Customs and Tax Authority

VAT Processing Department

Circular no. 30179, of December 15, 2015

VAT – subparagraph b), number  27)  of article 9 CIVA (Asset  Valuation for Guarantees of Credit)

In this circular, the AT clarifies the scope of application of the exemption established in subparagraph b), number 27) of article 9 of the VAT Code, which exempts from VAT “the negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees by the person who is granting the credit”.

According to the circular, administration or management carried out by the entities granting credit include all the procedures required to obtain the granting of the credit, comprising organizational and administrative procedures, which include the valuation of the assets for mortgage purposes with the view of securing the underlying credit .

Therefore, when charging its customers a fee for valuing the asset that will guarantee the credit, the entity granting the credit should not assess VAT given that the asset valuation, being an essential element of the granting of credit, benefits from the exemption abovementioned.

Consequently, under the terms of the circular, although they may benefit from other VAT exemptions, external evaluators to the entity granting the credit do not benefit from the VAT exemption established in subparagraph b), number 27) of article 9 the VAT Code, since this exemption is limited to situations in which the administration or management of credit guarantees is made “by the person who is granting the credit”.

Customs and Tax Authority

Binding information concerning Case no. 9577, with order of December 9, 2015, published on December 11, 2015

VAT – Right to deduction – Electrical or hybrid plug-in light passenger or mixed use vehicles, considered touring vehicles

In this binding information the AT sets the VAT regime of the right to deduct the cost of purchase, manufacture or import, leasing and transformation in electrical or hybrid plug- in vehicles, of light passenger or mixed use electrical or hybrid plug -in vehicles, when qualified as touring vehicles.

For the purposes of article 21.1(a) of the VAT Code, the AT defines a “touring vehicle” as any automobile vehicle, including trailers, that, due to its construction and equipment, is not solely aimed to be used to transport goods or within an agricultural, commercial or industrial context, or that, having a mixed nature, does not have more than nine passengers, including the driver.

However, following the Green Taxation Reform, which added subparagraph f) to the referred article 21.2, the AT emphasizes that the taxpayer may also exercise the right to deduct VAT included in the expenses relating to the purchase, manufacture and import, and to the leasing and transformation of touring vehicles when they have been classified as electrical or hybrid plug-in vehicles, provided that the purchase cost does not exceed the limits established in Ordinance no. 467/2010, to which article 34.1(e) of the CIT Code refers to.

Finally, the AT points out that the limits established in the Ordinance for this purpose do not include VAT, given that the purchase cost cannot be influenced by regularizations or settlements made in other tax periods than the purchase tax period.

Customs and Tax Authority

Binding information concerning Case no. 9638, with order of December 9, published on December 11, 2015

VAT- Rates- Transportation of tourists in a TUKTUK vehicle, with guided tour in the city where the activity is carried out

In this binding ruling, the AT clarifies that the transportation of passengers, whether individually or collectively, even for tourist purposes, is subject to the reduced VAT rate. For that reason, the activity of transporting tourists in a TUKTUK vehicle is subject to a reduced VAT rate of 6%, under item 2.14 of the List I of the VAT Code.

Customs and Tax Authority

Binding information concerning Case no. 9650, with order of December 9, 2015, published on December 11, 2015

VAT – Rate – Urban rehabilitation works

In this binding ruling, the AT rules on the VAT regime of three contractual obligations relating to the rehabilitation of a property located in an urban rehabilitation area.

The AT begins by stating that there is a clear difference betwe en an urban rehabilitation work agreement, which cannot include neither the purchase nor the installation of movable assets in the property, and a provision of goods agreement, even when this agreement involves the installation, the assembly and/or other associated services (e.g., related to projects and project management).

Regarding a general construction agreement for the entire works, the AT concludes that, under the terms of item 2.23 of List I of the VAT Code, and under paragraph 1(a) of article 18 of that Code, the reduced tax rate of 6% must be applied.

However, the purchase and the installation of frames and blinds, as well as the purchase and the installation of kitchen fixtures, fittings and appliances , do not fall within the concept of rehabilitation works, under article 2(j) of Decree-Law no. 307/2009; therefore they are subject to the standard 23% VAT rate.

The AT further states that, when issuing invoices to the construction owner, the contractor must mention such item, identifying the urban rehabilitation area where the property is located, in order to justify the application of the reduced VAT rate.

Customs and Tax Authority

Binding information concerning Case 9676, with order of December 10, 2015, published on December 11, 2015

VAT – Regime- senior sports technician

The AT establishes that, in terms of VAT, only the healthcare professionals that possess qualifications to carry out paramedic activities under Decree-Laws no. 261/93 and no. 320/99, may benefit from the exemption established in article 9(1) of the VAT Code, which exempts the provision of professional paramedic services from VAT.

Consequently, the activity carried out by a senior adapted sports technician in a rehabilitation medical center is subject to and not exempt from VAT at the standard rate of 23%.

However, this activity may benefit from the special exemption regime established in article

53 of the VAT Code, provided that the taxpayer (i) is not obliged to keep organized accounts for Personal Income Tax purposes; (ii) has not carried out activities involving import, export or related activities; (iii) has not carried out transfers of goods or services foreseen in Annex E of the VAT Code; and (iv) had a business turnover less than or equal to €10,000.00 in the previous calendar year.

Customs and Tax Authority

Tax Management Area

Circular 30177, of December 10, 2015

VAT – Regime for public waste disposal service

The AT establishes the VAT regime of the public service of waste disposal as well as the service of waste management and street cleaning services.

According to the circular, waste disposal services consist of collecting urban household solid waste, and collecting waste which, due to its nature or composition, is similar to household waste, whose daily production does not exceed 1 ,100 liters per producer and whose management is allocated to by city councils, under the terms of article 5(2) of the General Waste Management Regime.

The provision of this service is not subject to VAT when the provider is a public entity, including municipalities, parishes, associations of municipalities or parishe s, or metropolitan areas, inter-municipal communities, or State and local businesses (see circular 30159, of June 16, 2014), when exercising their authority powers under article 2(2) of the VAT Code. However, when the same service is provided by a private entity, even if by the means of a concession, VAT will be charged at a reduced rate under item 2.22 of List I.

The same applies to the provision of street cleaning services, including for instance, boulevards, streets and parks, which is not subject to VAT when the provider is a public entity exercising its authority powers, being subject to VAT at a reduced rate when the provider is a private entity, under the terms established above.

Waste management, mainly characterize by the collection, storage, transport, valuation and disposal of waste, that does not qualify as being included in the public service of waste disposal, is subject to VAT at a reduced rate, regardless of the legal nature of the provider, as the service of waste management is not included in the exercise of authority powers.