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The Portuguese parliament on June 20 passed a law reducing the general VAT
rate from 21 percent to 20 percent. The changes will take effect July 1,
coinciding with the monthly and quarterly VAT reporting periods.
The reduced rate, 5 percent, and the intermediate rate, 12 percent, remain
unchanged. The reduced rate applies to most unprocessed foods and produce;
pharmaceuticals; gas and electricity; books, magazines, and newspapers;
public transport; and hotel accommodation services. The intermediate rate
was introduced in 1996 and applies to most processed foods and restaurant
services.
The new rates apply on any invoices that are issued as of July 1,
including those for supplies of goods and services that have taken place
immediately before the rate change. For ongoing supplies of goods and
services that are invoiced at the end of a period spanning the change of
the VAT rate, the old rates will apply to the goods supplied or services
rendered before July 1 and the new rates will apply to the goods supplied
or services rendered since July 1.
This is the sixth time that Portugal has changed its general VAT rate
since introducing the VAT at the general rate of 16 percent in 1986,
before the country joined the European Union.
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