# New business tax question



## Jeff TT (Aug 1, 2010)

Need some opinions rather than actual legal rulings on a business tax question.

Let`s say I live in Pt and operate a UK internet based mail order company that supplies small items in the Algarve from a stock within Pt, but the payments are made either on line or by phone through UK based card terminal all going into a UK bank and the Vat and tax paid at UK rates, is there any implication for PT taxation? would I need an IVA registration number? 

Thanks in advance

Jeff


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## Jeff TT (Aug 1, 2010)

Just found the following on an accountacy web site, so I must charge UK vat..is that right? i am confused, its suggests as part of the European Union no Vat needs to be charged within the Union but of the amount of sales is sufficient there is a requirement to charge UK Vat or get an IVA registration, but now amount is mentioned...

Jeff




Exporting goods to Portugal
A VAT-registered UK business does not need to charge VAT on goods it is sending to Portugal, provided it keeps documentary proof of export. It must also obtain the Portuguese customer’s IVA registration number and show it on the invoice (including the PT prefix). All Portuguese VAT numbers are in the format of 9 numerals.

For VAT purposes it is physical movement of goods that is relevant, rather than the invoicing name or address. An invoice to a Portuguese customer when the goods are not leaving the UK will not normally be classed as an export, and UK VAT would be chargeable. However, goods being sent to Portugal on behalf of a UK customer without a Portuguese VAT number are still subject to UK VAT at the usual rate (even if the customer is registered for VAT in the UK).

Even where VAT is not being charged, the net value of the sale must still be reported on the UK VAT return, in boxes 6 and 8. It should also be included on the EC Sales List, and the Intrastat return if the business is required to make one.

The UK business is able to reclaim any UK VAT on the goods which it is exporting, subject to the normal rules about reclaiming input VAT.

If the Portuguese customer is not registered for IVA, and the UK business is not registered for IVA, then UK VAT must be charged. In this case, the sale is included in box 1 and box 6 of the UK VAT return, but not box 8. It does not get included on the EC Sales List, but is liable to be reported on Intrastat. No VAT is chargeable on goods which would normally be zero-rated or exempt when supplied in the UK (for example, books, children’s clothing and some food items).

Any compulsory extra charges for freight, shipping, postage or delivery should be charged at the same rate of VAT as the rest of the items in that shipment, being either 0% if all the conditions are met, or the usual UK rate applicable to those items if not.

Regardless of whether or not VAT was charged on the sale, if the UK business accounts for VAT on the Flat Rate Scheme, it must include the value of the export in the turnover on which the Flat Rate VAT is paid. This may mean that the business is better off not being on the Flat Rate Scheme.


Every year the UK business should check whether its level of sales to unregistered customers in Portugal requires it to register for IVA under the distance selling rules. Broadly, these require a UK business to register for IVA, and then charge IVA instead of UK VAT, if its sales of goods to customers in Portugal who are not registered for IVA are over €35,000 in a calendar year. All such sales would then be outside the scope of UK VAT, but still reportable in boxes 6 and 8 of the UK VAT return. They would not get included on the EC Sales List, but are liable to be reported on Intrastat. Overseas registration is also optional at lower levels of sales, but as the rate of Portuguese IVA is usually 23%, which is higher than the UK VAT equivalent, this is unlikely to be favourable.


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## jerryceltner (May 15, 2012)

I had a business in the UK which was VAT registered and imported products from Portugal, Italy and Poland. 
I was not charged VAT on the products because of this but when I sold them on then I had to charge VAT and then pay the amount I charged in VAT to the Customs and Excise.
The retailer that I sold the products onto could claim back the VAT I charged but individuals would bare the cost of the VAT.
Just guessing but you would have to sell your products to a VAT registered company here in Portugal VAT free otherwise you would have to charge VAT.
The company you sold your products to would then charge VAT on them and pay this into the Portuguese system. 
Any individuals you sold your products to would have to be charged VAT and paid to the UK Inland Revenue......That is if you are VAT registered in the UK.
Sorry if I seem a bit vauge but it is now 10 years since I retired and the memory isn't what it was.


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## Jeff TT (Aug 1, 2010)

Thanks Jerry very helful, I expect to have many individial customers but there is a chance I will deal with some Pt business who would most likely want to pay locally rather than via the UK anyhow so that will be dealt with differently, so if the individial customers pay through our web site and pay UK tax/ vat for parts already in Pt is there any reason to declare the parts sale to Pt authorities? not looking to avoid paying or declaring any tax, I really do not want to fall foul of any laws as looking for the long term envolvement here.

Jeff


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## canoeman (Mar 3, 2011)

If your a Resident in Portugal you can't just try to evade your tax responsibilities here and what you need to research or understand is 
1. Your status which as a Resident requires you to file a yearly IRS return reporting amongst other things your worldwide income
2. If I understand your business model it comes under Portuguese Tax legislation IRC (Corportate Income Tax) suggest you plough through the two main publications
Portal das Finanças - Notícias Portuguese Tax System
or slightly easier http://www.portugalglobal.pt/EN/Biblioteca/Documents/PortugueseTaxSystem.pdf

What you don't mention is the UK based internet company is just that or is it a business in the sense that it makes UK Tax/VAT returns? because if it doesn't then there is no VAT issue because you can neither claim or re-charge it, but you might well have to charge IVA in Portugal on sales or if you have this mobile mechanic service you where advertising for.

Personally I would think it would be far easier to set up a Portuguese company and simplify matters so your not operating in two tax countries with different tax rules


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## loonytoon (Feb 11, 2009)

canoeman said:


> If your a Resident in Portugal you can't just try to evade your tax responsibilities here and what you need to research or understand is
> 1. Your status which as a Resident requires you to file a yearly IRS return reporting amongst other things your worldwide income
> 2. If I understand your business model it comes under Portuguese Tax legislation IRC (Corportate Income Tax) suggest you plough through the two main publications
> Portal das Finanças - Notícias Portuguese Tax System
> ...


if your UK company is a limited company then it will have no real impact on your tax situation in PT as it is a legal entity in the UK and has its own responsibilities - the only issue would be your earnings from that company. as far as the VAT goes, i don't know a lot about export but as far as i am aware all exports to the EU are not VATable (not sure whether they are VAT exempt or VAT free) but any half decent accountant should be able to advise. also, a lot will depend on how you source your stock in PT - there could be VAT/IVA implications depending on where it comes from - accountant advise needed here but it still shouldn't affect your personal tax situation if it is bought through a limited company in the UK

jeff


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## canoeman (Mar 3, 2011)

" that supplies small items in the Algarve from a stock within Pt" 

this is the bit that raises all sorts of complications for JeffTT


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## Jeff TT (Aug 1, 2010)

Ah maybe I should explain better, the parts been supplied will be imported from the UK to Pt from our supplier in the UK directly to us and then we ship out accordingly within in Pt. when customers order/ pay via our UK website.

We will be paying all Vat and tax at source in the UK, our company is not Ltd but is Vat registered, basically I have a 12 year old company in the UK and been Vat registered for 10 of those, its a spin off of that business we want to model here, rather starting again and be viewed as a new start up its more like we are just expanding our market with a twist.


Jeff TT


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## canoeman (Mar 3, 2011)

It's as soon as you have a Pt base that you have problems as it effectively brings you under IRC regulations as I posted and more than likely various other bits of Pt legislation from use of buildings to deilvery.

Suggest you read the second link I gave P8 3.1.2 I think you would have great difficulty persuading Financas you that you didn't have "places of effective management on Portuguese soil"

If you supply direct from UK then this is not an issue neither is VAT unless you operated distance selling regulations, or invoicing and your major issue is then on how you declare "earnings" in Portugal on an existing UK company that still exists.


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