Portugal Introduces VAT Grouping from July 2026: What Businesses Need to Know

Last year, Portugal formally introduced its first ever VAT group regime with the publication of Lei n.º 62/2025, de 27 de outubro in the Republic’s Official Gazette, the Diário da República.

The new regime, now less than two weeks from coming into force, applies to tax periods beginning on or after 1 July 2026 and allows corporate groups to consolidate the VAT balances payable or recoverable by their Portuguese group members into a single net position.

More recently, Ordinance no. 244/2026/1 of 1 June 2026 approved the official VAT group declaration form and its submission rules, completing the legal framework ahead of the regime's entry into force.

What is the Portuguese VAT group regime?

The Portuguese model is a consolidation of VAT balances, not a full VAT group in the sense of Article 11 of the EU VAT Directive. Each group member remains a separate taxable person with its own VAT number and continues to submit its own periodic VAT return. The novelty is that the credit and debit balances calculated individually by each member are aggregated into a single group declaration, resulting in one net amount payable or refundable for the group as a whole.

Importantly, intra-group transactions remain subject to VAT under the Portuguese regime. This is a key difference compared with the single taxable person models applied in countries such as Germany or the Netherlands, where supplies between group members fall outside the scope of VAT. Businesses with limited input VAT deduction rights, such as those in the financial or insurance sectors, should factor this into their assessment, as the cash-flow benefit may be more limited than in other EU jurisdictions.

Who can form a VAT group in Portugal?

A VAT group exists when a dominant entity and its dependent entities are closely bound by financial, economic, and organisational links. The conditions are as follows:

• Financial link: the dominant entity must hold, directly or indirectly, at least 75% of the share capital of the dependent entities for more than one year, and this holding must confer more than 50% of the voting rights.

• Economic link: all entities must pursue similar, complementary, or interdependent economic activities.

• Organisational link: the entities must share a common management structure or be subject to the same business strategy.

• All members must have their head office or a permanent establishment in Portugal.

• All members must be registered under the standard monthly VAT regime.

• All members must carry out transactions granting a full or partial right to deduct input VAT.

• No entity may belong to more than one VAT group.

How does the VAT group election work?

The regime is optional. The dominant entity opts in by submitting a declaration of commencement or amendment of activity, and the election takes effect from the tax period in which it is filed. Once made, the option is binding on the group for a minimum period of three years.

The regime terminates automatically for any member that does not carry out taxable transactions for more than one year, or that enters insolvency or special revitalisation proceedings.

Filing and payments under the new regime

The VAT compliance mechanics combine individual and consolidated reporting:

1. Individual VAT returns: each group member continues to calculate its own VAT position and submit its periodic VAT return within the normal deadlines.

2. Group declaration: under Ordinance 244/2026/1, the Portuguese Tax and Customs Authority (AT) will make available a pre-filled group declaration, based on the algebraic sum of the credit and debit amounts reported in each member's periodic VAT return.

3. Confirmation by the dominant entity: the dominant entity must confirm the group declaration by the 20th day of the second month following the relevant tax period, in line with the standard Portuguese VAT return deadline. If the dominant entity does not confirm it within the deadline, the declaration is automatically deemed submitted.

4. Rectification: the group declaration must be corrected whenever the individual returns of group members are amended or where the tax authorities issue an official assessment.

The dominant entity pays the net VAT due on behalf of the group, while the dependent entities remain jointly and severally liable for the payment. Where the consolidated position results in a credit, this may be carried forward to subsequent periods or refunded under the general rules of the Portuguese VAT Code.

Benefits and limitations of Portuguese VAT grouping

The main advantages of the regime are the automatic offsetting of credit and debit positions within the group, fewer refund claims and monthly payments, improved cash management, and administrative simplification at group level.

On the other hand, the regime does not remove VAT from intra-group transactions, members must remain on the monthly filing regime, and the three-year lock-in period requires groups to assess eligibility and benefits carefully before opting in. Joint and several liability across the group is also an important governance consideration.