Correctly determining the location of service provision is essential to ensure compliance with VAT tax obligations. Article 6 of the VAT Code (CIVA) establishes the rules that define where a service provision is taxed, distinguishing between B2B (Business to Business) and B2C (Business to Consumer) operations.
📌 General Location Rules
Paragraph 6 of Article 6 of the CIVA presents two main rules:
- Provision of services to taxable persons (B2B): Taxation occurs in the country where the acquirer is established, provided they are a VAT taxable person.
- Provision of services to non-taxable persons (B2C): Taxation occurs in the country where the provider is established.
These rules aim to ensure that VAT is charged where the effective consumption of the service takes place.
⚠️ Exceptions to the General Rules
The CIVA provides for exceptions to the general rules, detailed in paragraphs 7 to 11 of Article 6. These exceptions apply to specific services, such as:
- Services related to immovable property: Taxed where the property is located.
- Passenger transport services: Taxed proportionally to the distance covered.
- Cultural, artistic, sporting, scientific, educational, recreational, and similar services: Taxed where the events physically take place.
- Electronically supplied services, telecommunications, and broadcasting services: Taxed in the country of the final consumer, with the possibility of applying the OSS (One Stop Shop) regime to simplify tax obligations.
🧾 Practical Application
When providing services, it is fundamental to:
- Identify the nature of the service: Determine whether it falls under general rules or an exception.
- Verify the status of the acquirer: Ascertain whether they are a VAT taxable person or a non-taxable person.
- Determine the location for VAT purposes: Apply the corresponding rule to ensure correct taxation.
The correct application of these rules avoids problems with the Tax Authority and ensures the company’s tax compliance.
This article was prepared based on information available to date and is intended for informational purposes.
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