State Budget 2021 – now in force – main VAT changes

© Catarina Mantero

The 2021 Portugal State Budget Law entered into force in 1 January 2021.

There are 5 VAT key measures to keep in mind:

1. Postponement of e-commerce package entry into force

Postponement to 1 July 2021 (previously foreseen to 1 January 2021) of the entry into force of the new e-commerce package for distance sales,  (Law no. 47/2020, 24th August, with transposition of UE Directive 2017/2455 of 5 December 2017 and transposition of EU Directive 2019/1995 of 21 November 2019). This is in line with the recent indications of the European Commission.

2. VAT reduced rate on face masks and hand sanitizer sold to general public 

Extension for the year of 2021 of the VAT reduced rate applicable to imports, local supplies and intra-community acquisitions (general public nature) of respiratory protection masks and alcohol gel sanitizer.

3. Exemption on supplies of PPE’s to public bodies, listed private health and charity entities and scientific institutions and public universities

Extension until April 2021 (currently until 31 October 2020) of the VAT exemptions (with right of deduction) applicable to local supplies and intra-community acquisitions of PPE – protective personal equipment (specifically listed/identified) used to fight COVID-19 when such supplies have, as recipients, public bodies of the State or other entities (private health and charities, scientific institutions and public universities) identified/recognised by the PT government/Instituto Nacional Ricardo Jorge as benefiting from the exemption regime.

4.  Bad debt relief

It is clarified that the certification for the recovery of VAT on bad debt (over due or written off credits) can be made by an independent certified  accountant, provided the adjustment amount does not exceed  € 10 000, per each  previous adjustment request submitted to the authorities (previously the wording of the law referred to “€ 10 000 per each VAT return”).

5. VAT reduced rate for frozen chestnuts and red fruits   

Frozen chestnuts and red fruits now benefit from the same 6% VAT reduced rate provided for fruits, in the natural or dehydrated state.

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