If you’re considering expanding your business to Portugal or starting a company there, it’s crucial to understand the country’s accounting requirements and obligations. Accounting in Portugal is governed by specific regulations and standards that must be followed to ensure compliance and avoid penalties. This comprehensive guide will walk you through the essential aspects of accounting in Portugal, including the professional associations responsible for regulation, accounting requirements, invoicing rules, auditing obligations, and more. Let’s dive in!
Professional Associations for Regulation
In Portugal, there are two primary professional associations responsible for the regulation of accountancy:
1. Ordem dos Contabilistas Certificados(OCC)
Ordem dos Contabilistas Certificados (OCC) is the largest Portuguese professional body in accounting. With over 75,000 affiliates, OCC plays a crucial role in regulating and overseeing tax and accountancy practitioners in Portugal. To become an authorized tax and accountancy practitioner in Portugal, individuals must pass the admittance examination conducted by OTOC every four months.
OTOC offers its members a wide range of training programs and actively participates in public discussions on accounting and finance issues.
2. Ordem dos Revisores Oficiais de Contas (OROC)
Ordem dos Revisores Oficiais de Contas (OROC) is responsible for conferring the national qualification for auditors (ROC) in Portugal. OROC is the national member of the International Federation of Accountants (IFAC), which ensures that auditors in Portugal adhere to international auditing standards.
Accounting Requirements
To maintain compliance with Portuguese regulations, companies operating in Portugal must adhere to specific accounting requirements. Understanding these requirements is essential to ensure accurate financial reporting and avoid penalties. Here are the critical accounting requirements in Portugal:
1. Accounting Records
Portuguese companies are required to keep accounting records in Portuguese. These records should be maintained according to the accounting standards set forth by the regulatory authorities. The responsibility for maintaining the accounting records lies with a certified accountant who must be a member of the official Portuguese Accountants Guild (OCC).
All transactions undertaken by the company must be duly recorded in the accounting books, supported by original documents. It is crucial to provide all original supporting documents, including bank statements, invoices, receipts, contracts, and any other relevant documents, to the certified accountant before the deadline for submitting tax returns.
2. Invoicing Rules
Companies in Portugal must adhere to specific invoicing rules to ensure compliance with tax regulations. Here are the key elements that invoices must contain:
- Names, firm or corporate name, and registered office or domicile of the supplier of goods or service provider and the recipient or purchaser.
- Tax identification numbers of taxable entities involved in the transaction.
- Quantity and usual designation of the goods supplied or services rendered.
- Price, net of tax, and other elements included in the taxable amount.
- Applicable tax rates and the total amount of tax due.
- Reasons justifying the non-application of tax, if applicable.
- The date on which the goods were made available or the services were performed.
It is important to note that invoices must be issued using authorized computer invoicing software, and non-compliance with invoicing rules may result in fines.
3. Auditing Obligations
Public limited companies (S.A.) and private limited companies (Lda.) in Portugal have auditing obligations. The auditing requirement applies if two of the following conditions are met over two consecutive years:
- Annual turnover greater than €3,000,000.
- Total balance sheet value above €1,500,000.
- Total number of employees exceeds 50.
Companies that meet these criteria must have their accounts audited by an independent auditor to ensure accuracy and transparency in financial reporting.
4. Registration of Accounts
Portuguese companies are required to register their accounts in the respective Commercial Registry by July 15th. Failure to comply with this requirement may result in the inability to register any other company-related information.
Companies that fail to register their accounts for two consecutive years may be subject to an administrative procedure of dissolution and liquidation.
5. Compulsory Use of Bank Accounts
All company transactions in Portugal (including in the Autonomous Region of Madeira) must be conducted through one or more bank accounts exclusively assigned to the associated business activity. This includes transactions related to capital contributions, loans, and shareholder payments. Any payments above €1,000 must be made using traceable methods such as bank transfer or current account cheques.
Portuguese banks may request supporting documents for transactions above €12,500.
Tax and Accounting Information
Understanding Portugal’s tax and accounting landscape is crucial for businesses operating in the country. Here is an overview of the key tax and accounting information in Portugal:
1. Portuguese Tax Regime
The Portuguese tax regime encompasses various taxes that businesses must navigate. The essential taxes include:
- Corporate Tax: Companies in Portugal are subject to corporate tax on their profits. The standard corporate tax rate is 21% (Portuguese mainland), 14,7% (Autonomous Region of Madeira) or 5% (MIBC).
- IRS: Individuals in Portugal are subject to personal income tax, known as IRS. The tax rates vary based on income brackets.
- Value Added Tax (IVA): IVA is a consumption tax applied to most goods and services in Portugal. The standard IVA rate is 23%, with reduced rates for certain goods and services.
- Social Security: Portuguese companies are required to contribute to social security funds on behalf of their employees.
2. Double Taxation Agreements
Portugal has signed double taxation agreements with numerous countries to prevent the same income from being taxed twice. These agreements provide relief for individuals and companies operating in multiple jurisdictions.
3. Tax Information Exchange Agreements
Portugal has also established tax information exchange agreements with several countries to enhance international tax cooperation and combat tax evasion.
4. Accounting Standards
Portuguese companies must adhere to specific accounting standards set forth by regulatory bodies. Compliance with these standards ensures accurate and transparent financial reporting.
Conclusion
Accounting in Portugal is subject to specific regulations and requirements that businesses must adhere to to maintain compliance and avoid penalties. Understanding the professional associations responsible for regulation, accounting requirements, invoicing rules, auditing obligations, and tax and accounting information is crucial for businesses operating in Portugal. Following the guidelines outlined in this guide and engaging trusted professionals ensures that your business meets its accounting obligations and operates smoothly in Portugal.
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