What is tax representation in Portugal?

Tax representation in Portugal refers to the obligation for certain foreign entities to appoint a local tax representative for its VAT obligations. This generally applies to companies not established in Portugal and established outside the European Union in countries that have not signed a mutual assistance clause for the recovery of tax claims with Portugal, which carry out transactions subject to VAT in Portugal. For companies established in the European Union or in countries that have signed the said clause, tax representation is optional.

The role of the tax representative is to represent the foreign entity before the Portuguese tax authorities and to ensure that its tax obligations are met. This includes filing tax returns, paying taxes, communicating with the tax authorities and managing tax issues.

In general, the appointment of a tax representative is mandatory for foreign entities with tax obligations in Portugal, including VAT (value added tax), corporate income tax, personal income tax, etc. The specific requirements for tax representation may vary depending on the nature of the foreign entity’s activities and tax obligations. The specific requirements for tax representation may vary depending on the nature of the foreign entity’s activities and tax obligations. In this article, we will look at the different types of tax representation in Portugal.

What are the duties of a tax representative in Portugal?

Firstly, the tax representative and the third-country company for which he is acting are bound by a tax representation agreement. The tax representative will be responsible for ensuring that the foreign company’s VAT-related accounting and tax obligations in Portugal are properly met. In this respect, his duties are as follows:

• Tax returns: Preparing and submitting the necessary tax returns.
• Tax payments: Ensuring that all taxes due in Portugal are paid on time.
• Communication with the Portuguese tax authorities: Acting as an intermediary to deal with tax issues with the authorities.
• Regiastration in the Portuguese tax register: Make sure you are registered and have a tax identification number.
• Managing VAT obligations: managing the collection and payment of VAT, where applicable.
• Legal compliance: Ensuring compliance with Portuguese tax laws.
• Protection against penalties : Prevent sanctions by ensuring tax compliance in Portugal.Protection against sanctions : Prevent sanctions by ensuring tax compliance in Portugal.
• Tax advice: Providing advice on optimising the tax situation in Portugal.

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Appointing a tax agent in Portugal

What are the steps involved in appointing a tax representative in Portugal?

• Start by looking for a qualified and competent tax representative in Portugal. You can consult lawyers, chartered accountants, tax consultants or tax services companies such as ASD Group, which has a sound knowledge of Portuguese taxation.
• Discuss your specific tax needs with the potential tax representative. Explain your situation, your activities and your tax obligations in Portugal. The tax representative will need to understand your needs in order to provide a tailored service.
• Once you have selected a tax representative, you will need to enter into a tax representation agreement. This contract should clearly define the tax representative’s responsibilities, fees, payment terms and other relevant conditions.
• The tax representative must formally accept his role by signing a declaration of acceptance. This declaration must be submitted to the Portuguese tax authorities to confirm that the tax representative agrees to act as such for your foreign entity.
• You will need to provide the tax representative with formal authorisation to act on your behalf with the Portuguese tax authorities. This authorisation may be required to deal with tax matters on your behalf.
• Once the tax representative is in place, he or she will work with you to ensure that your tax obligations in Portugal are properly met. This may involve preparing and filing tax returns, VAT returns, paying taxes, communicating with the Portuguese tax authorities, and dealing with any tax issues that may arise.
• Make sure you regularly monitor the work of your tax representative to ensure that all your tax obligations in Portugal are being met and that you are complying with current tax legislation.

When is it necessary to appoint a tax representative in Portugal?

In Portugal, it is necessary to appoint a tax representative in several contexts, particularly for foreign entities established outside the European Union that have tax obligations or economic interests in the country.

The following are some of the circumstances in which it may be necessary or advisable to appoint a tax representative in Portugal:

• You are a foreign company carrying out activities subject to VAT in Portugal;
• In the non-EU country in which you are branching, there is no legal instrument relating to mutual assistance with a scope similar to that provided for by Directive 76/308/EEC [10] and by Regulation (EC) No 1798/2003 (mutual assistance for the recovery of claims)* ;
• You carry out transactions that make you liable for VAT in Portugal (e.g. local sales for which no reverse charge mechanism is applicable, intra-Community supplies, intra-Community acquisitions, exports, etc.).

* At present, only Norway has signed the clause with Portugal.

If any of these conditions apply to you, you will need to find and appoint a tax representative in Portugal.

When is it not necessary to appoint a tax representative in Portugal?

The possible alternative conditions which will mean that your company does not have to appoint a tax representative are :

• Be based in Portugal, the European Union or Norway*.
• Not be subject to VAT
• Not carrying out taxable transactions in Portugal

What are the advantages of tax representation in Portugal?

The relationship between the third-party company and the tax representative will play a crucial role in facilitating cross-border commercial transactions and will offer considerable advantages such as :

• Assurance of compliance with tax regulations in force in the European Union and therefore in Portugal.
• The possibility for the foreign company to carry out commercial activities in Portugal.
• Good tax transparency and governance through compliance with reporting and registration requirements, as well as tax representation.
• The promotion and development of economic exchanges between the Portuguese state and foreign companies.

What are the key points to remember?

• It is crucial to note that, despite these changes, the appointment of a tax representative remains compulsory in the majority of cases.
• If you find yourself in one of the situations in which you need a tax representative, it is important to know that the deadline for appointing one or registering to receive information digitally is 15 days.
• Penalties may apply for failure to designate, ranging from €75 to €7,500, with potential consequences for the right to take administrative and legal action.

Make sure you follow the specific rules and requirements for tax representation in Portugal, as these can vary depending on the nature of your business and your tax obligations. It is strongly recommended that you consult a tax expert or lawyer specialising in Portuguese taxation to guide you through the process and ensure that everything is correctly in place. ASD Group keeps you informed of recent tax developments in Portugal, as these adjustments can have a significant impact on the tax obligations of non-residents. Take the necessary steps to comply with the new regulations and avoid unwanted financial penalties.