Proposed VAT measures in Portugal’s Budget in 2024

Portugal's draft Budget Law for 2024 was submitted to parliament in previous days. Portugal’s draft budget law for 2024 includes various tax measures. There are a large number of changes that are currently under discussion, and they are subject to change. The budget law must be approved by the parliament before it can be officially enacted. If the law is approved, it will enter into force on January 1, 2024, and, unless otherwise noted, its measures are generally expected to apply as of the same date. More on VAT changes, as follows.

Some of the VAT-relevant changes refer to:

• VAT exemption for essential food items will not be extended until the end of 2023.
• VAT exemption for compost, fertilizers, and other products suitable for feeding livestock was extended until December 2024.
• VAT exemption on tickets for people accompanying those with a disability
• Reduced VAT rate of 13% on certain beverages when supplied with food and beverage services
• Simplified VAT refund regime for travel agencies organizing events and procedures for refunds
• Progressive taxation of certain petroleum and energy products
• The IABA rates applicable to alcoholic beverages and to drinks containing added sugar or other sweeteners would increase, in general, by 10%.

Importantly, Law No. 56/2023 was published on October 6, 2023, and provides for changes to the Portuguese VAT Code to apply the reduced VAT rate (currently, 6% in mainland Portugal, 5% in Madeira, and 4% in the Azores) to services relating to the construction or rehabilitation of certain immovable property. The law entered into force on October 7, 2023, and the reduced VAT rate is applicable as of the same date.