PERSONAL INCOME TAX DEDUCTION OF INPUT VAT ON INVOICES IN PORTUGAL: AN EXPLORATORY STUDY

Abstract

The present investigation is an exploratory study focusing on the deduction to the collection Portuguese Personal Income Tax (PIT) due to the requirement of an invoice. as a measure to combat tax fraud and evasion in Portugal, and, in addition, as a measure to encourage voluntary compliance by economic agents in issuing invoices.
In Portugal, after the economic and financial crisis that occurred between 2008 and 2014, the fight against fraud and tax evasion became notorious. Consequently, there was a restructuring of the invoicing system, with both the Portuguese e-fatura (e-invoice system) and the deduction from the collection in IRS of a percentage of the Value Added Tax (VAT) borne on its acquisitions in the Portuguese tax system (Melo, 2018).
With the recent study by the Working Group for the Study of Tax Benefits in Portugal, which proposed the continuation of the study of tax benefits in Portugal, it becomes pertinent to study the tax benefit of deducting PIT from VAT supported on invoices, through an exploratory study, analyzing whether the measure is justified to maintain in the Portuguese tax system.
The investigation starts by framing the problem, followed by the definition of concepts relevant to the investigation, such as the concept of fiscal benefit and tax expense. Once the research was framed, an investigation was carried out using a questionnaire to the academic community of the Polytechnic Institute of Cávado and Ave (IPCA).
Therefore, using a sample of 420 respondents, we concluded that respondents tend to request invoices, one of the main reasons mentioned being the duty to combat tax fraud and tax evasion. On the other hand, about 59,8% of the sample recognizes a positive effect in the calculation of its PIT due to the tax benefit by invoice requirement.
Using Spearman’s rho, the results showed a greater perception of the respondents about the effect of deduction on the collection of PIT, due to the requirement of invoice, in combating fraud and tax evasion, the greater the frequency they request invoice in the sectors of activity that grant them this tax benefit. The analysis carried out also confirmed that as the gross annual income of respondents increases, the lesser their consideration of the effect of deduction for the invoice requirement in the calculation of their IRS is, and the greater is their perception of the relevance of the benefit in study has on combating fraud and tax evasion.
The study allowed, through the perception of respondents, to gauge that the benefit under study appears to be effective in combating fraud and tax evasion and, in the long term, will allow the request for invoices to become a custom in Portuguese households, justifying, therefore, its maintenance in the Portuguese tax system.