several transitional tax measures aimed at enhancing the liquidity situation of companies and simplifying their compliance with tax obligations.
Corporate income tax (CIT) return and payments
Considering the exceptional situation, the deadlines for companies to comply with certain tax obligations have been extended, which means companies have until:
August 7 (instead of July 15) to file their simplified business information (IES) return, with no penalties;
August 31 (instead of July 15) to prepare and file (if required) their tax file (including transfer pricing documentation), with no penalties;
June 30 (instead of March 31) to make the first special payment on account, with no penalties; and
August 31 (instead of July 31) to make the first advance and first additional advance payment, with no penalties.
Also, CIT and personal income tax (PIT) amounts withheld in April and May 2020 may be delivered by May 25 and by June 25, respectively (instead of May 20 and June 20, respectively).
Settling and paying stamp tax
Stamp tax settlement and payment obligations for January, February and March 2020 were extended to April 20 2020, with no penalties.
Stamp tax, regarding the months of April and May 2020, may be paid by May 25 and June 25, respectively (instead of May 20 and June 20, respectively).
Periodical value added tax (VAT) return
The February, March and April 2020 deadline for filing the periodical VAT returns (monthly regime) has been extended to April 17, May 18 and June 18, respectively, and the payment deadline has been extended to April 20, May 25 and June 25 (without prejudice of the option to a tax payment plans).
The first quarter 2020 deadline for filing the periodical VAT return (quarterly regime) has been extended to May 22 and the payment deadline has been extended to May 25 (without prejudice of the option to a tax payment plans).
Tax payment plans
VAT payments and PIT and CIT withholdings
Additional tax measures have been established to support business enterprises, coming into force during the second quarter of 2020.
Therefore, taxpayers may opt for fractioning payments (without interest), in three or six monthly installments, for VAT payments, PIT and CIT withholdings due in April, May and June, without interest and without having to provide a guarantee.
The option for fractioning payments applies to companies:
With a turnover of up to €10 million in 2018;
Whose business activity is included in the closed activity sectors under Article 7 of Decree 2-A/2020, of March 20, as amended;
That started (or restarted) their business activity on or after January 1 2019 (and did not have a turnover in 2018); and
That have a reduction in the invoicing communicated through E-Fatura of at least 20% on average for the three months preceding the month to which the obligation relates, compared to the same period in the previous year.
If the invoicing data reported through the E-Fatura platform does not reflect all the operations subject to (or exempt from) VAT, the invoicing reduction should be ascertained in reference to turnover.
The invoicing reduction made based on the E-Fatura platform or turnover should be proven through certification by the statutory auditor or a chartered accountant.
The option for fractioning payments must be made electronically, up to the deadline for making the voluntary payment.
If a taxpayer chooses the fractioning payment, the first monthly payment is due on the date of the payment obligation, and the remaining payments must be made on the same day of the subsequent months.
Periodical VAT returns
To simplify taxpayers’ compliance obligations, February and March 2020 (monthly regime), as well as first quarter 2020 (quarterly regime) periodical VAT returns may be filed based only on information included in the E-Fatura platform and with no supporting documentation. This measure applies to:
Companies with a turnover of up to €10 million in 2019; and
Companies that started (or restarted) their business activity on or after January 1 2020 (and did not have a turnover in 2019).
However, if any adjustment is required, this return must be replaced by an amendment periodical VAT return, with no penalties, provided the return is filed and the VAT payment is made in July 2020 for February VAT return and in August 2020 for March and 1st quarter 2020 VAT return.
Invoices in PDF format
The possibility of issuing and receiving invoices in PDF format during April, May and June 2020 was also established, with these invoices being equivalent to electronic invoices for tax purposes.
Electronic invoicing to public entities
It was determined that companies (other than micro, small and medium-sized enterprises) that invoice public entities are only obliged to invoice through electronic invoicing procedures from January 1 2021 (instead of April 18 2020).
For small and medium-sized enterprises, this deadline is extended to July 1 2021, and for micro enterprises to January 1 2022 (instead of January 1 2021, for both situations).
Paying stamp tax
The monthly stamp tax return approved is only mandatory for operations and facts that were liable for stamp tax on January 1 2021. To pay any stamp tax due, taxpayers should continue to file the stamp tax document in force in 2019.
To complement the above transitional measures, an overall stay of statute of limitation deadlines has been established, as well as a stay of the deadlines to submit administrative claims, judicial claims, and appeals against tax assessments. Deadlines are also stayed in tax misdemeanour procedures, as well as the starting of procedures pursuing tax foreclosure.
The above stay of deadlines does not apply to tax audit procedures or the deadlines for taxpayers to comply with the tax authorities’ information or clarification requests.
Exemption for donations
Transfers of goods free of charge to the state, to private institutions of social solidarity (IPSS) and to non-profit, non-governmental organisations aimed at people who need health care during the national emergency period related with the COVID-19 pandemic are exempt from VAT.
This VAT exemption allows the deduction of the input VAT, entitling the taxable person donating the goods to recover the VAT on the costs of acquiring them.
It was also established that until July 31 2020, donations granted by resident entities to SPMS (Serviços Partilhados do Ministério da Saúde), EPE (public enterprise or Empresa Pública Empresarial) and hospital institutions integrated in the regional public health services, all with the status of EPE, are allowed as a tax deductible cost for CIT purposes for 140% of the respective amount, being exempt from stamp tax.
Exemption and reduced VAT rate applicable to certain goods
The following temporary measures were approved:
VAT exemption on the domestic transfer and intra-EU acquisition of goods needed to combat the effects of the COVID-19 pandemic by the government and public entities or non-profit organisations.
Reduced VAT rate for the importation, transfer and intra-EU acquisition of masks for respiratory protection and sanitiser gel.
Please note measures above shall apply until December 31 2020.
Ana Helena Farinha
André Caetano Ferreira