How VAT (IVA) Works in Portugal (2026): Rates, What They Cover and Registration
Mainland Portugal applies three main IVA (Imposto sobre o Valor Acrescentado -- Value Added Tax) rates in 2026: 23% standard (most goods and services), 13% intermediate (restaurant meals, some processed foods, wine), and 6% reduced (basic foods, medicines, books, public transport). The autonomous regions of the Azores and Madeira set their own lower rates. Small businesses below the registration threshold may be exempt from charging IVA under certain conditions.
The three mainland IVA rates and how they are structured
IVA (Imposto sobre o Valor Acrescentado -- Value Added Tax) is Portugal's consumption tax, equivalent to VAT across the European Union. Portugal operates within the EU VAT Directive framework, which sets minimum rates and the general structure, while Portugal sets its specific rates within those limits. For mainland Portugal (Continente) in 2026, three positive rates apply to domestic supplies: Taxa normal (standard rate): 23%. This is the default rate applying to all goods and services unless a lower rate or exemption is specifically listed in the IVA Code annexes. It covers most professional services, electronics, adult clothing, alcohol, cosmetics, fuel, and luxury goods. Taxa intermédia (intermediate rate): 13%. Applies to a specified list including restaurant and catering meals, certain processed foods and agricultural inputs, wine sold at retail, olive oil for human consumption served in restaurants, and certain other listed items. The 13% rate broadly covers the food-service and catering sector. Taxa reduzida (reduced rate): 6%. Applies to basic foods for human consumption (fresh meat, fish, vegetables, fruit, bread, eggs, milk), medicines and pharmaceutical products, print and electronic books, periodicals, domestic passenger transport fares, and certain social housing and rehabilitation works. Portugal does not apply a zero rate to domestic goods (unlike Ireland or the United Kingdom before Brexit). Exports and qualifying intra-EU supplies are zero-rated under EU rules, but the lowest rate for domestic consumption is 6%. The authoritative list of which goods and services fall under each rate is set out in the Codigo do IVA annexes. When uncertain about the correct rate for a specific supply, consult the Autoridade Tributaria at portaldasfinancas.gov.pt or a qualified accountant.
What each rate covers: key categories in 2026
Understanding which rate applies to common categories helps businesses invoice correctly and consumers estimate the tax included in a price. At the 23% standard rate: most professional, consulting, legal, IT, and marketing services; electronics and household appliances; adult clothing and footwear; beer, spirits, and packaged wine; petrol and diesel; cosmetics; most hotel accommodation; and luxury goods generally. At the 13% intermediate rate: restaurant and cafe meals (food served on the premises or as hot takeaway prepared to order); most processed and packaged foods not covered by the 6% reduced rate; wine; certain agricultural products and fertilisers; entrance to some cultural events; and some short-stay tourist accommodation. At the 6% reduced rate: basic unprocessed foodstuffs -- fresh and frozen meat, fish, vegetables, fruit, eggs, bread, milk, and cereals; medicines and pharmaceutical products for human use; books and educational materials (print and e-book format); periodicals and newspapers; domestic bus, train, ferry, and metro travel; certain medical devices and aids for disabled persons; and certain energy supplies for domestic use. The boundary between the 13% and 6% rates for food products can be intricate. Fresh fruit is typically 6%, but certain fruit juices may be 13% or 23% depending on processing and packaging. Cold ready-to-eat takeaway food may qualify for 6%, while hot food prepared to order in a takeaway context is typically 13%. The IVA Code annexes and official AT rulings are the authoritative source for borderline cases. Some supplies are IVA-exempt (isentas de IVA) -- such as health services provided by regulated professionals, financial services, and insurance. Exempt means no IVA is charged and the supplier cannot reclaim IVA on costs related to those exempt activities. Exempt is legally distinct from zero-rated or reduced-rate. Verify all classifications with the Autoridade Tributaria or an accountant.
Azores and Madeira: lower regional rates
The autonomous regions of the Azores and Madeira each set their own IVA rates, which are lower than the corresponding mainland rates as part of their fiscal autonomy frameworks. Regional rates apply to supplies made within those regions. Both the standard, intermediate, and reduced rates in the Azores and Madeira are each lower than the mainland's 23%, 13%, and 6% structure. The exact rates for each region for 2026 are set by regional legislation and are subject to change independently of the mainland Budget. Because precise regional figures fall outside the scope of this mainland Portugal guide, they should be verified directly with the regional tax authorities or the AT. For businesses operating across both mainland Portugal and the islands -- for example, a company with customers in the Azores ordering goods delivered from a mainland warehouse -- the correct rate depends on where the supply is deemed to take place under the IVA place-of-supply rules. Cross-region and cross-border transactions can be complex. A qualified accountant familiar with Portuguese IVA rules should be consulted for any business with meaningful activity in the autonomous regions. Note that mainland Portuguese IVA rates also do not apply in Ceuta or Melilla (Spanish territories) or other non-EU territories, and different rules apply to supplies to the Canary Islands even though they fall under Spanish sovereignty.
IVA registration threshold and the small-business exemption
Not all businesses in Portugal must charge and remit IVA. A registration exemption under Article 53 of the Codigo do IVA relieves small businesses with annual taxable turnover below a specified threshold from mandatory IVA registration. The threshold has been raised in recent years and for 2026 stands at a level intended to remove micro-businesses and small sole traders from the administrative burden of IVA compliance -- the exact current threshold should be confirmed at portaldasfinancas.gov.pt, as it is subject to revision by Budget legislation. Businesses operating under the Article 53 exemption do not charge IVA on their sales but also cannot reclaim IVA paid on their business inputs (purchases, equipment, services). That unrecoverable input IVA becomes a cost of doing business. The exemption is advantageous mainly for businesses selling to end consumers who cannot themselves recover IVA, and less attractive for businesses supplying to other IVA-registered businesses who would prefer a recoverable IVA charge. Mandatory registration is required once annual turnover exceeds the threshold, or when a business reasonably expects to exceed it. Voluntary registration below the threshold is permitted and may be worthwhile if the business has significant IVA-bearing input costs. Registration is completed through the Portal das Financas. Once registered, a business must issue IVA invoices, file periodic declaracoes periodicas (IVA returns), and remit net IVA to the AT. Failure to register when required can result in the AT assessing IVA on all turnover from the date registration was due, plus interest and penalties.
How IVA works in practice: charging, recovering, and filing
IVA is a tax on final consumption collected at each stage of the supply chain. For a registered business the mechanics are: IVA repercutido (output IVA): IVA charged on sales. A business selling a EUR 100 service at the 23% rate charges the customer EUR 123. The EUR 23 is collected on behalf of the AT, not kept as revenue by the business. IVA dedutivel (deductible or input IVA): IVA paid on business purchases and expenses. A registered business can reclaim input IVA paid on costs relating to its IVA-taxable activities, offsetting it against output IVA owed to the AT. Net IVA due: output IVA minus input IVA for the period. If output exceeds input, the difference is remitted to the AT. If input exceeds output -- common for businesses making primarily reduced-rate or export supplies -- the AT owes a reembolso (refund). Periodic declarations: most businesses file monthly or quarterly IVA returns (declaracoes periodicas) depending on annual turnover. Deadlines and formats are set by AT regulations and must be met to avoid interest and penalties. Electronic invoicing: Portugal requires IVA invoices to be issued through the Portal das Financas e-fatura system or compatible certified software. Invoices must contain prescribed details including the supplier's NIF (Numero de Identificacao Fiscal), the applicable IVA rate and amount, and the transaction date. Invoices not meeting these requirements may not support a valid input IVA recovery claim. Always verify current IVA rates, the registration threshold, and filing obligations with the Autoridade Tributaria (Portal das Financas) or a qualified accountant.
FAQ
What IVA rate applies to a restaurant meal in mainland Portugal in 2026?
Restaurant meals in mainland Portugal are taxed at the 13% intermediate IVA rate (taxa intermédia). This applies to food served in a restaurant or cafe setting, including hot meals served at the table or as hot takeaway prepared to order. Alcoholic beverages served in a restaurant context are typically taxed at the 23% standard rate. Cold ready-to-eat items (such as pre-packaged sandwiches) may qualify for the 6% reduced rate as basic food. The exact classification depends on how the food is prepared and presented -- consult the AT or a Portuguese IVA specialist for borderline cases. These are the mainland rates; lower rates apply in the Azores and Madeira.
Why does Portugal not have a zero rate for basic goods like some other EU countries?
Portugal applies a 6% reduced rate rather than a zero rate on its most basic domestic goods and services. Under the EU VAT Directive, member states have flexibility in how they use reduced and zero rates within defined limits. Some member states such as Ireland have traditionally zero-rated food and children's clothing, while Portugal opted for a low positive rate. The practical difference is that even reduced-rate supplies generate some IVA for the AT, and businesses making predominantly reduced-rate supplies can still generate meaningful input IVA recovery claims on their costs, whereas a zero-rated business in a country without that flexibility would need separate arrangements.
Can I reclaim IVA on business expenses even if I am below the registration threshold?
No. Input IVA recovery is available only to IVA-registered businesses. If you operate under the Article 53 exemption because your turnover is below the threshold, you do not charge IVA on your sales and you also cannot reclaim IVA paid on your purchases and operating costs. Those input IVA amounts become irrecoverable costs of doing business. If your IVA-bearing input costs are significant, voluntary registration may be financially worthwhile even before the mandatory threshold is reached. This trade-off should be discussed with an accountant who can assess your specific cost structure and customer base.
Do the 23%, 13%, and 6% rates apply in the Azores and Madeira as well?
No. The 23% / 13% / 6% rate structure applies only to mainland Portugal (Continente). The autonomous regions of the Azores and Madeira each set their own IVA rates under their regional fiscal autonomy, and those rates are lower than the mainland equivalents. Businesses making supplies in the Azores or Madeira must apply the relevant regional rate, not the mainland rate. The exact regional rates for 2026 should be confirmed with the Autoridade Tributaria or the relevant regional tax authority, as they are set by regional legislation and can change independently of the mainland Budget.
⚠️ Informational estimate, not tax advice. Payroll software may differ in edge cases. Verify with a professional.