Portugal Tax Refund: All You Need to Know

Imagine strolling through the vibrant streets of Lisbon or sipping a glass of Porto wine, knowing you’ve smartly navigated Portugal’s tax refund process.

This guide is your first step towards that reality. Designed for both seasoned expats and first-time visitors, we’ll unravel the tapestry of Portugal’s tax refund system with clarity and a hint of charm.

From eligibility criteria to step-by-step application processes, we’re here to ensure you understand how to reclaim your hard–earned money, making your Portuguese experience even sweeter.

Let’s dive in!

Who Is Eligible For A Value Added Tax (VAT) Refund?

Any self-employed person or organization may claim a value-added tax (VAT) refund if they have:

A claim for 12 months in a row that exceeds EUR 250
A claim above EUR 3 000
A claim above EUR 25 in the case of scheme termination or amendment.

To be eligible for a VAT refund, a self-employed person or company must:

Must have reported all invoices issued in prior quarters
Must have supplied information on a valid bank account held by the individual or firm
Not in default with VAT returns or payment
Must ensure that there is no contrast between reported values and the declared values of the tax which has been paid and is deductible
May not include people with an invalid Tax Identification Number (TIN) or who have ceased trading during the tax period.

Refund Of Tax Paid In Another Member State Based In Portugal

Refund claims are submitted to the Tax and Customs Authority (AT) over the Internet when filing the periodic declaration.

Within 15 days of receipt, AT will submit claims to the Member State issuing the return.

AT will not put in claims to the Member State issuing the reimbursement if the self-employed individual or business:

Is exempt from VAT
If it is not registered as an ongoing business with the Tax and Customs Authority.

If any of these conditions are met, applicants will get an email informing them that their claim has not been passed on to the Member State.

How Can I Obtain A Tax Refund For Payments Made Outside Portugal?

Determine Eligibility: Verify if you qualify for a tax refund based on the specific circumstances of your payments and residency status.

Gather Documentation: Collect all relevant documents, such as proof of payment, invoices, and any required forms.

Contact Tax Authorities: Reach out to the tax authorities in Portugal to inquire about the process for claiming a refund for payments made outside the country.

Submit Application: Complete and submit the necessary forms and documentation to initiate the refund process.

Await Processing: Allow time for the tax authorities to review your application and process the refund.

Receive Refund: Once approved, you should receive the refund through a designated method, such as direct deposit or check.

AT paid in Portugal may be returned to employees or businesses who:

Having no registered office or fixed business in Portugal from which they have carried out taxable activities
Have only provided transport and related services

Sums paid that were incorrectly invoiced, including those that may be exempt from payment, will not be repaid.

Refund Claim Based In Another Member State

Claim details: Refund claims must be submitted in the member state where the worker or company is located and must include:

Identification and tax identification number (TIN)
Address, and email
Description of professional activity using harmonized codes of the statistical classification of economic activities (NACE)
Identification of bank accounts, including International Bank Account Number (IBAN) and Bank Identifier Code (BIC)
The return period to which the claim relates
A declaration from the claimant verifying that it qualifies for the reimbursement.

The reimbursement claim must include the following information for each import the document or invoice issued in Portugal:

The supplier’s or service provider’s name, address, and tax identification number beginning with the letter PT
The invoice or import document’s date and number
the taxable amount
The VAT amount in euros
The amount of deductible VAT and, when appropriate, the percentage of deduction
The nature of the products and services purchased, as described by identification codes.

The refund claim must be made in Portuguese or English, and if you want to use a tax representative, the representative’s name, address, email address, and tax identity number (TIN) must be included.

The worker’s or company’s home country will not forward the claim to the member state issuing the reimbursement if:

All of the data has not been provided
The claimant was not registered as a continuing concern during the return period
The claimant exclusively carried out exempt activities during the refund period
The claimant is exempt from VAT.

The time limit for filing a claim: By September 30 of the year after the period to be refunded, the reimbursement claim must be lodged in the member state in which the claimant is established.

The time frame for a refund: Within four months, claimants will be notified whether a reimbursement has been granted or a request for additional information has been made.

If more information is required, the deadline will be extended by 2 or 4 months.

Even if repeated requests for further information are made, claimants will be notified of the reimbursement decision within a maximum of eight months.

If the claim is accepted, the money will be handed back to you within ten working days.

The claimant will be contacted via email, and the claim decision will be mailed.

Correction of a claim: Claimants have until September 30 of the year after the period to be refunded to revise or correct any refund claim.

Claimants may submit any adjustment up to the end of the year after the period to be repaid if the change is to correct the information of the invoice(s) supporting the claim.

Incorrect Assertions

If an inaccurate claim results in an overpayment, the Tax and Customs Authority (AT) will gather the overpayment plus interest and initiate a procedure that may result in the payment of a fine.

Refund Claims Outside Of The European Union

Claim details: Workers or firms founded in countries outside the European Union may seek refunds for VAT paid in Portugal if they are subject to a general turnover tax in that country and there is a reciprocity agreement between Portugal and that country.

Workers or businesses must choose a tax representative who is a resident of Portugal to obtain a refund.

The tax representative must submit claims in a written copy to the Tax and Customs Authority (AT) along with the following documents:

Original invoices and import paperwork
Proof of payment of value-added tax (VAT)
A certificate provided by the country where the claimant is based demonstrating that the worker or firm is subject to a general turnover tax and that workers or companies formed in Portugal are entitled to a refund of that tax.

The certificate mentioned in the previous point is valid for one year and is not necessary if Portugal and the country where the worker or firm is established have a reciprocal agreement.

The time limit for filing a claim: Refund requests must be received by September 30 of the year after the reimbursed period.

The time frame for a refund: Claims will be repaid, if appropriate, by the end of the sixth month following the month in which it is made.

Refunds will be built through a bank transfer to the account specified in the refund claim.

Activities That Are Not Eligible For VAT Refunds

VAT is not refundable:

For VAT-exempt activity
Where there are limits in the country of refund
For the purchase, use, import, or repair of tourism vehicles, boats, aircraft, and motorcycles, except where the sale or operation of such equipment forms the claimant’s economic activity
For business travel
Including tolls for all expenses other than normal operating expenses for food, accommodation, beverages, and tobacco, except where expenditure is incurred in connection with conferences, fairs, exhibitions, or congresses, in which case, refunds may be limited to 50% or 25%
For petrol

In most cases, just half the money paid for LPG, natural gas, diesel, or biofuels is repaid.

VAT on petrol, diesel, LPG, natural gas, and biofuels may be repaid in full if used by:

Unregistered machinery
Tractors meant exclusively or predominantly for agricultural use
Vehicles and commodities transport weighing more than 3 500 kg
Heavy-duty passenger vehicles
Cars licensed for public transport other than hire cars

Refund Ceiling

To be eligible for a refund, the sum must be at least:

EUR 400 if the return period is longer than three months but less than a year.
If the refund period is one year, the fee is EUR 50.

There is no set limit for VAT refunds.

Companies incorporated in another country are subject to a proportional deduction.

If a person or company can only deduct a percentage of the tax due to the legislation of the respective place of establishment, the value-added tax (VAT) paid in Portugal will be returned in line with the rules of that country.

Deduction In Proportion

Companies incorporated in other countries are subject to a proportional deduction.

Challenging A Decision

If claimants disagree with a ruling, they have the following options:

Complain to the Director of VAT Refund Services
Commence legal action

Complaints must be made within 120 days.

Buying Something In Portugal

If your purchase is qualified for a VAT return, notify the shop that you wish to participate in the VAT refund system.

They will ask for your passport, so bring it with you, and will offer you a standard receipt as well as a special tax-free form with a registration code. Keep both since you’ll need them at the Airport to collect your VAT refund.

The entire process is now done electronically through the e-Taxfree Portugal System.

Claiming VAT Refund At The Airport

You must claim a VAT refund at the Airport on the day of your EU departure. Arrive at least 30 minutes before your flight’s departure time.

Allow at least 30 minutes for the wait for a tax refund, but it can take much longer, especially during busy periods or if you’re in a queue behind a tour group.

Depending on whether you put the item you purchased in your checked luggage or not, proceed as follows:

Luggage must be checked: Inform airport check-in personnel that you have an item to declare. Then, take your passport and boarding permit, as well as the item in your luggage and the tax-free form, to an e-tax-free Portugal kiosk.

If you follow the instructions, the kiosk should approve the VAT refund and display Code Green. Return to the baggage claim area. Otherwise, Code Red indicates that you must report to Customs.

Hand luggage:

After passing through security, proceed to an e-tax-free Portugal kiosk with your passport and boarding pass, as well as the item and the tax-free form.

If you follow the instructions, the kiosk should approve the VAT refund and display Code Green. Otherwise, Code Red indicates that you must report to Customs.

Receiving a VAT refund: At Lisbon Airport, there are several VAT refund operators, and each operator may handle returns differently.

In general, after passing through security, you must show the verified tax-free form at the corresponding operator’s desk to receive an immediate (cash or credit) refund.

Otherwise, put the validated tax-free form in one of the available drop boxes and wait for the VAT refund to be issued to your credit card or mailed to your home address. The service may incur an administrative cost.

How Are Tax-Free Refunds Calculated?

It can be hard to determine exactly how much you will be repaid in Portugal and other tax-free countries. This page was created to assist you in navigating this topic. To begin, there are two things you must know to determine the amount of your tax-free refund:

Portugal’s VAT rate
VAT status of the product you purchased

We’ll use an example to show you how big your tax-free refund will be.

Portugal levies a 23% VAT on its products. In other words, out of a 1200 EUR purchase, 224 EUR are allocated to tax.

As a result, you should potentially be able to reclaim 224/1200, or 18.7% of your tax-free purchase; unfortunately, this sum cannot be entirely recovered.

Another item to keep in mind while calculating your tax-free refund in Portugal is that to get your tax-free payout, you must cooperate with an intermediary refund agent.

Although Planet Payment and Global Blue are the two most prominent companies in this regard throughout Europe, other companies may mediate local or smaller tax-free transactions, and this varies by country.

The commission that these intermediary companies get may also have an impact on the amount you can recover. These companies typically deduct a percentage of your overall refund. The lower the percentage of deduction, the greater the price of the things you buy.

Because the fee received by tax-free refund agents varies by company, this page can assist you in calculating tax-free refunds in Portugal.

The actual amount you get will be determined by the company, whether you want your return in cash, and whether the reimbursement sent to your account is subject to currency changes.

What Are The four steps One Must Follow In Portugal To Obtain A Tax Refund?

The four steps you must do in Portugal to get your tax returned on your purchases are as follows:

Select stores that provide tax-free purchasing.

Fill out the relevant tax-free documents at the store.
Customs will verify your tax-free paperwork at the Airport.
Visit the airport headquarters of the tax refund company with which you operate.
You will be able to get your tax-free refund from Portugal once you have completed these four steps. As a result, you will pay even less for the things you purchase in Portugal. Let’s take a closer look at each of these processes.

Conclusion

Now that you’re armed with the essential knowledge about tax refunds in Portugal, the path to reclaiming what’s rightfully yours is clear.

Whether you’re an expat concluding a stint in this captivating country or a visitor looking to maximize your shopping splurge, understanding the tax refund process is crucial.

So, go ahead and enjoy Portugal’s rich culture and stunning landscapes, knowing you’ve got the financial savvy to navigate its tax refund system. Here’s to a more rewarding Portuguese adventure.

Até a próxima (Until next time)!

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