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Portugal to launch VAT grouping in 2026

Author: Published on: Published in: News and Insights

Big changes are on the horizon for businesses in Portugal. From 1st July 2026, related taxpayers will be able to opt into a VAT group regime, a simplification already in place in 19 other EU member states.

This long-awaited reform, based on Article 11 of the EU VAT Directive (2006/112/EC), gives eligible businesses the option to consolidate reporting under a single VAT number. That means no more intra-group VAT invoices, and a single VAT return covering the whole group. For many companies, the change could translate into significant cash flow and compliance benefits.

What’s changing?

  • VAT grouping option: Related VAT-registered resident businesses will be able to file one consolidated VAT return under a single number.
  • Intra-group invoicing exemption: Transactions within the group will be zero-rated, eliminating unnecessary VAT charges and reclaim cycles.
  • Joint and several liability: All group members will share responsibility for each other’s VAT liabilities.
  • Cash accounting simplification: The threshold for using this scheme will jump from €500,000 to €2 million, making it accessible to a much wider range of businesses.

Who can join a VAT group?

To qualify, businesses must be closely linked financially and/or organisationally. That means:

Financial links (any of the following):

  • Holding more than 50% of the share capital;
  • Controlling more than 50% of the voting rights;
  • Owning more than 50% of participation in profits.

Organisational links (any of the following):

  • Operating under joint management (legally or practically, directly or indirectly);
  • Running activities that are partly or wholly organised in agreement with one another.

In practice, one nominated company will be responsible for submitting the consolidated VAT return on behalf of the group.

Looking ahead

Portugal’s VAT group regime is expected to look very similar to those in other EU countries, but as always, the details will matter. The scheme becomes available from 1st July 2026, giving businesses some time to assess eligibility, systems, and processes before deciding whether to join.

At Innovate Tax, we make sure your tax engine and reporting systems are fully equipped to handle the complexities of any VAT regime. So when Portugal goes live, you’ll already be ahead of the curve.

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