The decision also clarifies the procedures to be followed to correct invoices previously issued using a foreign tax identification number, rejecting the possibility of a merely aggregated correction, as well as the conditions required for input VAT incurred on purchases to be deductible.
1. The framework: when a foreign company carries out business in Portugal
The increasing internationalisation of businesses means that companies headquartered outside Portugal are increasingly carrying out transactions in the country.
The fact that a company is headquartered outside Portugal does not, in itself, mean that it is outside the scope of Portuguese tax and invoicing obligations.
The key issue is to determine where the transaction is deemed to take place for VAT purposes and who is responsible for accounting for the tax.
The case under review concerned a company headquartered in Germany carrying out short-term rental activities in Portugal involving light motor vehicles. The vehicles were rented from Portuguese suppliers and subsequently made available to customers.
The activity included both business-to-business (B2B) and business-to-consumer (B2C) transactions.
2. Short-term vehicle rental: where is VAT due?
Portuguese VAT legislation contains a specific rule for determining the place of supply of short-term rental services involving means of transport.
As a general rule, short-term rental means a rental period not exceeding 30 days, while a 90-day limit applies to vessels.
For these transactions, the place of taxation is determined by the location where the means of transport is actually placed at the customer’s disposal.
Therefore, if a vehicle is made available to the customer in Portugal and the rental qualifies as short-term, the transaction is regarded as taking place in Portugal for VAT purposes.
In the case examined by the Tax Authority, this rule led to a particularly relevant conclusion: both the transactions carried out with Portuguese suppliers and the sub-rental transactions carried out with customers in Portugal were subject to Portuguese VAT rules.
This specific rule takes precedence over the general rules governing the place of supply of services.
3. Foreign companies may be required to obtain a Portuguese tax number and register for VAT
One of the main conclusions of the guidance is that a company headquartered in another EU Member State may be required to have VAT registration in Portugal.
The exemptions from registration applicable to certain non-resident taxable persons are not universal.
Where a non-resident entity exclusively carries out transactions for which VAT is payable by the customer under the reverse charge mechanism, certain registration exemptions may apply.
However, the situation is different where the company provides services directly to final consumers in Portugal.
In such circumstances, the reverse charge mechanism will generally not apply, meaning that the non-resident company must comply with the relevant Portuguese tax obligations.
In the case under review, the company was therefore required to be registered for VAT in Portugal and to submit the relevant periodic VAT returns.
4. Invoices for transactions carried out in Portugal must comply with Portuguese rules
Another key aspect of the Binding Information concerns invoicing requirements.
Where a transaction is deemed to take place in Portugal and the supplier is responsible for accounting for the VAT, the invoicing must comply with Portuguese rules.
Portuguese legislation requires invoices to include, among other elements, the identification of the supplier and customer, including their respective tax identification numbers, as well as the other legally required information.
The rules governing the processing and retention of invoices are also regulated under Portuguese legislation.
In the case examined, the German company had issued invoices to final consumers using its German tax identification number, despite the transactions being located and taxable in Portugal.
The Tax Authority considered that this situation did not comply with Portuguese invoicing requirements.
5. Invoices issued using the foreign tax number must be replaced
One of the most important conclusions of Case No. 30761 concerns the procedure for correcting the invoices.
Where the transactions should have been invoiced using the Portuguese tax identification number, the invoices previously issued using the German tax number cannot simply remain in the invoicing system.
The solution is to cancel the incorrect invoices and issue new invoices, using the Portuguese tax identification number and correctly reflecting the VAT due in Portugal.
This issue is particularly relevant for companies that have carried out thousands of transactions, since an error in the tax identification details may affect not only invoicing but also periodic VAT returns and the exercise of the right to deduct input VAT.
6. Individual correction cannot be replaced by aggregated invoicing
The company under review proposed an alternative solution: issuing corrective documents or new invoices on an aggregated basis, by period, accompanied by detailed schedules identifying all the original invoices.
The Tax Authority did not accept this approach.
The reason lies in the VAT invoicing rules themselves, which require corrective documents to refer to the invoice to which they relate and identify the changes made.
Therefore, the fact that a company has a large number of invoices requiring correction does not, by itself, allow individual invoice corrections to be replaced by an aggregated invoicing mechanism.
This position reinforces the importance of companies having invoicing systems capable of ensuring full traceability between the original invoice and the corresponding correction.
7. A simple correction of the tax number does not necessarily require a credit note
There is also an important distinction regarding the mechanism to be used to correct invoices.
Where the issue is solely a formal error concerning the tax identification number, with no change to the taxable amount or VAT charged, the solution does not necessarily involve issuing a credit note.
According to the Tax Authority’s position, the incorrect invoice should be cancelled in the invoicing system and a new, correctly identified invoice issued.
In such cases, the mechanisms applicable to adjustments to the taxable amount or VAT should not be used.
This distinction is particularly important in practice, as the incorrect use of credit notes may create inconsistencies in both accounting records and VAT returns.
8. What about VAT incurred on invoices issued by Portuguese suppliers?
The treatment of input VAT is also particularly relevant.
In the case under review, Portuguese suppliers had issued invoices including Portuguese VAT, but identified the acquiring company using its German tax identification number rather than its Portuguese one.
The Tax Authority regarded this as a material error concerning the identification of the customer.
However, although European case law recognises that certain formal errors should not, by themselves, prevent the exercise of the right to deduct VAT, in this particular case the systematic use of the German tax number made it more difficult for the Tax Authority to verify the connection between the transactions and the taxable business activity carried out in Portugal.
For this reason, the invoices must first be properly corrected before the right to deduct input VAT can be exercised.
9. The right to deduct VAT is not lost, but proper documentation is essential
Once the suppliers have corrected the invoices — cancelling the original invoices and issuing new ones with the Portuguese tax identification number — the company may exercise its right to deduct the input VAT incurred.
The deduction may be made in the VAT return corresponding to the period in which the corrected invoices are received or in a subsequent period, subject to the applicable statutory deadlines.
The guidance confirms, in this context, the relevance of the general four-year period applicable under Portuguese VAT legislation for exercising the right to deduct.
This means that an invoicing error does not necessarily result in the permanent loss of deductible VAT, but the supporting documentation must be properly regularised.
10. What about VAT on transactions carried out with customers?
The regularisation is not limited to invoices received from suppliers.
The company must also correct the position concerning the transactions carried out with its customers.
Where B2C transactions are located in Portugal, Portuguese VAT must be correctly accounted for and reported in the periodic VAT returns corresponding to the periods in which the tax became due.
There is also a particularly relevant situation: if VAT was not expressly charged on the original invoices and it is subsequently objectively impossible to recover the VAT from final consumers, the tax may have to be calculated “VAT-inclusive”, meaning that the amount received from the customer is treated as already including VAT.
In practice, this can represent a significant cost for the company if the tax cannot subsequently be passed on to its customers.
11. Regularisation of previous periods
The Binding Information also addresses an issue with significant operational implications: the company had effectively started its activity in Portugal in 2024 but had only formally registered the commencement of activity for tax purposes in 2026.
In such situations, regularisation should not be limited to issuing new invoices.
The company’s tax position must also be corrected, including amending the declaration of commencement of activity to reflect the actual date on which the operations in Portugal began.
Periodic VAT returns for the outstanding periods must then be submitted, including the VAT due on transactions with customers and, once supplier invoices have been corrected, the deductible input VAT to which the company is entitled.
12. An issue that goes beyond the vehicle rental sector
Although the specific case concerns vehicle rental, the guidance has a much broader practical relevance.
Foreign companies carrying out activities in Portugal should carefully assess:
- where their transactions are located for VAT purposes;
- whether they are required to register in Portugal;
- whether they must use a Portuguese tax identification number;
- who is responsible for accounting for VAT;
- which Portuguese invoicing rules apply;
- whether issued invoices comply with the legal requirements;
- whether input VAT incurred on purchases is properly documented;
- and whether transactions from previous periods need to be regularised.
Defining these procedures correctly from the beginning of the business activity can prevent complex regularisations, additional costs and difficulties in exercising the right to deduct VAT.
Conclusion
The Binding Information relating to Case No. 30761 reinforces an important message for foreign companies operating in Portugal: carrying out transactions subject to VAT in Portugal may require full compliance with Portuguese VAT and invoicing rules, even where the company is headquartered in another EU Member State.
In the case of short-term vehicle rental, where vehicles are made available to customers in Portugal, the transactions may be subject to Portuguese VAT.
Where final consumers are involved, the non-resident company may be required to obtain a Portuguese tax identification number and register for VAT in Portugal, account for the tax and comply with Portuguese invoicing requirements.
The decision is equally clear regarding the need to correct invoices individually when they have been issued incorrectly, as the issuance of aggregated documents accompanied by supporting schedules is not sufficient.
At the same time, input VAT may be deductible once the supporting documentation has been properly regularised, provided that the other legal requirements and applicable deadlines are met.
This guidance once again demonstrates that the proper tax structuring of an international business activity should be carried out before operations begin, rather than only when invoicing or tax compliance problems arise.
How can Nominaurea help?
Nominaurea supports national and international companies with the analysis and implementation of their tax obligations in Portugal, particularly in situations involving:
- VAT registration of non-resident companies in Portugal;
- analysis of the VAT place-of-supply rules;
- treatment of B2B and B2C transactions;
- support in defining invoicing procedures;
- review and regularisation of incorrectly issued invoices;
- preparation and submission of periodic VAT returns;
- analysis of the right to deduct input VAT;
- regularisation of previous tax periods;
- accounting and tax support for operations carried out in Portugal by foreign companies.
In an increasingly international business environment, ensuring compliance with Portuguese rules from the outset is essential to avoid costs, tax risks and compliance issues.
Nominaurea can help turn this complexity into a secure and efficient tax and accounting solution.
