Navigating the VAT Maze: A Case Study of Financial Recovery with Kilobanan

At Kilobanan, we thrive on turning complex financial challenges into clear, manageable solutions. In this case study, we delve into the journey of one of our clients—a marketing professional who found themselves caught in a web of tax complexities after relocating to Portugal. We'll explore their initial struggles, the strategic solutions we proposed, and the positive financial turnaround that ensued.

The Client's Predicament

Our client, a marketing professional, relocated to Portugal with the help of an immigration agency. Initially, the case seemed straightforward: the agency opened a Trabalhador Independente activity (TI) and provided a link to an online manual for issuing Recibos Verdes (Green Receipts). The client only had one invoice to issue for a single contractor.

However, complications arose quickly:

• Despite following the provided manual, the client was slapped with a €575 penalty from the Portuguese Tax Authority (AT).
• The client sought our help to pinpoint the error—whether it lay with the immigration agency, the online manual, or their own actions.
• They also requested assistance in reducing the penalty and ensuring future compliance to avoid further issues with tax authorities.
  
  

Uncovering the Issue

Our initial investigation revealed a crucial mistake made by the immigration agency during the activity setup. Although the client’s parameters qualified for VAT exemption under Article 53.º (Isenção de IVA), the agency mistakenly registered them under the regular quarterly VAT regime (IVA - Normal Trimestral). This oversight required the client to submit quarterly VAT declarations and remit 23% VAT.

The online manual, tailored for activities under the IVA - Normal Trimestral regime, further compounded the confusion. As a result, the client faced the following losses:

• €540 penalty for failing to submit VAT declarations for two quarters.
• €35 underpaid VAT.
• 23% loss of revenue on future payments due to the incorrect tax regime.
  

Kilobanan's Strategic Solution

Upon onboarding, we swiftly made the necessary adjustments on the AT portal to switch the client’s VAT regime from IVA - Normal Trimestral to Isenção de IVA - Artigo 53.º. We then filed a request with AT, arguing a technical error during the activity setup and referencing the relevant legislation that exempted the client from charging VAT.

After two months of diligent communication with AT, our team successfully reduced the penalty from €575 to €150. This reduction was achieved by cancelling AT’s claim on the €35 VAT and lowering the overall penalty. Furthermore, the client saved 23% on all future incoming payments.

Conclusion

This case highlights a common issue faced by many: the pitfalls of generic online manuals and template solutions from immigration agencies that fail to account for individual circumstances. Additionally, VAT profiles can be dynamic, requiring adjustments throughout the year. Neglecting timely updates can lead to costly fines and penalties from AT.

At Kilobanan, we offer tailored support from certified professionals to navigate these complexities and safeguard against potential penalties. If you’re looking to ensure your financial compliance and optimize your tax situation, schedule a consultation with one of our specialists today using promo code KILOBLOG to get 20% discount. Click the link below to get started.

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