How is VAT (IVA) calculated in Portugal?

What is VAT (IVA)?

VAT (IVA, Imposto sobre o Valor Acrescentado) is a consumption tax added to the price of most goods and services sold in Portugal¹. The seller charges VAT to the customer and hands it over to the State, they do not keep it. So the amount you pay always splits in two: the net amount (what the seller keeps) and the VAT itself.

This article (and our VAT calculator) shows how to add and how to remove VAT from an amount, and which rate to apply in each case.

How is VAT calculated?

There are two opposite calculations, depending on what you already know:

Add VAT (you have the net amount): gross = net × (1 + rate)

Remove VAT (you have the gross amount): net = gross ÷ (1 + rate)

In both cases, the VAT is the difference between the gross and net amounts. You can run both, in either direction, in the VAT calculator.

How do you remove VAT from a price?

This is where many people go wrong. To remove VAT you do not subtract the percentage from the final price, you divide by 1 plus the rate:

• at 23% → divide by 1.23;
• at 13% → divide by 1.13;
• at 6% → divide by 1.06.

The result is the net amount; the VAT is what is left. Simply subtracting 23% from the final price gives the wrong figure, because the 23% was applied to the lower, net amount.

What are the VAT rates in Portugal?

There are three VAT rates¹. On the Mainland:

• Standard, 23% (most goods and services);
• Intermediate, 13% (for example, some foodstuffs and catering);
• Reduced, 6% (essentials, books, medicines).

The rate that applies to each product is set in Lists I and II of the VAT Code². The calculator does not decide your product’s rate, it applies the one you choose.

Is VAT different in Madeira and the Azores?

Yes. The autonomous regions apply lower rates than the Mainland¹:

• Madeira: 22% / 12% / 5%;
• Azores: 16% / 9% / 4%.

So when you calculate the VAT on an invoice issued in Madeira or the Azores, pick the correct region, using the Mainland’s 23% overstates the tax.

Worked example

Take a €100 service excluding VAT, on the Mainland, at the 23% standard rate:

• VAT = 100 × 23% = €23;
• gross amount = 100 + 23 = €123.

The other way round, if a receipt shows €123 including VAT at the same rate:

• net amount = 123 ÷ 1.23 = €100;
• VAT = 123 − 100 = €23.

Note that the €23 is about 18.7% of the final price (23 ÷ 123), not 23% of it. Test your own case in the VAT calculator.

Who charges and remits VAT?

Anyone registered for an activity, businesses and the self-employed, charges VAT on invoices and remits it to the State, deducting the VAT they paid on their own purchases. If you work as a sole trader (recibos verdes), see how IRS and Social Security work for recibos verdes, and for income tax, how IRS is calculated.