Running a restaurant in Lisbon comes with its own set of challenges, especially for expat business owners. One area that often causes confusion is how to apply the correct VAT (IVA) rates — something that’s essential for staying compliant with local tax rules.
It’s easy to enter incorrect VAT information into a Point of Sale system, and those small errors can lead to reporting issues or tax penalties. In Portugal, VAT rates can vary depending on the type of product (such as food vs. soft drinks) and whether it’s sold for takeaway or consumed on-site.
When the term “on-premises” is used, it means the customer uses the restaurant’s tables, chairs, or other facilities. For restaurant and beverage services consumed on-premises, the VAT rates in Lisbon are as follows:
– Intermediate VAT Rate (13%): This rate applies to most food and non-alcoholic beverages other than soft drinks.
– Maximum VAT Rate (23%): This rate applies to alcoholic beverages and soft drinks.
The VAT treatment for takeaway and delivery services in Lisbon differs from on-premises services:
– Reduced VAT Rate (6%): Applies to basic food items listed in Annex I of the VAT Code, such as certain fruits, vegetables, and dairy products.
– Intermediate VAT Rate (13%): Applies to ready-to-eat meals prepared for immediate consumption.
– Maximum VAT Rate (23%): Applies to items not listed in Annex I or II, like certain pastries and individually sold ready-to-eat snacks.
Here are some practical examples of how VAT rates apply to different products and services in Lisbon:
– Orange Juice: Intermediate rate for on-premises consumption; reduced rate for take-away.
– Milk and Chocolate Milk: Intermediate rate for on-premises consumption; reduced rate for take-away.
– Ice Cream and Savory Snacks: Intermediate rate for on-premises; maximum rate for individual take-away items.
Navigating VAT requirements in Lisbon can be complex, especially for expat business owners. Our English-speaking team works with international clients to support them in understanding how VAT rules apply to their specific activity and how to stay aligned with Portuguese tax obligations.
Applying the correct VAT rates is important for compliance and for maintaining accurate financial records. We offer structured bookkeeping and accounting support designed to meet the needs of businesses operating in Portugal.
If you’d like to learn more about how our services can support your business, feel free to reach out.
Contact us today for a free consultation and to discuss how Elevate Accounting can support your business in Portugal.