The VAT Grouping regime is introduced by Law No. 62/2025, approved in October in Portugal. This system consists of consolidating the VAT balances (input and output) individually calculated by companies within the same group. Therefore, the measure promotes efficiency in companies’ cash flow management. It will be possible to reduce monthly VAT payments or the VAT refunds to be requested.

When will the regime come into force?

The law now approved stipulates that the regime may be applied to periods starting from July 1, 2026.

What does this regulation introduce?

Companies with a financial link can constitute a VAT group. This link exists when the dominant company holds, directly or indirectly, at least 75% of the capital of other entities. This condition is met provided that the shareholding grants it more than 50% of the voting rights.

Furthermore, the control relationship must have existed for at least one year, and there must be a common management structure or one subordinate to the same commercial strategy.

How to access the VAT regime?

Companies must carry out transactions that grant the right to deduct the tax (in whole or in part), and must have their headquarters or permanent establishment in the national territory. In addition, these entities must be subject to the normal VAT regime with monthly periodicity.

Each entity may not belong to more than one VAT group, and each member of the VAT group must calculate the tax individually. Therefore, the responsible parties must submit their own VAT declaration.

Key aspects of VAT payment

Subsequently, the VAT to be paid or received by the group is calculated by the dominant company. This system is based on the sum of the amounts from each of the dependent entities’ VAT declarations, which are included in the dominant company’s monthly VAT declaration.

The VAT payment (if applicable) must be made by the dominant company. The dependent companies will remain jointly and severally liable. However, adopting the regime is optional, although it requires a minimum commitment period of three years.

When will the system end?

The regime will automatically cease when a company stops carrying out taxable transactions for a period longer than one year, enters insolvency, or begins a special revitalization process (PER). Finally, the group declaration model (which the dominant company must submit) will be defined in the future via a ministerial order.

Expansion into Portugal is beneficial for entering the Ibero-American market, which boasts very prosperous economies. Therefore, if you wish to inquire about Auxadi’s services, do not hesitate to contact us to assist you with your multinational’s international expansion.

At Auxadi, we offer comprehensive services in accounting, tax, payroll, transfer pricing and corporate legal services to multinationals and funds. With experience since 1979 and a presence in over 50 countries, including 26 proprietary subsidiaries, our advanced technological platform and proven methodology enable us to guarantee efficient management in compliance with local regulations.