The Proposed 2012 State Budget (OE2012) has introduced a minimum level of VAT for those people not making regular declarations.

The taxpayers who are not submitting the periodic VAT or who do not report the closure of their business will be subject to the increase in tax settlements.

The measure aims to encourage voluntary VAT declarations. The minimum limits for settlement vary between €1,455 and €2,910, depending on the turnover of the company or individual.

The statement in the proposal for 2012 reads "If the periodic statement is not filed, the Taxation General Directorate (DGCI), based on the information in its possession relating to the taxpayer or its business sector, proceeds with the official settlement of the tax, which has a minimum annual value equal to three or six times the minimum Portuguese wage (€485 in 2011)"

The official settlement of VAT will thus be subject to an annual minimum €2,910, if respectful of taxpayers with a turnover equal or higher than €650000 or a minimum value payment of €1,455 for those taxpayers with a turnover of less than €650000.

This measure will also cover other areas such as non-compliance with declaring the closure of a business. This means that if a company stops its activity, without the correct notification to the authorities, it may well be requested to make a series of VAT payments, automatically created by the Treasury.

As we know, finance and official regulation regarding taxes in Portugal can be rather a minefield. If you are in any doubt as to what to do or what you have to pay it is always best practice to consult someone who can provide help and advice.

Written by Ricardo Costa

HWK Consulting

238 601 892

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