2024 Portugal State Budget Proposal – VAT key measures

End of the temporary VAT exemption on essential foods 

• Currently, there is a temporary VAT exemption, which will be extended until 31.12.2023, for import and supply of a number of essential foods (see here).

• This exemption will not be renewed.

• As from 1.1.2024, essential foods will go back to be taxed at the reduced VAT rate (6% for mainland Portugal, 5% for Madeira and 4% for Azores).

• The Ministry of Finance indicated the expenditure incurred with this benefit (around 550M EUR) will be put into other social measures.

Renewal of VAT exemption on the supply of compost, fertilizers, soil improvers and animal food connected to agricultural production

• Currently, there is a temporary VAT exemption (with right of deduction), up until 31.12.2023, on the following operations, for goods normally used within the scope of agricultural production activity: (a) supply of compost, fertilizers and soil improvers  and  (b) flours, cereals and seeds, including mixtures, residues and waste from the food industries, and any other products suitable for feeding livestock, poultry and other animals listed in the Codex Alimentarius, irrespective of breed and live functionality, including farmed fish, intended for human consumption.

• This exemption will be renewed up until 31.12.2024, considering it levels the playing field of the agricultural sector currently dealing with drought.

Harmonization of restaurant services intermediate VAT rate as to include juices, nectars and carbonated waters

• Currently, juices, nectars and carbonated waters served in a restaurant with a meal are taxed at the standard rate of VAT (23% for mainland Portugal, 22% for Madeira and 16% for Azores).

• As of 01.01.2024 these products will be taxed with the same rate as the meal service, i.e. the intermediate rate (13% for mailand Portugal, 12% for Madeira and 9% for Azores).

• The measure, described as “harmonization”, derives from the 2024 social dialogue agreement entered into between Government and the Confederations of Employers and Trade Union Confederations.  

• The estimate expenditure on this measure is 40M.

Travel agencies will benefit from the reimbursement of VAT regime in place for event organizers

• Last year, a new regime was enacted allowing for reimbursement of additional VAT by event organizers with CAE 82300.

• Under this regime, event organizers can recover and additional 50%  of the VAT incurred in hospitality expenses (the other 50% is recovered via the general rules of the PT VAT Code and general VAT returns). You can see more on this regime here.

• This regime is now extended to travel agencies registered under CAE 79110.

Next steps

The State Budget Proposal will be discussed in national parliament and its final vote will be held on 29.11.2023. 

Adjustments can be made but we expect for the above measures to remain and enter into force on 01.01.2024.

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