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Portugal offers VAT instalment option to mitigate Covid squeeze

Portugal is allowing payment of VAT in instalments, if certain criteria are met. 

The move aims to provide relief to businesses that have suffered from the Covid-19-related economic downturn.

Who is eligible for VAT instalments in Portugal?

The measure is only available to businesses with an annual turnover below  €2 million. In order to qualify for the VAT relief measure, a business needs to demonstrate that average monthly revenue has decreased by 25% or more in 2020 compared to 2019. 

The deferment applies to the period November 2020 to April 2021 for monthly filing and Q4 2020 to Q1 2021 for quarterly filings. 

Companies must apply to tax authorities in order to take advantage of the VAT relief measures.

Ongoing VAT relief

In 2020, Portuguese authorities allowed businesses with annual turnover of less than €10 million to pay VAT in instalments. 

In that case, the option was automatic. 

Portugal is not alone in offering VAT relief. In addition, numerous countries around the world responded to the Covid-19 crisis by cutting VAT or offering other relief mechanisms. 

What are the effects of deferred VAT?

Predictably, deferred VAT has led to a drop in revenue collection in many jurisdictions. For example, UK VAT authorities report that VAT receipts in the UK declined by 1.5% in 2019-2020, compared to the previous year.

The decline partly relates to the UK’s VAT deferral mechanism. Of course, the measures aim to boost consumer spending and offer relief to cash-squeezed businesses. Long-term VAT collection trends are expected to be positive. 

Optimise VAT, enhance cash flow

As global VAT experts, Vatglobal will make sure you always take advantage of the most favourable VAT options available to you, in Portugal and everywhere else you pay VAT.

Our technology-driven VAT solution makes global VAT compliance simple, easy and efficient. Get in touch with Vatglobal to enhance how you manage your company’s VAT and ensure you are always 100% VAT compliant.

 

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