THE DEFINITION OF REVERSE CHARGE OF VAT
The reverse charge of VAT due on import allows companies who have opted for its application, to report the amount of this tax on their VAT return. This mechanism enables cash flow neutrality for companies.
The mechanism of reverse charge on imports is used in a lot of European Union member states, and is provided by the Directive 2006/112 / EC. Portugal has put this mechanism in place gradually.
Before this mechanism, when an enterprise established in Portugal imported goods from a third state, the Portuguese company had to pay VAT and customs duties. It could subsequently recover the VAT only when filing the VAT return.
This process would therefore generate an immediate cash flow for companies.
TO LIMIT THE TAX LOAD FOR COMPANIES
By the Law 42/2016 published on 28 December 2016, the Portuguese Government approved a mechanism to limit the tax load for Portuguese companies importing goods.
After that, another law published on July 20, 2017, provided details on this optional mechanism for deferring payment of VAT on importation, namely :
– The company must be registered for VAT in Portugal and subject to the monthly filing of the declaration ;
– It must not have incurred any tax debt ;
– It only carries out taxable transactions.
Implementation of this mechanism has been gradual :
Firstly, on 1 September 2017, the application concerned all imports of products mentioned in Annex C of the Portuguese VAT Code (eg cereals, coffee, cocoa).
Starting from 1 March 2018, it will concern all goods imported into Portuguese territory.
It should be noted that in order to apply this mechanism of reverse charge on imports, the company must apply for an authorization with the Portuguese Tax Administration.
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