The law that introduces a new VAT group regime was published today in the Official Gazette, to apply from July 1, 2026.
The new VAT collection model will allow economic groups with several companies to consolidate the tax balances they have to pay to the State or to recover from these entities that are “united by financial, economic and organizational ties”, reads the new legislation.
The law comes into force on Tuesday, but will only take effect next year, applying “in relation to tax periods that begin on or after July 1, 2026”.
According to the text of the law, the linkage required on a financial level occurs when the dominant entity holds “a direct or indirect shareholding of at least 75% of the capital of another or other so-called dominated entities, provided that such shareholding gives it more than 50% of the voting rights”.
The new model is aimed at companies that belong to the same economic group, based on the consolidation of tax balances to be paid or recovered by the members of a corporate group.
Companies will be able to choose to adhere to this new regime, and it will be up to the “dominant entity” to exercise this option with the Tax and Customs Authority (AT), reads the legislative text. If a group joins, the new model will cover “all entities that are part of the group”.
It is necessary for the group entities to meet several conditions cumulatively.
It is necessary that they “have their registered office or permanent establishment in the national territory”, that they “carry out, totally or partially, operations that confer the right to deduct” VAT, that “they are included in the normal VAT regime on a monthly basis at the time of the option, or become included in that regime” in accordance with the rules set out in the code, that “the controlled entity is owned by the dominant entity, with the level of participation legally required, there is more of one year, with reference to the date on which the application of the regime begins”.
From this last condition, “entities created less than a year ago by the dominant entity or by another entity that is part of the group” are excluded, if since the date of their incorporation there has been direct or indirect ownership, in accordance with the rules of financial linkage (75% of the capital and more than 50% of the voting rights).
According to the explanation that the Government included in the bill approved in parliament, the consolidation takes place “in a VAT declaration made available by the Tax and Customs Authority and confirmed by the member of the group considered as the dominant entity [a casa-mãe do grupo económico]”.
The group companies “continue to present their respective periodic declarations, determining the respective balance, creditor or debtor, which is then revealed in the group’s declaration”, the Government further explained.
When presenting the proposal, the executive says he took into account the “experience acquired in the taxation of corporate groups” in the IRC and “the contributions obtained within the scope of the Large Taxpayers Forum”, a dialogue group between AT and the largest national companies.
The initiative was approved in the Assembly of the Republic, in a final global vote, on October 17, having received votes in favor from the PSD, CDS-PP, Chega and IL. The PCP and BE voted against. PS, Livre, PAN and JPP abstained.
The diploma was promulgated on the same day by the President of the Republic, Marcelo Rebelo de Sousa.
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