What is legal representation (as in tax representation)? In Portugal, it is a compulsory legal mechanism for specific categories of taxpayers to ensure compliance with their tax obligations to the Portuguese Tax and Customs Authority (AT).
There is a legal-tax relationship with the AT when, in particular, the citizen:
- Is the owner of a vehicle registered in Portuguese territory?
- Owns a property located in Portuguese territory.
- Signs an employment contract for an activity in Portuguese territory; or
- Is self-employed in Portuguese territory.
Requirements and Appointment to be a Tax Representative
The tax representative must be a resident for tax purposes in the Autonomous Region of Madeira if they are a natural person. On the other hand, if they are legal, they must have their registered office or permanent establishment in Portugal.
In addition, if the non-resident or non-EU resident carries out a self-employed activity subject to VAT, the tax representative must also be a VAT taxpayer resident in Portugal.
The appointment of a tax representative must be formalised through a written declaration by the taxpayer identifying the representative, either through a power of attorney or a mandate contract with powers of representation, accompanied by the tax and civil identification documents of the tax representative. The express acceptance of the representative is also an indispensable requirement.
Who needs tax representation?
- Non-residents: Natural or legal persons who do not reside in Portugal but who have tax obligations in the country, such as income obtained in Portuguese territory.
- Residents outside the European Union (EU): Portuguese citizens or foreigners residing outside the EU or the European Economic Area (EEA).
Duties of the Fiscal Representative
The tax representative has several responsibilities, including:
- Receiving notifications and correspondence from the AT on behalf of the taxpayer.
- They ensure that taxpayers fulfil their tax obligations, including all ancillary tax duties and the submission of tax returns.
- Exercising rights before the AT, including administrative claims, hierarchical appeals or judicial challenges.
As a rule, the tax representative is not responsible for paying the taxes of the non-resident citizen. Exceptionally, the tax representative may be jointly and severally liable for the VAT payment if the non-resident citizen carries out a self-employed activity subject to VAT.
Consequences of Lack of Tax Representation
Failure to appoint a tax representative when compulsory (without having signed up for electronic notifications) is subject to a fine of €75 to €7,500, and non-resident citizens will not be able to exercise their rights with the AT (including the right to complain, appeal, or challenge).
The penalty applies to designations that omit express acceptance by the representative.
Revoking and Replacing the Tax Representative
The taxpayer can revoke the appointment of their tax representative at any time and appoint a new one, provided they notify the AT of this change.
The exemption of the tax representative in Portugal
There are two situations in which the appointment of tax representation is waived:
– When there are no tax obligations in the taxpayer’s legal sphere.
– When taxpayers subscribe to the dematerialised notification channels, namely the electronic notification and summons system available on the Finance Portal or in the ViaCTT electronic mailbox, they are exempt from appointing a tax representative.
Outside the scope of this exemption, there are still cases in which the taxable person carries out a self-employed activity in Portuguese territory. In these situations and where applicable, the obligation to appoint a tax representative, who must cumulatively be subject to VAT and have a tax residence in Portugal, is maintained.
To summarise, tax representation is a fundamental requirement to guarantee tax compliance for non-residents in Portugal, ensuring that all tax obligations are fulfilled efficiently and on time.
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