Running a restaurant in Portugal presents a number of administrative and tax-related responsibilities — especially when it comes to understanding how VAT (IVA) applies to different products and services. For expat business owners, navigating these requirements can feel unfamiliar at first.
One area to pay close attention to is how your till or POS system applies VAT rates. The correct rate can vary depending on factors like the type of item sold or whether it’s consumed on-site or taken away. If these settings are incorrect, it can lead to compliance issues or reporting discrepancies that may go unnoticed for some time.
Working with a certified accountant can help ensure that your systems reflect current VAT rules and reduce the risk of errors.
VAT rates vary for restaurants based on the type of item being provided, and where the service takes place (eating in the restaurant versus take away). Specifically:
These rates ensure that services provided in a restaurant setting, such as the use of tables, chairs, and other facilities, are appropriately taxed.
When it comes to take-away or home delivery services, the VAT treatment changes significantly. The sale of products for consumption off-premises is considered a simple transfer of goods rather than a service, impacting the VAT rate:
– Meals: Intermediate rate (13%) charged whether consumed on-site or as take-away.
– Orange Juice: Intermediate rate (13%) for on-premises consumption; reduced rate (6%) for take-away.
– Milk and Chocolate Milk: Intermediate rate (13%) for on-premises consumption; reduced rate (6%) for take-away.
– Ice Cream and Savory Snacks: Intermediate rate (13%) for on-premises; standard rate (23%) for individual take-away items.
Navigating VAT requirements in Portugal can be complex, particularly for expat business owners. At Elevate Accounting, our English-speaking team supports clients across the country, including in the Faro and Vilamoura areas, often referred to as the “Golden Triangle.”
Applying the correct VAT rates is important for compliance and for maintaining clear, accurate records. Our team uses digital tools and a structured approach to provide bookkeeping and accounting services designed to meet the needs of businesses operating in Portugal.
If you’re based in the Algarve or elsewhere in the country, we’re available to help clarify your obligations and support your ongoing financial operations.
Contact us today for a free consultation and lets discuss how we can support your business.