Running a restaurant in Portugal comes with its own set of challenges, especially for expat business owners. One critical area is understanding the VAT (IVA) rates applied to different services and products. At Elevate Accounting, we aim to simplify these complexities, ensuring your business remains compliant while maximizing your after-tax profits.

It is absolutely critical to ensure that your till system is set up to correctly charge these VAT rates – errors in setup are easy to make and can be overlooked for years, costing you thousands of dollars in profit.

VAT for On-Premises Services

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:

Intermediate VAT Rate (13%): Applied to food and non-alcoholic beverages other than soft drinks served for consumption on the premises.
Standard VAT Rate (23%): Applied to alcoholic beverages and soft drinks.

These rates ensure that services provided in a restaurant setting, such as the use of tables, chairs, and other facilities, are appropriately taxed.

VAT for Take-Away and Delivery Services -

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:

Intermediate VAT Rate (13%): Applied to ready-to-eat meals prepared for immediate consumption (take-away meals).
Reduced VAT Rate (6%): Applied to basic food items listed in Annex I of the VAT Code, such as certain fruits, vegetables, and dairy products.
Standard VAT Rate (23%): Applied to items not listed in Annex I or II, like certain pastries and individually sold ready-to-eat snacks.

Examples of VAT Application -

– 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.

Simplifying Compliance with Elevate Accounting

Navigating these VAT complexities can be challenging, but Elevate Accounting is here to help. Our team of English-speaking accountants specializes in supporting expat business owners throughout Portugal, including in the Faro and Villamoura areas, known as the “Golden Triangle.” We use modern technology and premium service to make your life easier, while earning more money.

Understanding and applying the correct VAT rates is crucial for compliance and profitability. At Elevate Accounting, we provide expert guidance and comprehensive BOOKKEEPING SERVICES tailored to expat business owners in Portugal. Whether you’re in the “Golden Triangle” or elsewhere, our goal is to simplify your financial management and help you maximize your business potential.

For personalized assistance and more information, CONTACT US today.

Ready to Chat?

Contact us today for a free consultation and let us show you how Elevate will help you take your business to the next level.