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Portugal Improves Flat-Rate Scheme For Farmers

Portugal has confirmed the introduction of tax compensation for farmers under the sector’s flat-rate value-added tax (VAT) special scheme to ameliorate the issue of otherwise unrecoverable VAT being incurred on inputs.

The flat-rate special scheme is intended to support Portuguese farmers by enabling them to opt out of standard VAT arrangements and enable them to recover part of the VAT incurred on inputs. This is achieved through a flat-rate amount of compensation (calculated based on macroeconomic statistics), rather than through input tax credits.

Small farmers who join the special scheme will receive compensation worth six percent of total sales to VAT-registered taxpayers, capped at a maximum of EUR600 (USD684) per year, Secretary of State for Fiscal Affairs, Paul Nuncio, told an event hosted by the Confederation of Farmers Portugal. “The simplified tax regime… is very attractive to farmers who have an income between EUR22,600 and EUR 200,000,” he said.

The announcement from Portugal follows infringement proceedings launched by the European Commission in 2009, when it challenged the zero percent compensation rate provided under the scheme.

A number of agricultural inputs are taxed at a rate of five percent in Portugal, while agricultural machinery and agricultural fuel are subject to a rate of 13 percent.

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