Green receipts: what are the new VAT exemption rules?

More and more workers are choosing to work on their own, using the green receipts scheme for this purpose. Consequently, doubts and questions regarding this issue arise, namely, when tax rules change, as was the case when entering the New Year.

The proposal for the State Budget for 2020 presents the new change in the Green Receipts regime, which increases from 10,000 euros to 12,500 euros the annual income limit to be subject to VAT exemption.

This tax benefit covers all taxpayers who are not required to have organized accounting for IRS or IRC purposes. Working under the Green Receipts regime requires some care and obligations to take into account when it comes to tax obligations. And VAT is one of the bureaucratic obstacles that causes certain obstacles to the fluid activity of workers under this regime.

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VAT on Green Receipts in Portugal

The term “green receipts” is used to refer generically to self-employed or freelancers. Basically, they are professionals who do not necessarily have a formal boss, but collaborate with different companies to carry out certain services.

VAT collection

VAT is the Value Added Tax that is levied on the consumption of products, services, imports of goods and intra-community acquisitions of goods and services.

This tax is collected when a company sells a product or service, through the issuance of the respective invoice. It is, however, the consumer who pays the value of the good or service plus VAT. This amount must then be handed over to the State by the company or service provider that sold it.

Typically, self-employed workers must charge 23% VAT. This is called the normal tax regime. However, depending on the nature of the activity, there are self-employed workers who may be subject to a special VAT regime.

What are the special VAT regimes?

• Special exemption regime;

• Special regime for small retailers;

• Liquid fuel taxation regime applicable to resellers;

• Special scheme for travel agents and tour organizers;

• Special VAT taxation regime for second-hand goods, art objects, collections and antiques;

• Special VAT regime applicable to investment gold.

As a self-employed person without organized accounting, you can be exempt from VAT if your business has an annual volume of less than 12,500 thousand euros, in accordance with Article 53 of the CIVA. In this case, it is included in the VAT Exemption regime.

Green Receipts: changes to VAT exemption

This new approved VAT exemption rule, provided for in Article 53 of the VAT code, covers taxpayers who do not have and are not required to have organized accounting for the purposes of the IRS or IRC, and have not reached a turnover greater than 10,000 euros in the previous calendar year, which now rises to 12,500 euros.

When this limit is exceeded, taxpayers remain exempt from VAT collection until January of the following year, when they must submit a declaration of change of activity to the AT.

Simplified regime or organized accounting?

When opening a Finance activity, the self-employed person must opt for two options: simplified regime or organized accounting.

The vast majority of self-employed workers are covered by the simplified regime. This means that the deduction of expenses for IRS purposes is limited. In addition, to be able to take advantage of this scheme, you must meet some requirements:

• Be a taxable person residing in Portugal;

• Not being legally bound to the statutory audit;

• Have a balance of the previous tax period of less than 500 thousand euros;

• Have an annual gross amount of income of less than 200 thousand euros.

This regime is automatically assigned by the Tax Authority at the time of commencement of activities. If you do not want this regime, you should change to the organized accounting regime.

The organized accounting system is mandatory for all types of companies (such as public limited companies or private limited companies) and all self-employed professionals or individual entrepreneurs, whose net annual income exceeds 200 thousand euros and there is also the obligation to hire a certified accountant.

However, these professionals can opt for organized accounting even if their income does not exceed 200 thousand euros per year.

Respond to tax obligations with Jasmin Software

Choosing the best ally is critical to driving your business's growth. And the right tools are the best ally in answering the tax obligations of all independent professionals.

Jasmin is a cloud software certified by the Tax Authority that fulfills all legal and tax obligations. If you are included in the VAT exemption regime, Jasmin contemplates the various reasons for exemption from VAT and the tax tables are already pre-configured.

In addition to monitoring your business, Jasmin gives you access to all information, anytime and anywhere.

Source: Property News