VAT treatment
When a Portuguese entity acquires a used vehicle in another Member State, it is not sufficient simply to establish that the vehicle is “used”. It is necessary to determine who is selling the vehicle and which VAT regime is being applied by the seller.
For VAT purposes, it is also important to distinguish between a used vehicle and a “new means of transport”. A motorised land vehicle is considered new for VAT purposes when the supply takes place within six months of its first use or when the vehicle has travelled no more than 6,000 kilometres.
Therefore, a vehicle that does not meet these criteria may be treated as used, although the applicable VAT regime must subsequently be determined.
1. Acquisition under the general intra-EU transaction rules
One of the most common situations occurs when a Portuguese entity purchases the vehicle from a taxable person established in another Member State and the transaction is carried out under the general rules applicable to intra-EU supplies.
Where the conditions for applying the exemption in the Member State of origin are met, the supplier does not charge VAT on the invoice.
The Portuguese entity, in turn, carries out an intra-EU acquisition of goods in Portugal and is required to self-account for the corresponding Portuguese VAT.
For the transaction to be correctly treated, it is essential, among other requirements, that:
- the supplier and purchaser act as taxable persons;
- the Portuguese entity has a valid VAT identification number;
- the vehicle is actually dispatched or transported to Portugal;
- there is evidence supporting the intra-EU transport;
- and the applicable reporting obligations are fulfilled.
The Portuguese entity should therefore provide the supplier with its valid VAT number and retain documentation demonstrating the vehicle’s departure from the Member State of origin and its arrival in Portugal.
The VAT self-accounted for in Portugal may, where legally permitted, also be deductible. However, this deduction is not automatic and must be assessed in accordance with the general rules and the specific VAT restrictions applicable to certain vehicles and related expenses.
2. Acquisition from a dealer applying the VAT margin scheme
A different situation arises when the vehicle is purchased from a professional dealer applying a special margin taxation scheme in the Member State of origin.
Under this scheme, VAT is calculated by the seller on the margin obtained from the transaction and is not separately shown on the invoice.
Consequently, for the Portuguese purchaser, the transaction is not treated as an intra-EU acquisition subject to VAT in Portugal.
In this situation:
- no Portuguese VAT self-assessment is required;
- the transaction is not treated as an intra-EU acquisition in the Portuguese VAT return;
- and there is no deductible VAT relating to the acquisition.
It is therefore essential to check that the documentation contains an appropriate reference identifying that the sale was carried out under the special margin scheme.
3. Acquisition from a private individual in another Member State
A Portuguese entity may also acquire a used vehicle from a private individual resident in another Member State.
Where the seller is genuinely a private individual who is not acting as a taxable person in the course of an economic activity, the transaction does not, in principle, constitute an intra-EU acquisition of goods subject to VAT in Portugal.
Accordingly, the Portuguese entity does not carry out the type of VAT self-assessment applicable to an intra-EU acquisition from another taxable person.
Nevertheless, the transaction documentation should be carefully reviewed, as it is important to confirm the actual status of the seller and the nature of the transaction.
4. What happens when the foreign invoice includes VAT?
This is one of the situations that can create the greatest uncertainty.
A Portuguese entity may receive an invoice from a foreign supplier showing an amount of VAT from the country of origin. However, the mere presence of VAT on the invoice does not, by itself, determine the correct VAT treatment.
For example, the supplier may initially require an amount equivalent to VAT as a form of security while awaiting documentation proving that the vehicle has been transported to Portugal.
Once the required documentation has been provided, the supplier may correct the invoice and refund the amount collected.
It may also happen that the supplier has actually charged VAT in its own Member State.
Where the conditions for the VAT exemption applicable to an intra-EU supply are nevertheless met, the foreign VAT may have been incorrectly charged.
In such circumstances, the foreign VAT should not be deducted in the Portuguese VAT return. In principle, the supplier should be asked to correct the documentation and refund the VAT incorrectly charged, without prejudice to the correct VAT treatment of the acquisition in Portugal.
5. The importance of reviewing the invoice
The documentation issued by the supplier plays a fundamental role.
Invoices are issued according to the rules of the Member State of origin and may contain legal references or specific wording that does not directly correspond to the terminology used in Portuguese legislation.
For this reason, a foreign legal reference should not be interpreted automatically.
Where the information included on the invoice is insufficient, ambiguous or apparently incorrect, it is advisable to request confirmation from the supplier regarding the VAT regime applied to the transaction and, where necessary, request a corrected invoice.
This review should take place before the accounting and tax treatment of the acquisition, thereby reducing the risk of an incorrect classification affecting the Portuguese VAT return.
6. The right to deduct VAT
Even when the acquisition is treated as an intra-EU transaction and the Portuguese entity self-accounts for VAT, this does not automatically mean that all of the VAT can be deducted.
The right to deduct VAT depends on the use of the vehicle in the business activity and on the applicable Portuguese VAT rules.
Specific restrictions may apply to certain vehicles and to expenses relating to their acquisition, use, maintenance and other associated costs.
Therefore, before concluding that an intra-EU acquisition is VAT-neutral, it is necessary to assess not only the VAT regime applicable to the acquisition, but also the actual right to deduct the self-accounted VAT.
7. What if the Portuguese entity is a vehicle dealer?
Where the Portuguese entity carries out a business involving the purchase and resale of used vehicles, the analysis becomes even more relevant.
Depending on how the vehicle was acquired, it may subsequently be possible to apply the special margin scheme to a sale carried out in Portugal.
The margin scheme does not apply automatically to all used vehicles. The possibility of using this regime depends, among other factors, on how the Portuguese dealer acquired the vehicle and on the VAT regime applied to that acquisition.
For example, a vehicle acquired from a supplier in another Member State under the general intra-EU transaction rules does not, by itself, qualify for the margin scheme when subsequently sold in Portugal.
By contrast, certain acquisitions from private individuals or from other dealers applying the margin scheme may meet the conditions for a subsequent sale to be carried out under the margin scheme.
8. The acquisition should be analysed before the purchase
For a Portuguese entity intending to acquire a used vehicle abroad, the tax analysis should not begin only when the invoice reaches the accounting department.
Ideally, before completing the purchase, the following aspects should be checked:
- the identity and status of the seller;
- the seller’s VAT identification number;
- the applicable VAT regime;
- the information and references included on the invoice;
- the vehicle’s route to Portugal;
- the documentation proving the intra-EU transport;
- whether the margin scheme applies;
- the VAT treatment in Portugal;
- whether VAT can be deducted;
- and, where applicable, the tax treatment of any subsequent sale of the vehicle in Portugal.
This preliminary analysis can help avoid unnecessary tax costs and subsequent problems with VAT reporting.
Conclusion
The acquisition of used vehicles in other EU Member States by Portuguese entities can give rise to different VAT treatments. It is therefore not sufficient to consider only the price shown on the invoice or the fact that the vehicle is classified as used.
The distinction between an intra-EU acquisition under the general rules, an acquisition covered by the special margin scheme and an acquisition from a private individual has different consequences for VAT purposes in Portugal.
Particular attention should be paid to situations where the foreign invoice includes VAT, as such VAT should not automatically be regarded as deductible in Portugal. Whenever there is uncertainty about the regime applied, the documentation should be confirmed with the supplier and, where necessary, corrected before the transaction is processed for tax purposes.
For companies that regularly acquire vehicles abroad, establishing appropriate internal procedures and analysing each transaction individually are essential to reducing tax risks and ensuring compliance with VAT obligations.
How can Nominaurea help?
Nominaurea can assist Portuguese entities with the accounting and tax analysis of acquisitions of used vehicles in other EU Member States, including:
- reviewing invoices and documentation issued by foreign suppliers;
- identifying the VAT regime applicable to each transaction;
- accounting treatment of intra-EU acquisitions;
- support with the correct reporting and settlement of VAT;
- analysing the conditions for exercising the right to deduct VAT;
- reviewing the documentation required to prove intra-EU transport;
- assistance where foreign VAT has been incorrectly charged;
- and accounting and tax support for the subsequent sale of vehicles in Portugal.
With a team specialised in accounting and taxation, Nominaurea helps companies manage potentially complex international transactions with the appropriate tax treatment and supporting documentation.
Contact Nominaurea to assess the tax treatment of your transaction before acquiring a vehicle in another EU Member State.
