Ecovis Portugal News 30.04.2021
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Ecovis Portugal News 30.04.2021

The Portuguese Tax office has issued Circular Letter no. 30235, dated 27.04.2021. These guidelines relate to the application of the reverse charge rules regarding non-established taxpayers and represent the clarification announced by the Tax Authority in October 2019. Businesses should analyse if these rules apply to them as this may have important consequences in the continuity of their VAT registration in Portugal and hence in the need to be compliant with Portuguese invoicing regulations.

A detailed translation of these guidelines is hereby provided:

“Whereas Circular letter 30213/2019 of October 1, which issues administrative guidance on the processing of invoices and other tax relevant documents, as well as on the keeping of books, records and other supporting documents, makes it clear that Circular letter 30073/2005 of March 24, which dealt with VAT refunds to non-resident[1] taxpayers, is tacitly revoked, and new instructions on the matter are expected to be issued shortly.

Considering, also, the obligations arising from Decree-Law no. 28/2019, of February 15, and the introduction of article 35-A in the Value Added Tax Code (CIVA), which transposes the content of article 219-A of Directive 2006/112/EC, of November 28, 2006.

Considering, also, that as of July 1, 2021 the obligation to use only computer programs previously certified by the Tax and Customs Authority will apply not only to taxpayers with headquarters, permanent establishment, or domicile in national territory but also to other taxpayers whose obligation to issue invoices is subject to the rules established in domestic legislation under Article 35-A of the CIVA[2] [3].

Considering, finally, the rules of reverse charge provided for in paragraphs e), g), and h) of article 2.1 of the CIVA.

It is necessary to clarify the set of rights and obligations, in terms of VAT, that are imposed on taxpayers who are not resident in the national territory and who perform transfers of goods and services here, as well as the rules applicable to operations in which the reverse charge is applicable[4].

Thus, for the information of the services and other interested parties, these instructions are published.

I – NON-RESIDENT TAXPAYERS

OBLIGATION TO REGISTER AND APPOINT A REPRESENTATIVE.

1. Under the terms of article 29(1)(a), in conjunction with article 31(1), both of the CIVA, the taxpayers referred to in article 2(1)(a) of the same Code are obliged to register for VAT purposes when carrying out taxable operations here, which presupposes the assignment of a national tax (VAT) identification number (NIF).

2. This obligation applies to all VAT taxpayers who exercise an economic activity in the national territory, that is, who carry out taxable operations here, except when they are not liable for the tax by application of one of the reverse charge rules foreseen in paragraphs e), g) and h) of no. 1 of article 2 of the CIVA.

3. Article 30 of the CIVA establishes that non-resident taxpayers without a permanent establishment in national territory, who perform taxable operations here and who do not have a head office, permanent establishment or domicile in another member state, are obliged to appoint a representative, a taxable person in national territory, who must comply with the obligation of registration and other obligations arising from the application of the CIVA, and is liable for the tax that may be due for the operations performed by its representee.

4. The appointment of a representative is, however, optional for non-resident taxpayers who have their head office, permanent establishment, or domicile in another member state.

Existence of a registration, for VAT purposes, in the national territory.

5. Obtaining a registration, for VAT purposes, by a non-resident taxpayer who does not have a tax representative under the terms of article 30 of the CIVA, presupposes that taxable operations subject to the general obligations of the Code have been carried out, including those of invoicing, paying the tax and submitting the periodic declaration referred to in article 41.

6. Thus, non-resident taxpayers who only carry out transactions covered by the reverse charge rules laid down in paragraphs e), g) and h) of article 2(1) of the CIVA should not have a VAT registration in the national territory.

REMOVAL OF THE RULES APPLICABLE TO INVOICING OBLIGATIONS BY NON-RESIDENT TAXPAYERS

7. In accordance with the provisions of no. 1 of article 35-A of the CIVA, the issuance of invoices for the transfer of goods and services rendered in the national territory is subject to the rules established in the Code. However, when the obligation to assess the tax falls on the taxable person acquiring the goods or services, namely by applying one of the reverse charge rules referred to in these instructions, the issue of the invoice by the non-resident taxable person is not subject to the rules set out in the CIVA, as determined by Article 35-A (3) of the Code.

8. However, invoices drawn up under nº 11 of article 36 (self-billing) by taxpayers who acquire goods or services, with headquarters, permanent establishment or, in its absence, domicile in national territory, regarding operations carried out here, are subject to the rules provided for in the Code.

EXERCISE OF DEDUCTION RIGHT AND VAT REFUND TO NON-RESIDENT TAXPAYERS

9. Non-resident taxpayers may request the refund of VAT that has been charged on goods or services acquired or imported for the purposes mentioned in paragraphs a) and b) of no. 1 of article 20 of the CIVA, in no. 2 of article 19 of the RITI and in the operations mentioned in paragraph 11 of these instructions.

10. Excluded from the right to reimbursement, in any case, is the tax charged on the expenses mentioned in Article 21 of the CIVA, under the conditions foreseen therein.

Taxable persons established in other Member States.

11. In accordance with the VAT refund scheme for non-resident taxpayers, approved by Decree-Law 186/2009, of 12 August, taxpayers established in another Member State are entitled to a refund of VAT borne within the national territory if, during the period to which the refund relates, they do not have their head office or permanent establishment or domicile in the national territory, from which taxable operations have been carried out and, in the same period, have not carried out any transfer of goods or provision of services which are considered to have been carried out within the national territory under the terms of the CIVA, with the exception of the following:

  • Transport services and services ancillary to transport, exempted under the terms of paragraph f) of no. 1 of article 13 of the Code, the value of which is included in the taxable amount of the import, in accordance with no. 2 of article 17 of the CIVA.
  • Transport services and ancillary transport services, exempted under any of the applicable provisions of articles 14 and 15 of the CIVA.
  • Transmissions of goods and supplies of services whose tax is due by the acquirers, under the terms of paragraphs e), g) and h) of no. 1 of article 2 of the CIVA.
  • Transmissions of goods made within the scope of triangular transactions, under the conditions of paragraph 2 of article 15 of the VAT Regime on Intra-Community Transactions (RITI), in which the tax is due by the purchaser of the goods under the terms of paragraph 5 of article 24 of the RITI.

Taxable persons established outside the EU

12. Taxpayers established outside the EU are also entitled to a refund of the VAT borne on national territory, under the conditions referred to in the previous point and in accordance with Sections 1 and 3 of Chapter III of the regime of refunds to non-residents, provided that there is reciprocity of treatment on the part of the States in which they are established.

13. For this purpose, these taxpayers must appoint a tax representative resident in the national territory, holding a power of attorney with sufficient powers, who must comply with the obligations arising from the regime, being jointly and severally liable with the representee for its compliance.

14. This tax representative is merely for the purposes of the refund scheme for non-residents and presupposes the non-existence of a registration as referred to in Article 30(3) of the VAT Code. This cannot be confounded with the figure of the representative referred to in that Article, over whom fall the obligations arising from the application of the VAT Code, including that of registration and, concomitantly, the exercise of the right of deduction under the terms of Article 22.

Existence of a register on national territory.

15. Non-resident taxpayers, who do not have or are not obliged to have a tax representative under the terms of article 30 of the CIVA, but have a VAT registration in the national territory for taxable transactions for which they are considered liable for VAT, are subject to the general obligations of the Code, including those of payment of the tax and submission of the periodic declaration referred to in article 41. The exercise of the right of deduction must follow the rules of article 22 of the same Code, observing the provisions of Normative Ruling no. 18-A/2010, of 1 July, when a tax refund is requested.

16. Non-resident taxpayers who only carry out operations covered by the reverse charge rules foreseen in paragraphs e), g) and h) of no. 1 of article 2 of the CIVA (VAT Code), should not register or use a national TIN to carry out these operations.

II – REVERSE CHARGE

ARTICLE 2(1)(E), (G) AND (H) OF THE CIVA

17. The reverse charge rules transfer the obligation to assess and pay the tax to the sphere of the taxable person acquiring the goods, removing from the registration obligation provided for in Article 29(1)(a) of the CIVA the non-resident taxpayers who only carry out transactions covered by Article 2(1)(e), (g) or (h) of the Code.

18. Subparagraph g) is of particular relevance, insofar as it relates to operations that take place within national territory, while subparagraphs e) and h), although considered to be located in Portugal by virtue of the rules provided for in the CIVA, are carried out from the head office, establishment or domicile of the non-resident taxpayer.

Article 2(1)(g)

19. According to paragraph g) of No. 1 of Article 2, taxable persons are individuals or legal entities that meet the requirements for personal incidence provided for in paragraph a) of the same number, when they acquire goods or services in the national territory from taxable persons who do not have their head office, permanent establishment, or domicile here, nor have a representative in accordance with Article 30 of the CIVA.

20. This rule of subjective incidence places the obligation to assess and deliver the tax to the State in the sphere of the taxpayer who has its head office, permanent establishment or domicile in national territory or, not having its head office, permanent establishment or domicile in national territory, has appointed a representative therein in accordance with Article 30 of the CIVA, when acquiring goods or services from a non-resident taxpayer, but with its head office, permanent establishment or domicile in another Member State, who does not have a tax representative here.

21. The obligation also subsists when the transmitter of the goods or services is a taxable person with headquarters, permanent establishment or domicile outside the Community and exclusively carries out, within the national territory, transactions within the scope of article 2(g). Therefore, the obligation to appoint a representative provided for in article 30(2) is waived.

22. Under the conditions referred to in the previous points, the non-resident taxpayer, transferor of goods or provider of services, should not register or use a national tax number for the transaction.

23. It should also be noted that whenever the transferor of goods or provider of services has a representative under the terms of article 30 of the CIVA, either because he has chosen that option, in the case of EU taxpayers, or because he performs operations other than those mentioned in paragraphs e), g) and h) of no. 1 of article 2 of the Code, in the case of taxpayers from third countries, he is obliged to communicate this fact to the purchaser before the operation takes place.

24. Under these terms, in view of the provisions of article 30(4) of the CIVA, when the non-resident transferor of goods or provider of services has not, prior to the transaction, informed the purchaser that he has appointed a representative, the purchaser becomes the actual debtor of the tax on the acquisition of the goods or services.

25. This obligation is determinant for the removal of Article 2(1)(g) and has consequences for the way the non-resident taxpayer exercises his right to deduct tax and other obligations under national law, when applicable.

Article 2(1)(e) and (h)

26. Paragraph e) of no. 1 of article 2 of the CIVA determines that taxable persons are individuals or legal entities that meet the personal tax liability requirements set out in paragraph a) of the same number, for the acquisition of services covered by the location rule set out in paragraph a) of no. 6 of article 6 of the Code, from providers who do not have their head office, permanent establishment or, in their absence, the domicile from which the services are provided, in the national territory.

27. In turn, subparagraph b) of paragraph 1 of Article 2 of the CIVA determines that taxable persons are individuals or legal entities that meet the personal tax liability requirements set out in subparagraph a) of the same number, for purchases of gas, through a natural gas network or any network connected to it, of electricity and heat or cooling energy, through heating or cooling networks, when the respective transferors do not have their head office, permanent establishment or, failing that, the domicile from which the transfers are made, in the national territory.

28. Unlike the provisions of paragraph g), these two subjective incidence rules do not foresee, as a condition for their application, the non-appointment of a tax representative under the terms of article 30 of the Code. Therefore, the reverse charge occurs whenever the provider of the services or the transferor of the goods, as the case may be, is a non-resident taxpayer, regardless of the location of his headquarters, permanent establishment or domicile from which the operations are performed.

SCOPE OF THE CONCEPT OF TAXABLE PERSON FOR THE PURPOSES OF THE REVERSE CHARGE RULES

29. The State and other legal persons governed by public law, as well as any other legal person, when they are not covered by paragraph a) of No. 1 of Article 2, but are or should be registered under Article 25 of the VAT Regime on Intra-Community Transactions, are for the purposes of applying the reverse charge rules provided for in paragraphs e) and g), taxable persons subject to the tax for the acquisition of goods and services listed therein from non-resident taxpayers.

30. The State and other legal persons governed by public law, as well as any other legal person, are also taxable persons for the purposes of applying the reverse charge rule provided for in paragraph h) when acquiring the goods listed therein from non-resident taxpayers.

31. Individuals or companies that exclusively perform operations that are exempt under the terms of article 9 of the CIVA, as well as taxpayers under any of the special regimes foreseen in the Code are also taxable for the acquisition of goods and services under the terms established in the aforementioned paragraphs.

32. The entities mentioned in the previous points are, therefore, obliged to assess the tax arising from the reverse charge rules, and must send the corresponding declaration by electronic data transmission and pay the respective tax by the end of the month following the one in which it becomes due, in accordance with article 27(3) of the CIVA.

III -PRODUCTION OF EFFECTS

33. These instructions take effect from the date of their publication. However, any guidance deriving from previous binding information, which advocates the administrative guidance now released, must be complied with.”

[1] Those who do not have headquarters, permanent establishment, or domicile in the national territory.

[2] See paragraph 1 of article 4 of Decree-Law No. 28/2019, of February 15.

[3] See SEEAF Order No. 404/2020-XXII, dated October 20, 2020.

[4] These instructions do not cover operations carried out under the special “One Stop Shop” regimes, commonly known as “MOSS-Mini Balcão Único” and “OSS”- Balcão Único”, which will be addressed in a circular letter dedicated to these operations, to be published shortly.

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