Introduction
Following the resignation of the previous head of government, and the results of the new elections, the president of Portugal appointed a new PM, of the center-right Democratic Alliance (AD) and invited him to form a minority government. For now, and until Friday (12th april), all the government’s attention is focused on submitting to a vote of its program in Parliament, which contains the main political guidelines, and policies to be adopted in the various areas of government activity. After that, it is very likely that the new government will submit a new budget adjustments bills, to parliament. The actual Budget for 2024, approved by Decree-Law no. 82/2023, of December 29, approved by Parliament by the previous government, and so, it is still in force.
I – General Information
There are in Portugal main important Laws that deal with direct selling (please see below a list of the Decree-Law and the Portuguese legal full text web site link). The Direct Selling Law includes also, some norms related to the consumers rights. The Constitution of Portuguese Republic does already fix the principle of defense of consumers (article 60). In fact, indeed, there are many Laws, but not a unified Consumer rights Code.
- a) Legal framework
– Decree-Law n. º 82/2008, May 20th introduces in Portugal the Directive 97/7/CE, from European Parliament and European Council, from the 20th of May 1997. It concerns the protection of consumers in (distance Contracts) or sale contracts, and also regulating home and similar made contracts, as well as other contract types, for the supply of goods and services, in the direct selling mode.
as published on the IPVD web site – Vendas à Distância Decreto-lei 82-2008.doc (www.ipvd.pt )
– Decree-law 166/2013, 27th December amended by Decree-Law n.º 108/2021, 7th December, and previously by Decree-Lay Nº 76/2021, 27th August, and Decree-Law n. º 9/2021 of 29th January . This law represents progress in the effort to rebalance and provide greater equity and transparency in relationships between suppliers and distributors.
::: DL n.º 166/2013, de 27 de Dezembro (www.pgdlisboa.pt )-
– Legal Defense Consumer Law – Law n. º 24/96, 31st July with updated version introduced by Decree-Law n.º 84/2021, October 18th and Decree-Law n.º 59/2021 of July 14th and recently by Law n. º 28/2023, July 4th . That Law establishes the legal regime applicable to consumer protection.
::: Lei n.º 24/96, de 31 de Julho (www.pgdlisboa.pt )
– Direct Sales Contracts celebrated outside the main trade shop – Decree-Law No 24/2014 dated 14th of February, with the last amendment introduced by Law 10/2023 of march 3th, defines the rules framework for distance direct sales, or other outside the shop .
::: DL n.º 24/2014, de 14 de Fevereiro (www.pgdlisboa.pt )
– Decree Law 236/86, dated 19 August, as amended by Decree Law 42/88 of February 6th, all contracts and information’s should be written in Portuguese. In addition, in accordance with the regulations that apply to Consumer Protection (Law 24/96, of 31 July), the information provided to the consumer must be in Portuguese, including the labeling, packaging, prospectuses, catalogs and manuals instructions.
(Decreto-Lei 238/86, 1986-08-19 – DRE )
– E-Commerce and cross border activities LAW number 47/2020, dated 24th August. This legislation implementing the European Directive 2017/2455, 5th December, and European Directive 2019/ 1995, 21st November, and introduced changes to the VAT Code, the VAT Regime on Intra-Community Transactions and complementary legislation relating to this tax, within the scope of the treatment of electronic commerce
(::: Lei n.º 47/2020, de 24 de Agosto (www.pgdlisboa.pt )
– COUNCIL DIRECTIVE (EU) 2020/284 of 18th February 2020, which amends Directive 2006/112/EC, introducing new obligations applicable to payment service providers. These obligations are applicable since January 1, 2024
https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020L0284
-COUNCIL DIRECTIVE (EU) 2020/285 of 18th February 2020 amending Directive 2006/112/EC on the common system of value added tax as regards the special scheme for small enterprises and Regulation (EU) No 904/2010 as regards the administrative cooperation and exchange of information for the purpose of monitoring the correct application of the special scheme for small enterprises.eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32020L0285
- b) Jurisprudence
Due to the recent legal regime of Decree-Law n. º 9/2021, January 29th, we have not been able to find any decision from the Portuguese courts regarding the legal framework for direct selling. The jurisprudential decisions that follow, therefore, refer to a normative framework that has already been revoked. However, there are dogmatic aspects that deserve to be underlined.
I-court decisions
– Judgment of the Porto Court of Appeal of 27 April 2015.
– Judgment of the Porto Court of Appeal of 5 May 2005.
II – Cooling-off Period
14 days according to the European directive 2011/83/UE, dated 22nd November 2011, full transposition (European Parliament and European Council), See article 10 of Decree-Law 24/2014, 14th February, amended by Decree Law n. º9/2021, of 29th January.
However, the Decree Law nº 109-G/2021, 29th December had introduced on 28th May 2022, some alteration, such us, the extended cooling-off period to 30 days. This legislation partially implemented in Portugal the Directive 2019/2161 UE, from European Parliament and European Council from the 27th November.
III – Pyramid Schemes
Its forbidden Cross selling, unless there exists a complementary relation between the products according to article 27 of Decree-Law 24/2014, February 14 was repealed by Decree-Law No 78/2018 of October 15th.
IV – Multi-Level Marketing
There is no law or regulation in this field. No restrictions are fixed by any law.
V – Products Prohibition
Financial services, real estate operations, health care and social services, touristic and travel agencies services, gambling and lotteries, food stuff and drinking, public services transportation.
- Product Trading Bans:
DS Ban on specific pharmaceutical and financial products.
There are no “bans” but some activities that are excluded from the legal framework on direct sales by Decree-Law 82/2008, May 20th such as:
– Investment services
– Insurance services
– Bank services
– Pensions funds services
– long term capital applications and options
– Vending machines or other automatic distributors
– phone sales using public phones
– real states operations
– auctions
– groceries delivered at home/offices
– tourism services-lodgment, transports. Restaurants and public shows and events.
Article 3º of Decree-Law n. º 82/2008, May 20th introduces in Portugal the Directive 97/7/CE, from European Parliament and European Council from the 20th May http://ipvd.pt/wp-content/uploads/2013/11/decreto_lei.pdf
Article 2º of Decree-Law 24/2014 dated the 14th February, with the amendments introduced by Decree-Law n. º 9/2021, January 29th – Contracts celebrated at distance and outsider trade settlement.
http://www.pgdlisboa.pt/leis/lei_mostra_articulado.php?nid=2062&tabela=leis&so_miolo
Due the implementation of Decree Law nº 109-G/2021, 29th December, those rules had changed on 28th May 2022.
https://files.dre.pt/1s/2021/12/23801/0000200052.pdf
VI – Country Credit Restrictions
No special or specific restrictions exist in relation with direct selling operations.
It depends on authorized payment methods.
VII – Money Collections
No special regulations exist, except of money or currency exchange.
VIII – Licenses
No special license is compulsory for the direct sales companies, however some products require notification procedures and should respect some restrictions on publicity, such as medical effects.
IX – Status of Direct Sellers (labour force (consultants)
Direct selling is based, mostly, in the entrepreneur spirit of direct selling agents, who share their enthusiasm and knowledge with the clients, to promote their products and provide a customized service, always respecting the consumer. If they are not full employees of the Direct selling company, this is considered a free independent activity, that requires only an individual registration, before the Tax Authorities (IRS and VAT) and the Social Security System.
X – Earnings Claims
No specific legal on regulations on the field, depends on the private initiative. All income should be paid after a legal invoice of the salesperson dully registered by the Tax services, since Law 51/2013, dated 24th July. However, all the paperwork can be produced and centralized by the Direct Sales Principal operator.
XI – Taxes and Fees
The Portuguese tax year runs for a calendar year (from 1 January to 31 December) and the sales force/agents, pays IRS according to their status and earnings, global level of income and family composition. With a Monthly income of 820 Euros no IRS is paid (actual minimum month salary, paid annually 14 months).
The IRS taxes are the following:
Until 820,00€ a month no taxes are paid.
From there on there is a very complex system of calculation, taking in account if there is a couple or a single worker, +with children? depending on their number etc. a Government Decree-Law fixes the method of calculation from the minimum to the maximum. For more related information, please see the following web page:
0000200008.pdf (diariodarepublica.pt)
The Personal Income Tax (IRS) is levied on the yearly amount of incomes comprised in several categories after the appropriate deductions and allowances.
IRS – Category B – Income from self-employment (business and professional activities)
The determination of net income in this category, other than incomes from companies’ subject to the fiscal transparency regime, shall be based, generally, on:
– Accounting records; or – Simplified tax regime.
However, if earned incomes are a result of services rendered to a single entity, except services rendered by a member of a company covered by the fiscal transparency regime, the taxpayer may opt for taxation according to the rules of category A for a period of three years.
XII – Social Security
As independent professional, the sales force must be registered at the Social Security System. The main web site is here Início – seg-social.pt (seg-social.pt)
The contributory obligation of self-employed workers includes:
-Payment of contributions
-The Quarterly Declaration of the amounts corresponding to the activity carried out
-The Annual Activity Declaration (Annex SS to IRS Model 3).
Quarterly, self-employed workers are required to declare:
-The total amount of income associated with the production and sale of goods
-The total value of income associated with the provision of services
-Other income necessary for the calculation of relevant income.
This declaration was made by the last day of the months of April, July, October, and January, in relation to the income obtained in the three immediately preceding months.
XIII – Others – Miscellaneous
Portugal’s Value Added Tax (VAT) rules are based on EU regulations; if a conflict ever arises regarding VAT in Portugal, the European Directive takes precedence – see COUNCIL DIRECTIVE 2006/112/EC of 28 November 2006, as amended, on the common system of value added tax CL2006L0112PT0240010.0001.3bi_cp 1..2 (europa.eu)
See also:
- VAT guidelines
The EU’s VAT system is semi-harmonized. While the guidelines are set out at the EU level, the implementation of VAT policy is the prerogative of Member States.
VAT is paid by consumers when paying for goods or services supplied. The seller or service provider receives the VAT and then pays it to the Tax and Customs Authority (AT).
In Portugal, there are three basic rates of Value Added Tax (VAT):
– a reduced rate of 6% in mainland Portugal, 4% in the Autonomous Region of the Azores and 5% in the Autonomous Region of Madeira for goods and services in List I of the Value Added Tax Code
– an intermediate rate of 13% in mainland Portugal, 9% in the Autonomous Region of the Azores and 12% in the Autonomous Region of Madeira for goods and services in List II of the Value Added Tax Code
– a standard rate of 23% in mainland Portugal, 16% in the Autonomous Region of the Azores and 22% in the Autonomous Region of Madeira for all remaining goods and services.
For more information, please refer to Article 18 of the Value Added Tax (VAT) Code.
The Article 53 of the special VAT exemption regime has a new limit of €14,500 in 2024, which means that self-employed workers can benefit from a higher VAT exemption limit.
This article underwent changes in the 2023 State Budget, which increased this exemption limit from €10,000 in 2022 to €13,500 in 2023 and referred to the current increase for 2024. However, this will not be the last change in this article as in 2025 it is expected that this limit will be updated to €15,000.
Self-employed workers who start activity in 2024 under a simplified regime can benefit from the tax exemption if the expected turnover does not exceed €14,500.
In short, taxpayers who do not have organized accounting and who, in 2023, reach a turnover equal to or less than 14,500 Euros can benefit from this special VAT regime.
Organized accounting is mandatory if the estimated annual income exceeds 200 thousand Euros. Even if you anticipated a lower income, you could always opt for organized accounting if you wish.
http://info.portaldasfinancas.gov.pt/pt/docs/Conteudos_1pagina/Pages/portuguese-tax-system.aspx
- The “E-commerce package”
The set of European regulations profoundly modifying the VAT rules in all EU countries – applicable to distance selling and more broadly to BtoC E-Commerce, initially supposed to come into force on January 1, 2021, was postponed for 6 months because of the Covid-19 crisis.
The main measures of the reform were the following:
New definition of « distance sales »
From 1st July , 2021, it is necessary to distinguish 2 types of distance sales:
Intra-community Distances Sales: BtoC sales of goods dispatched by the seller or on his behalf from an EU Member State to another EU Member State.
Distance Sales of goods imported from third countries: B2C sales of goods dispatched by the seller or on his behalf from a third country in the EU directly to the final customer in an EU Member State.
Removal of domestic distance sales thresholds
From 1st July 2021, the existing threshold for intra-Community distance sales of goods had been abolished and replaced by a new EU-wide threshold of EUR 10,000 below which the supplies of TBE services and intra-Community distance sales of goods may remain subject to VAT in the Member State where the taxable person supplying those TBE services is established or where those goods are located at the time when their dispatch or transport begins.
It should be noted that the plafond of 10 thousand Euros/year are not a limit per Member State, but a limit applicable to all intra-Community distance sales of goods made to all Member States.
Distance sales of goods imported from third countries are subject to VAT in the country of arrival, from the first sale.
Abolition of the import VAT exemption for consignments of a value up to €22
Since 1st July 2021, the exemption from import VAT and customs declaration for small consignments with a unit value up to €22 have been abolished. This exemption was widely abused by non-European sellers on marketplaces, leading to massive VAT fraud in Europe and distortion of competition with European companies.
This exemption had been replaced by an import VAT exemption only, applicable to consignments with a value not exceeding EUR 150 whose sales are declared via the new « Import One-Stop-Shop »
WARNING: a customs declaration will need to be filed at the moment of importation, and the import declaration will have to mention the IOSS VAT number of the seller, whose authenticity will be verified by the customs services.
Introduction of 3 optional special regimes and corresponding electronic platforms (OSS)
From 1st July 2021, the MOSS (or mini one-stop shop) had been replaced by 3 new optional special schemes that may apply to E-Commerce:
The Non-Union One-Stop-Shop will make it possible to declare the intra-Community BtoC services carried out by non-European companies.
The Union One-Stop-Shop will allow to declare:
– Intra-community Distance sales carried out by European companies, non-European companies and market-places;
– domestic BtoC sales carried out by the market-places;
– Intra-community BtoC services carried out by European companies.
The Import-One-Stop-Shop will make it possible to declare the Distance sales of goods imported from third countries with a value not exceeding €150 carried out by European and non-European companies and marketplaces.
The new OSS will thus make it possible to declare all the operations concerned and to pay the corresponding VAT amount by means of a single specific declaration via a single intra-community VAT number, regardless of the country in which the VAT is due and regardless of the applicable VAT rate. The VAT collected by the tax authorities of the country of identification will then be divided between the countries of consumption.
The use of the OSS will always be optional, the taxable persons will thus be able to choose to benefit from it or to apply the standard regime. Moreover, the use of special regimes for one type of transaction will not prevent the application of the standard regime for other taxable transactions. VAT refunds will not be possible through OSS. The deductible VAT will always have to be recovered via the current VAT refund procedures.
Introduction of the VAT liability of the market-places
Since July 1st, 2021, marketplaces are considered as “deemed suppliers”. That means that marketplaces are regarded, for VAT purposes, as having bought and sold the goods themselves.
Consequently, there are 2 operations for VAT purposes:
– A VAT exempt sale between the seller and the market-places in the country of departure.
– A taxable sale between the marketplace and the individual customer, subject to VAT in the country of arrival.
Warning: it will be therefore up to the market-places to collect, declare and pay the VAT instead of the sellers.
However, it should be noted that the marketplaces are liable for VAT only on the following operations:
– For European companies, on Distances Sales of goods imported from third countries with a value not exceeding 150 Euros;
– For non-European companies, on all BtoC sales located in the European Union, including domestic sales.
– Marketplaces will have access to the OSS’s to report the sales in which they act as deemed supplier, including domestic sales.
The Following list must be generally observed:
- Decree-Law 7/2004, 7th January, known as eCommerce law
- Law 46/2012 29th August, on data protection and privacy in electronic communications
- Decree Law 63/85, 14th January known as the copyright code
- Decree-Law 330/90, 23rd October, known as the Advertising Code
- Decree-Law 138/90, 26th April, known as the Consumer Price Law
- Law 24/96, 31st July, known as the Consumer Law
- Law 67/98, 26th October, known as the Personal Data Protection Act
- Decree-Law 143/2001, 26th April, known as the law on distance contracts.
- Decree-Law 70/2007, 26th March, known as the law on price reductions.