1. Overview
The Portuguese Tax Authority (Autoridade Tributária e Aduaneira – AT) recently issued a binding ruling confirming that self-employed professionals and freelancers can deduct the full amount of VAT paid on the purchase of a 100% electric car, provided certain conditions are met.
This clarification is highly relevant for lawyers, consultants, architects, accountants, and other professionals registered for VAT in Portugal who use an electric vehicle exclusively for business purposes.
2. Legal Framework
Under Articles 19 and 20 of the Portuguese VAT Code (CIVA), a taxpayer may deduct VAT on goods and services used to perform taxable business activities.
However, Article 21 of the VAT Code excludes the right to deduct VAT on certain expenses—most notably those related to passenger vehicles, which are typically considered suitable for private use.
3. The Exception for Electric and Plug-in Hybrid Cars
Following the Environmental Tax Reform (Law No. 82-D/2014, of December 31), Portugal introduced a key exception under Article 21(2)(f) of the VAT Code.
This exception allows full VAT deduction on the acquisition or leasing of 100% electric or plug-in hybrid passenger vehicles, as long as the following requirements are satisfied:
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The purchase price (excluding VAT) does not exceed €62,500, as set by Portaria No. 467/2010;
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The vehicle is used exclusively for professional or business purposes;
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The taxpayer performs VAT-liable operations that grant the right to deduction.
When these conditions are met, the Portuguese Tax Authority confirms that the VAT incurred on the acquisition of a 100% electric car can be fully deducted.
4. Important Limitations
Although the purchase itself qualifies for VAT deduction, running expenses such as maintenance, repairs, tolls, insurance, and electricity remain non-deductible.
If the vehicle is ever used for private purposes, this constitutes a taxable service for VAT purposes under Article 4(2)(a) of the VAT Code. The professional must charge VAT at the standard rate on the fair market value of the private use.
5. Carry-Forward and VAT Refunds
According to Article 22 of the VAT Code, if the deductible VAT exceeds the VAT charged in a given quarter, the remaining credit may:
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Be carried forward to subsequent VAT periods until fully used, or
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Be refunded upon request, through the periodic VAT return, under the terms of Normative Order No. 18-A/2010.
6. Selling the Vehicle or Ceasing Activity
The ruling clarifies that any future sale of the vehicle or cessation of activity must be assessed when it actually occurs, depending on the circumstances at that time.
If the vehicle is sold or transferred to private use, a proportional VAT adjustment may be required to account for the initial deduction.
7. Key Takeaways
The Portuguese Tax Authority confirms that a freelancer or independent professional can fully deduct VAT on the purchase of a 100% electric car, provided that:
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The vehicle costs less than €62,500 (excluding VAT);
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It is used solely for professional purposes;
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The taxpayer performs taxable business activities eligible for VAT deduction.
Any private use triggers the obligation to charge VAT on the corresponding benefit.
8. Why This Matters
This ruling provides much-needed clarity for self-employed professionals in Portugal investing in sustainable mobility. It reinforces the government’s commitment to promoting green transportation while offering a clear fiscal advantage for electric vehicle adoption.
Professionals can now confidently acquire electric cars knowing that—if properly justified—they may recover the entire VAT amount on the purchase, optimizing both their tax position and environmental footprint.
Prepared by Rui Borges, CPA No. 84392 – GoalSeek Tax Advisory.
For tailored guidance on VAT deduction for electric vehicles or other business expenses in Portugal, contact GoalSeek’s tax experts today.
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