1st October 2024 4% reduced rate decreases from 5% to 4%
The Portuguese autonomous Atlantic islands region of Madeira will cut its 5% reduced rate down to 4% from October 2024. The super reduced rate applies to:
- essential food products;
- periodic publications;
- books;
- pharmaceutical products;
- hotel accommodation;
- agricultural products; and
- passenger transport.
The Value Added tax rates will then therefore be:
- Standard rate: 22%;
- Reduced rate: 12% (certain foods; wine; agri supplies; restaurants);
- Super reduced rate: 4%; and
- Zero-rated: 0%
VAT in Madeira
Madeira VAT is based on Portugal VAT, and functions similarly to the broader EU VAT system but with some distinctions due to its status as an autonomous region of Portugal.
When businesses in Madeira sell products or services, they charge VAT to their customers, which is then collected and paid to the tax authorities. Businesses are also able to deduct the VAT they have paid on the goods and services needed for their own operations, meaning VAT is only levied on the added value at each stage of the supply chain.
Madeira benefits from lower VAT rates compared to mainland Portugal as part of its economic incentives to attract investment and promote tourism.
This differential VAT structure, including reduced rates, helps support Madeira’s economy while still maintaining alignment with Portugal and EU VAT policies. Businesses must register for VAT and comply with reporting and payment obligations to the regional tax authorities.