Reduced Rate for Olive Oil Production

Portugal’s 2026 State Budget proposes extending the reduced VAT rate to include olive oil production activities. Under the draft law, operations transforming olives into olive oil will be taxed at 6% in mainland Portugal and 4% in the Autonomous Regions of Madeira and Azores, aligning the processing stage with the existing reduced rate for final olive oil products.

Legislative Background

The Government submitted a draft amendment to List I of the VAT Code, explicitly adding “operations of transforming olives into olive oil” to the catalogue of goods and services eligible for the reduced 6% rate, effective January 1, 2026.

Reduced Rate Details

• Mainland Portugal: 6% reduced VAT rate on olive oil production activities
• Madeira & Azores: 4% reduced VAT rate on the same operations
• Includes both olive oil and olive pomace extracted during production, as well as processing services provided by mills to producers

Implementation Timeline

The preferential VAT treatment will come into force on January 1, 2026, reversing the temporary application of the standard 23% rate imposed earlier in the year following EU directive transposition

Sources

• Portugalpulse
• Government proposes reduced VAT of 6% on olive processing, a sector in which the Alentejo represents 82% of production. – Alentrium
• Draft bill

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