Tax Authority clarifies amendments made by the State Budget Law for 2020 on VAT
Tax Alert Portugal
Tax Authority ("AT") issued instructions, through Circular Letter no. 30219, of 2 April, clarifying the most significant changes to the VAT Code ("CIVA") resulting from the State Budget Law for 2020 (Law no. 2/2020, of 31 March - "OE2020").
We highlight below the main clarifications issued by the AT in this regard:
The OE2020 changed the threshold for VAT exemption applicable to taxable persons who are not required to have organized accounting. Until 31/03/2020, those who, in the previous calendar year, had not achieved a turnover of €10.000, were exempt from VAT. The aforementioned Law raised this exemption threshold to €11.000 in 2020 and to €12.500 in 2021 and subsequent years. AT now clarifies in this regard that the value of €11.000 only applies to taxable persons who start their activity as of 1 April and who estimate to exceed that value in 2020. The threshold of €12.500 will thus apply in the year 2021, with reference to the turnover achieved in 2020;
The OE2020 also reduced the term from 24 to 12 months (counted from the due date) for the credits to be considered as doubtful debts. AT clarifies for the purpose of adjusting the corresponding VAT that, once verified the remaining requirements of the rule, credits that, on 01/04/2020, had been in delay for less than 24 months, but for more than 12 months, are considered, on that date, doubtful debts. From that date onwards, the application for prior authorization to adjust the corresponding VAT can be submitted. We further underline that the State Budget 2020 also reduced from 6 to 4 months the deadline for the submission of such request. The AT clarify that for those credits that on 01/04/2020 had less than 24 months of delay but more than 12 months, the referred period of 4 months is counted as from 01/04/2020. We also point out in this respect that, in addition to statutory auditors, independent certified accountants are now also allowed to certify doubtful debts when the VAT to be regularized does not exceed €10.000 per periodic VAT return, as well as debts that are considered bad debts.