A new law (Law no. 62/2025, 27 October 2025) introduces the value-added tax (VAT) group regime in Portugal, allowing certain entities to consolidate their VAT obligations. The new law becomes effective from taxable periods starting 1 July 2026 and later.

New regime

The VAT group regime aims to increase the competitiveness and efficiency by allowing the group to manage its cash flow and allocate resources in a more efficient manner.

This model allows VAT group members to consolidate their VAT balances into a single periodic return without affecting the normal operation of each entity's activity. Although each member remains obliged to submit its own periodic VAT returns, the tax balance calculated for the various members is aggregated into a group return.

Under this regime, the parent entity is responsible for paying the group's VAT, while all members are jointly and severally liable for the VAT due. In case of a consolidated VAT credit position, the parent entity is the entity eligible to request the VAT refund to the tax authorities.

In addition to having a financial link (verified whenever the parent entity owns, directly or indirectly, at least 75% of the capital of other entities (i.e., subsidiaries), and this participation grants the parent more than 50% of the voting rights), all entities within the VAT group must pursue a similar, complementary or interdependent economic objective and operate under a common management structure or according to a single business strategy.

The option to participate in the VAT group regime is exercised by the parent entity and applies to all group entities that meet the following requirements:

• Have their head office or permanent establishment in Portugal
• Are covered by the monthly VAT regime
• Have a full or partial right to deduct input VAT
• Have participated in the group for more than one year from the beginning of the application of the regime (unless the entity was established less than one year ago by the dominant entity or by another entity in the VAT group)

VAT groups that adhere to the regime are expected to apply the VAT group regime for at least three years. Although the regime may apply indefinitely, certain actions may provide grounds for determining its termination.

Implications

Affected VAT groups should consult with qualified tax advisors for help clarifying and evaluating whether to participate in the new regime. Examples of actions to consider include:

• Assessing the group structuring and its eligibility to apply the regime through the analysis of financial, economic and organizational links between the group's entities
• Evaluating the potential impact of applying the VAT group regime, considering the different input VAT deduction capacities of the group entities, the type of operations, their framework in the context of cross-border transactions, among others
• Obtaining support with communications and adherence to the regime, compliance with applicable legal requirements and deadlines, and communications with the tax authorities
• Implementing a compliance processes, developing internal practices to ensure the correct submission of individual periodic VAT returns and the group's consolidated return
• Managing changes to and termination of the regime, monitoring changes in the group's structure, and assistance in the exclusion or termination of the regime