Portugal Introduces VAT Grouping Regime Effective July 2026

Portugal – VAT Group Regime (Lei n.º 62/2025)

Effective Date:

• Law enters into force the day after publication.
• Applies to tax periods starting from 1 July 2026.

Key Features

• VAT Grouping allows consolidation of VAT balances (payable or recoverable) among entities with financial, economic, and organizational links.
• A dominant entity and its dominated entities form the group.

✅ Eligibility Criteria

• Dominant entity must hold ≥75% capital and >50% voting rights in dominated entities.
• Entities must:
  • Be established in Portugal.
  • Conduct VAT-deductible operations.
  • Be under the monthly VAT regime.
• Have held the required participation for over one year, unless newly formed by the group.
• Entities in a group cannot belong to another VAT group simultaneously.

VAT Calculation

• Each entity files its own periodic VAT return.
• Group VAT is calculated via a consolidated declaration submitted by the dominant entity.
• VAT credits can be carried forward or refunded.

Payment & Responsibility

• Dominant entity pays the group’s VAT.
• Dominated entities are jointly liable.

️ Legal Rights

• Both dominant and dominated entities may challenge tax acts affecting them.

❌ Termination & Exclusion

• Grouping ceases if eligibility conditions are no longer met.
• Entities may be excluded if inactive, insolvent, or under revitalization.
• If the dominant entity is excluded, the group dissolves.

Subsidiary Legislation

• The Portuguese VAT Code applies where the group regime is silent.

Link to the law

---

• Introduction of VAT Group Regime: Portugal’s Law no. 62/2025, effective from July 1, 2026, establishes a VAT group regime allowing certain entities to consolidate their VAT obligations, enabling them to submit a single periodic VAT return while each member remains responsible for individual returns.
• Eligibility and Structure: To qualify for the VAT group, entities must have a financial link (at least 75% ownership), pursue similar economic objectives, and operate under a common management structure. The parent entity will handle VAT payments and can request VAT refunds, while all members are jointly liable for the group’s VAT.
• Consultation and Compliance: Affected entities should assess their eligibility and potential impacts of the VAT group regime, consult tax advisors for compliance, and implement internal processes for submitting returns. Participation in the regime requires careful evaluation of financial and operational links and adherence to legal requirements, with a minimum commitment of three years.

Source EY

---

• A new VAT group scheme law allows economic groups with multiple companies to consolidate VAT balances if they are financially, economically, and organizationally linked.
• The law is effective immediately but applies to tax periods starting July 1, 2026.
• Eligibility requires the dominant entity to hold at least 75% of capital and over 50% of voting rights in other group entities for more than a year, with all entities based in the country and under the normal VAT system.
• The dominant entity opts the group into the regime, and all group members are included; each company still submits its own VAT declaration, which is consolidated at the group level.
• The law was approved by parliament on October 17, 2025, with support from PSD, CDS-PP, Chega, and IL, and was promulgated by the President the same day.

Source: portugalpulse.com

---

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

---

---