In order to meet the required conditions for the full implementation of the Value Added Tax (“VAT”) and Excise Duty (“IEC”) Codes, the National Assembly approved Law Nos. 17/19 and 18/19, both of 13 August 2019.

The VAT and IEC Codes enter into force on 1 October 2019. Among the newly-approved amendments to the Codes, we can highlight the following:

VAT Code

• The rate applicable to the transitory regime will be 3% (the limited deduction regime already foreseen remains);

• The rate of 3% will apply to the tax assessed for taxable persons in the transitory regime who purchase services from non-resident service providers;

• The declaration of commencement of activity must be submitted within 30 days from the publication of Law No. 17/19 (that is, by 12 September 2019);

• Consumption Tax may be recovered by deduction from taxable income, the deadline for this being extended by one year;

• Duly justified stock breaks, as well as offers to mitigate the effects of natural disasters, are not included in the concept of transfers of goods;

• The services location rules were amended to provide that certain services rendered outside the national territory will not be subject to VAT;

• VAT exemptions have now been extended to the health and education areas;

• The importation of foreign currency by financial institutions is now exempt from VAT;

• The range of operations excluded from the captive tax regime has been extended, notably the transfer of goods by supermarkets, water and energy;

• The relevant moment for the exercise of entitlement to deduction is the moment the invoice is issued, rather than the moment it is received.
 
IEC Code

• The basis of IEC taxation has been extended to include motor vehicles, plastic bags and straws, and retreaded pneumatic tires;

• The moment of the assessment of IEC, as regards producers, has been changed to the moment goods are made available to purchasers, instead of the moment the invoice is issued;

• Tax returns will be filed electronically by means of the official form, which should state the volume of transactions carried out in the month preceding the relevant tax assessment;

• There has been a significant increase in the rates for several products, including mineral water, sugary drinks and alcoholic beverages.

Should you wish to receive more detailed comments on the amendments to these Codes and/or a VAT Compliance Table, please let us know [email protected]