The fact that a customer is abroad doesn’t automatically mean the invoice should be issued without VAT.
To determine the correct treatment, you need to know:
- whether goods or services are involved;
- whether the customer is a business or a consumer;
- where the goods are located;
- where they are being transported to;
- the nature of the service;
- whether a special place-of-supply rule applies.
The decisive factor is the country where the transaction is considered to take place for VAT purposes.
Summary
- For B2B services (business to business), VAT is normally due in the customer’s country.
- For B2C services (business to consumer), the supplier’s country VAT generally applies.
- Special rules exist for real estate, accommodation, events, transport, and digital services.
- Intra-community sales between businesses may be exempt in Portugal.
- On sales to EU consumers, VAT may be due in the customer’s country.
- Exports are generally exempt, provided there is proof the goods left the country.
- Buying goods or services abroad may require self-assessment (reverse charge) in Portugal.
Services Provided to Foreign Businesses
For B2B service transactions, the VAT of the country where the customer is established generally applies.
A Portuguese company providing consulting services to a Spanish or German company would normally issue the invoice without Portuguese VAT. Within the EU, the purchaser self-assesses the tax in their own country through the reverse charge mechanism.
The Portuguese company must confirm the customer’s VAT number in the VIES system and comply with applicable reporting obligations — simply stating that the customer is a business is not sufficient.
When the business customer is located outside the EU, Portuguese VAT may also not apply, but the customer’s country’s local rules should be checked.
Services Provided to Consumers
For B2C services provided to end consumers, the general rule places the transaction in the supplier’s country.
So, a Portuguese company providing a service to a foreign individual may have to charge Portuguese VAT.
However, there are important exceptions. Digital services, telecommunications, and certain electronic services provided to consumers are normally taxed in the country where the consumer resides. In these cases, the One-Stop Shop (OSS) can be used to declare the tax due in different Member States.
Services Related to Real Estate
Services directly related to real estate are, as a rule, taxed in the country where the property is located.
For example, architecture, real estate brokerage, or inspection services relating to a property in the Algarve may be subject to Portuguese VAT, even if the client is a foreign business.
The reverse can also happen: if the property is located in another country, tax obligations may arise in that jurisdiction.
Sale of Goods to EU Businesses
A sale of goods to a business in another Member State may constitute an intra-community supply exempt from VAT in Portugal.
To apply the exemption, it’s necessary, among other things:
- that the goods are transported to another Member State;
- that the customer has a valid VAT number;
- that the transaction is correctly reported;
- that the seller keeps proof of transport.
If the goods remain in Portugal, the fact that the buyer is foreign is not enough to rule out Portuguese VAT.
Sales to Consumers Within the EU
For online or distance sales to consumers in other Member States, it may be necessary to apply the VAT rate of the customer’s country.
The OSS scheme allows VAT reporting and payment for other Member States to be centralized in Portugal, avoiding, in many cases, multiple local tax registrations.
Exports and Imports
Sales of goods shipped outside the EU are, as a rule, exempt from VAT, provided the seller can demonstrate the actual departure of the goods.
Customs proof is essential. Without sufficient documentation, the Tax Authority may refuse the exemption and demand Portuguese VAT.
On importing goods into Portugal, VAT is normally due upon entry into customs territory, without prejudice to the right of deduction where the legal conditions are met.
Purchases from Foreign Suppliers
When a Portuguese company buys services from a foreign supplier, it may need to self-assess VAT in Portugal.
The company must declare the tax and may deduct it if it carries out an activity that confers the right to deduction.
The same logic applies to intra-community acquisitions of goods transported into Portugal.
Frequently Asked Questions
Is an invoice to a foreign customer always issued without VAT?
No. It depends on the nature of the transaction and its place of taxation.
What is reverse charge?
It’s the mechanism through which the purchaser, rather than the supplier, becomes responsible for calculating and declaring the VAT.
Is an export the same as an intra-community supply?
No. An export involves goods leaving the European Union. An intra-community supply occurs between Member States.
How Can We Help?
URB Law Services supports businesses and professionals in analyzing international transactions, invoicing, reverse charge, intra-community supplies, exports, and correcting errors.
For businesses seeking a lawyer in Almancil with experience in VAT and international taxation, we provide services in Almancil and support clients throughout the Algarve and across the country.
Contact us to learn more.
