Madeira and Azores VAT Rates: Portugal's Three IVA Schedules
Portugal does not have one VAT rate. It has three sets of them — one for the mainland, one for Madeira and one for the Azores — and the rate you charge depends on where the supply happens, not where your business sits. Here are the current figures and the rule that decides which set applies.
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Quick answer: mainland Portugal charges 23% / 13% / 6%. Madeira charges 22% / 12% / 4%. The Azores charge 16% / 9% / 4% — the lowest standard VAT rate in the EU. Which set applies is decided by where the operation is located, not where the seller is registered. Run the numbers on the Portugal VAT calculator, which has a region switcher for all three.
The three schedules, side by side
Madeira and the Azores are autonomous regions with constitutional power to set their own IVA rates, within a discount ceiling fixed by national law. The ceiling is 30% below the mainland rate. The Azores take the full discount on every band; Madeira takes a shallower one at the top and matches the Azores at the bottom1.
| Territory | Standard | Intermediate | Reduced | Notes |
|---|---|---|---|---|
| Mainland Portugal | 23% | 13% | 6% | The default schedule. Anexo I to the VAT Code lists what is taxed at 6%, Anexo II what is taxed at 13%; anything in neither falls to 23%. |
| Madeira | 22% | 12% | 4% | Reduced rate cut from 5% to 4% on 1 October 2024 by DLR n.º 6/2024/M — the change most rate tables have missed. |
| Azores | 16% | 9% | 4% | The full 30% discount on every band. At 16% this is the lowest standard VAT rate in the European Union. |
Madeira's reduced rate is 4%, not 5%. It was cut on 1 October 2024 by Decreto Legislativo Regional n.º 6/2024/M2. A large share of the online rate tables and VAT calculators still print 5%, which has been wrong for roughly two years. If a source still shows 5% for Madeira, treat everything else on that page with suspicion too.
The Azores hold the lowest standard VAT rate in the EU
At 16%, the Azores sit below Luxembourg's 17%, which is normally cited as the EU's lowest. The distinction is that Luxembourg is the lowest member state rate, while the Azores are a region inside a member state — but for a business invoicing an Azorean customer, 16% is the number that goes on the invoice. The rate was cut from 18% to 16% on 1 July 20223.
For the full EU comparison, see European VAT rates by country.
Which rate applies to a cross-territory sale
This is the part most summaries skip, and it is the part that actually decides your invoice. The determining factor is where the operation is located, not where the seller is registered.
The old rulebook, Decreto-Lei n.º 347/85, was revoked by Lei n.º 12/2022, which folded the regional sourcing rules into Artigo 6.º of the Código do IVA (nos. 16 and 17)4. If you are reading guidance that still cites DL 347/85 as live law, it predates 2022.
| Supply type | Which territory's rate applies | Worked consequence |
|---|---|---|
| Goods | Where dispatch or transport to the customer begins, or where the goods are made available | Stock shipped out of a Funchal warehouse carries Madeiran rates wherever the buyer is — including a buyer in Lisbon |
| B2B services | The customer's seat or fixed establishment | A consultancy invoice to an Azorean company carries the 16% Azorean rate even if every hour was worked in Porto |
| B2C services | Generally the supplier's establishment, subject to the special rules for immovable property, transport, catering and electronically supplied services | A mainland supplier's consumer service is usually a mainland supply at 23% — but check the special rules before assuming |
The counter-intuitive one is goods. Most people assume the customer's address sets the rate. For goods it does not — the origin of the dispatch does. A Madeiran retailer shipping nationwide charges 22% to everyone, and a mainland retailer shipping into Madeira charges 23%. The direction of travel matters more than the destination.
Worked example: the same €1,000 sale, three ways
€70 of difference on a €1,000 sale between the mainland and the Azores — 7% of the net price, and enough to matter on any repeated transaction.
To pull IVA back out of a gross figure at any of these rates, divide rather than subtract: €1,220 ÷ 1.22 = €1,000, so €220 was tax. The mechanism is covered in how to work out VAT backwards, and the reverse VAT calculator does it at any rate.
Madeira and the Azores are inside the EU VAT area
Worth stating plainly, because the comparable Spanish case works the opposite way. The Canary Islands, Ceuta and Melilla sit outside the EU VAT area and run IGIC instead of IVA. Madeira and the Azores are inside it. They apply Portuguese IVA at their own rates, and the ordinary intra-EU machinery — OSS, the reverse charge, intra-Community supplies — works normally5.
Practically, that means a business selling into Madeira is making a domestic Portuguese supply, not an export, and there is one Portuguese registration covering all three territories. What changes is the rate applied, not the registration.
How to work out which rate applies
- Decide whether you are supplying goods or services. The sourcing rule differs. Goods follow the movement of the goods; services follow the customer or the supplier depending on whether the sale is B2B or B2C.
- For goods, find where dispatch begins. The rate is set by the place where dispatch or transport to the customer starts, or where the goods are made available. Stock shipped out of Funchal carries Madeiran rates wherever the buyer happens to be.
- For B2B services, find the customer's seat. The general rule points at the customer's seat or fixed establishment. A consultancy invoice to an Azorean company carries the 16% Azorean rate even if every hour was worked in Porto.
- For B2C services, start from the supplier's establishment. These generally follow the supplier, subject to the usual special rules for immovable property, transport, catering and electronically supplied services.
- Pick the band within that territory. Once the territory is settled, apply that territory's standard, intermediate or reduced rate to the item — 23/13/6 on the mainland, 22/12/4 in Madeira, 16/9/4 in the Azores.
The one operational trap: businesses trading between the mainland and the islands have to run three rate sets in their billing software and map each customer or delivery point to the right territory. Certified Portuguese invoicing software handles this natively; generic foreign tools frequently do not, and default everything to 23%.
Continue
- Portugal VAT calculator — switch between mainland, Madeira and Azores rates and calculate in either direction.
- European VAT rates by country — all 27 member states plus the UK, Norway and Switzerland.
- EU VAT OSS and IOSS guide — how cross-border sales into Portugal are reported.
- Cyprus property VAT — another case where the headline rate is not the rate you pay, this time on a first home.
- How to work out VAT backwards — extracting the tax from a gross price at any rate.
Frequently asked questions
Quick answers to the most common questions users ask.
What is the VAT rate in Madeira?
Madeira's standard IVA rate is 22%, with an intermediate rate of 12% and a reduced rate of 4%. The 4% figure is recent — Madeira cut its reduced rate from 5% to 4% on 1 October 2024, and a great many rate tables and calculators still show the old 5%.
What is the VAT rate in the Azores?
The Azores standard IVA rate is 16%, with 9% intermediate and 4% reduced. At 16% the Azores has the lowest standard VAT rate anywhere in the European Union — lower than Luxembourg's 17%. It was cut from 18% to 16% on 1 July 2022.
Why do Madeira and the Azores have lower VAT than mainland Portugal?
Both are autonomous regions with constitutional power to set their own IVA rates within limits fixed by national law. The permitted discount is up to 30% below the mainland rate. The Azores take the full 30% across all three bands; Madeira takes a shallower discount at the top (22% against 23%) but matches the Azores at the bottom.
Which regional rate do I charge when I sell from the mainland to Madeira?
The rate follows where the operation is located, not where your business is based. For goods it is set by where dispatch to the customer begins or where the goods are put at the customer's disposal. For B2B services the general rule points at the customer's seat or fixed establishment, so an invoice to a Funchal company carries Madeiran rates even if the work was done in Lisbon.
Is Madeira inside the EU VAT area?
Yes. Unlike the Canary Islands, which sit outside the EU VAT area and run IGIC instead, both Madeira and the Azores are inside it. They apply Portuguese IVA at their own regional rates, and intra-EU rules such as OSS and the reverse charge work normally.
Do the regional rates apply to services supplied electronically?
They can, but the general place-of-supply rules decide it first. B2C electronically supplied services follow the customer's location under the EU rules, so a digital service sold to a consumer in Ponta Delgada is an Azorean supply at 16%. B2B follows the customer's seat.
Which rate applies to a hotel stay in Funchal?
Accommodation sits in the intermediate band, so a Madeiran hotel charges 12% rather than the mainland's 13%. In the Azores the same stay is 9%.
Do I need separate VAT registrations for Madeira and the Azores?
No. There is one Portuguese registration and one partida — the regions are not separate tax jurisdictions. What you need is billing software that can apply three rate sets and map each customer or delivery point to the right territory. Certified Portuguese software does this natively; generic foreign invoicing tools frequently do not.
References
- Código do IVA — Artigo 18.º (taxas do imposto) and the regional rate provisionsAutoridade Tributária e Aduaneira↩
- Decreto Legislativo Regional n.º 6/2024/M — Madeira reduced rate cut to 4% from 1 October 2024Diário da República↩
- Decreto Legislativo Regional n.º 15-A/2021/A — Azores standard rate cut to 16% from 1 July 2022Diário da República↩
- Lei n.º 12/2022 — revokes Decreto-Lei n.º 347/85 and moves the regional sourcing rules into Artigo 6.º CIVADiário da República↩
- VAT rates applied in the Member States of the European UnionEuropean Commission — Taxation and Customs Union↩
- Portugal — Other taxes: value-added tax and the autonomous regionsPwC Worldwide Tax Summaries↩
Primary sources are linked directly. Rates and thresholds change on their own schedules — always confirm against the issuing authority before relying on a figure.
Calculate at all three Portuguese rates
Switch between mainland, Madeira and Azores schedules and add or remove IVA instantly.
Related guides
Keep reading — these cover the next step in the same chain.
All rates, thresholds, and regulatory guidance cited on this page are sourced from official government publications and non-partisan research institutions.
International Tax Bodies
European Commission — VAT Guide
Comprehensive portal for VAT rates and rules across all 27 EU member states, including B2B/B2C regulations.
ec.europa.euOECD — Consumption Tax Database
Global comparative data on VAT/GST structures and consumption tax trends across OECD member nations.
oecd.orgTaxesLedger is an independent educational tool. We are not affiliated with any government agency. Rate records include source metadata and verification status; always confirm with your jurisdiction's official Department of Revenue before filing. Last registry update: September 11, 2026.
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