1 June 2026
Background
Law No. 62/2025, of 27 October 2025, introduced the VAT Group regime in Portugal, witch will be for tax periods beginning on, or after, 1 July 2026.
The regime allows the consolidation of VAT positions individually assessed by companies within the same VAT group, promoting cash-flow efficiency and administrative simplification.
A VAT group exists where a parent entity (the dominant entity) and its subsidiaries (the controlled entities) are closely inter-related on a financial, economic and organisational basis.
As initially antecipated, its practical implementation depended on the approval of the subsequent VAT Group submisssion and other procedures. Ministerial Order No. 244/2026/1, published on 1 June 2026, now establishes these operational rules, providing the final implementation framework ahead of the regime’s entry into force on the next 1 July 2026.
Scope
The VAT Group regime may be applied by VAT taxable persons that meet the relevant requirements, form a group of entities and exercise in advance the corresponding option.
In general, the main conditions for the application of the regime include:
- The dominant entity must hold, directly or indirectly, at least 75% of the share capital of the controlled entities for a period exceeding one year, and such participation must ensure more than 50% of voting rights;
- All entities must pursue similar, complementary or interdependent economic activities;
- There must be a common management structure or management subject to the same business strategy;
- The entities must have their registered office or permanent establishment in Portugal;
- The entities must be subject to the standard VAT regime and file monthly VAT returns;
- The entities must carry out transactions that confer a full or partial right to deduct VAT;
- Each entity may not be a member of more than one VAT group.
The regime is designed for business groups that:
- Have a clear corporate control structure;
- Carry out activities giving rise to VAT deduction rights;
- Seek to simplify VAT assessment and settlement on a consolidated basis;
- Aim to improve cash-flow efficiency through the use of VAT credit balances within the group.
How the regime operates
Although integrated into a VAT group, each entity remains required to submit its own individual VAT return.
The dominant entity is responsible for submitting the VAT Group return, which consolidates the VAT positions of all entities within the group. The overall VAT position is determined by the algebric sum of individual balances, with the dominant entity responsible for payment of any VAT due or for requesting refunds, where applicable.
Entry into the regime is subject to an option exercised before the Portuguese Tax Authorities by the dominant entity on behalf of the VAT group. Once exercised, the option is binding for a minimum period of three years. It may only cease after this period, or where the legal requirements are no longer met.
Benefits and considerations
The application of the VAT Group regime may provide several benefits, including:
- Automatic offsetting of VAT credit and debit positions within the group;
- Improved cash-flow management and administrative simplification;
- Reduced need for VAT refund claims and monthly VAT payments;
- Simplified internal tax compliance processes.
When considering adoption of the regime, businesses should carefully assess eligibility requirements, the scope of the group perimeter, potential benefits and limitations, and any required adjustments to internal systems and reporting processes.
Ministerial Order No. 244/2026/1 – Operational framework for the VAT Group regime
As inicitally anteciped, the Ministerial Order No. 244/2026/1, of 1 June 2026, establishes the official VAT Group return and corresponding filing instructions, completing the operational framework for the regime introduced by Law No. 62/2025.
This development is particularly relevant as it was published only one month before the regime becomes effective on 1 July 2026, leaving limited time for businesses to finalise their assessment and prepare for implementation.
Below we would lice to summarize the main aspects now classified!
1. VAT Group return and role of the Tax Authorities
The VAT Group return will be pre-filled by the Portuguese Tax Authorities based on the individual VAT returns submitted , previously, by each entity within the group.
The return is made available electronically via the Tax Authorities’ portal and must be confirmed by the dominant entity. If not confirmed within the legal deadline, it is deemed automatically submitted.
2. VAT calculation at group level
The group VAT position will result from the automatic consolidation of individual VAT balances performed by the Tax Authorities.
The regime also establishes rules on VAT credits, carryforwards and refund requests.
3. Role of the dominant entity and entry into the regime
The option to apply the regime is exercised by the dominant entity before the Portuguese Tax Authorities.
The dominant entity plays a central role, being responsible for confirming the VAT Group return and ensuring compliance with the obligations arising from the regime.
Next steps for businesses
Businesses should now:
- Assess eligibility for participation in a VAT group;
- Identify entities that may be included within the group perimeter;
- Analyse financial, economic and organisational links between entities;
- Review VAT reporting and compliance processes in light of group consolidation;
- Prepare internal systems for centralised VAT reporting and coordination;
- Evaluate potential cash-flow and administrative benefits of the regime;
- Monitor implementation timelines given the proximity of 1 July 2026.
Critical Analysis & Recommended Next Steps
The VAT Group regime represents a significant development in the Portuguese VAT framework, enabling consolidated VAT reporting at group level and centralising compliance responsibilities in the dominant entity.
As mentioned, the Ministerial Order No. 244/2026/1 completes the implementation of the regime by establishing the operational rules governing the VAT Group return, confirming a highly automated process driven by the Portuguese Tax Authorities.
With the regime becoming effective on 1 July 2026 onwards, businesses have a limited timeframe to finalise their assessment and ensure readiness for implementation.
While the regime offers clear administrative and cash-flow benefits, its implementation may raise practical and operational challenges, particularly during the initial phase of application.
We remain available to support businesses in assessing eligibility, preparing for implementation and addressing any practical issues arising from the application of the VAT Group regime.
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The above information is not intended to be an exhaustive analysis of all the changes to the current legal regime, but a selection of those that we believe to be the most relevant, and does not dispense with the consultation of our Company and/or diplomas to which they refer.
For more information contact: Catarina Breia (+351 91 7575 832 or cbreia@pt-nexia.com) from our Tax Department.
