Client Success Stories Case 3: Avoiding Import VAT Penalties in Portugal

The Situation
A Portuguese entrepreneur running a lifestyle e-commerce store on Shopify imported goods directly from China to customers in Lisbon and Porto. Believing it was “safer”, he charged 23% Portuguese VAT at checkout on every order.

However, customs (CTT Portugal) still charged import VAT when the packages entered Portugal. Customers complained about being double-charged, and the entrepreneur feared potential audits.

The Problem
According to Código do IVA (CIVA), Article 6(1):

“Goods are subject to Portuguese VAT only if they are located in Portugal when transport to the acquirer begins.”

Since the goods were shipped from China, the place of supply was outside Portugal. VAT should not have been charged at checkout. Instead, VAT was due at import and collected by customs.

Our Approach

  1. Conducted a full VAT compliance review.

  2. Collected legal references from CIVA, Art. 6(1) and the EU VAT Directive, Art. 32.

  3. Submitted a ruling request with Autoridade Tributária (AT) to confirm the client’s VAT position.

  4. Updated Shopify settings to stop charging VAT on Chinese shipments, while maintaining VAT on EU-based orders.

  5. Assisted in filing a claim for refund of overpaid VAT on prior returns.

The Outcome

  • AT confirmed the client was correct to stop charging VAT at checkout for non-EU shipments.

  • Customers stopped complaining about double VAT charges.

  • Over €12,500 in overpaid VAT was refunded.

  • The business gained confidence to expand internationally without VAT risk.

Key Takeaway
In Portugal, VAT is only due if goods start their journey inside the EU. With the right compliance setup, dropshippers can avoid penalties and improve customer satisfaction.

Doing business in Portugal? We can help you avoid double taxation and stay fully compliant.

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