Contents:
1-Taxation of corporate groups in Portugal: what is the RETGS?
- How the RETGS works
- Eligibility criteria
- An optional scheme
- The role of the parent company
- Liability for tax payment
- A strategic decision
2-VAT groups in Portugal: a new tax landscape from 2026
- What the scheme entails
- Eligibility criteria
- Opting into and duration of the scheme
- Advantages and practical implications
- A decision requiring careful consideration
- Taxation of corporate groups in Portugal: what is RETGS?
When several companies belong to the same corporate group, Portuguese tax law provides for a specific scheme that allows this group of companies to be treated as a single economic entity for tax purposes. This scheme is known as RETGS – Special Taxation Regime for Corporate Groups.
Through this mechanism, the results of the different companies within the group can be considered jointly for corporate tax purposes, allowing for more efficient tax management that is aligned with the group’s economic reality.
1.1 How RETGS works
Under the general regime, each company is taxed separately. Thus, if one company makes a profit and another a loss, the profitable company will be taxed, regardless of the situation of the others.
With the application of RETGS, the results of the group companies are consolidated, meaning that the profits of one company can offset the losses of another. The tax is therefore calculated based on the group’s overall result.
This mechanism may prove particularly relevant in business groups with several entities carrying out complementary activities or with distinct profit cycles.
1.2 Eligibility requirements
For a group of companies to qualify for this scheme, there must be a parent company and one or more subsidiary companies.
The parent company must hold, directly or indirectly:
• at least 75% of the share capital of the subsidiary companies
• more than 50% of the respective voting rights
In addition, the companies forming part of the group must meet certain requirements, namely:
• have their registered office and place of effective management in Portugal
• be subject to the general corporate tax regime
• have the same tax year
1.3 An optional regime
The application of the RETGS is not automatic. It is an optional regime, and it is up to the group to decide whether or not to adopt it.
Before opting for this framework, it is essential to analyse the existing corporate structure, the tax situation of the various entities, and the potential benefits and risks involved.
1.4 The role of the parent company
Under the RETGS, the parent company plays a central role in the group’s tax management.
It is responsible, in particular, for:
• calculating the group’s consolidated taxable profit
• filing the group’s corporation tax return
Despite tax consolidation, each company retains its legal autonomy and continues to fulfil its individual tax obligations.
1.5 Liability for tax payment
A key feature of this scheme is the joint and several liability between group companies.
This means that, in the event of non-compliance, any company may be held liable for the payment of the tax due.
1.6 A strategic decision
Adopting the RETGS can be a valuable tool for tax planning and business organisation, enabling more efficient management of results within a group.
However, this is a decision that must be analysed on a case-by-case basis, taking into account the group’s structure, the companies’ activities and the business’s strategic objectives.
- VAT groups in Portugal: a new tax regime from 2026
From 1 July 2026, the VAT group scheme will come into force in Portugal, a significant change that allows several entities belonging to the same group to be treated, for VAT purposes, as a single taxable person.
This scheme represents a significant change in how the tax is calculated and may have a direct impact on the tax and financial organisation of business groups.
2.1 What the scheme entails
The VAT group scheme allows the VAT balances of the various entities within the group to be consolidated into a single calculation.
In practice, this means that:
• there is no longer any VAT charge on transactions between companies within the same group
• the tax is now calculated on an aggregate basis
• the group is treated, for VAT purposes, as a single economic entity
Each company continues to calculate its VAT individually, but the results are aggregated and validated by the parent company, with the tax being settled centrally.
2.2 Application requirements
For the regime to apply, there must be a group structure comprising a parent company and one or more subsidiaries, linked by financial, economic and organisational ties.
From a financial perspective, the parent company must hold, directly or indirectly:
• at least 75% of the share capital of the subsidiaries
• more than 50% of the voting rights
Furthermore, the entities must have their registered office and place of effective management in Portugal, be subject to the standard VAT regime, report on a monthly basis and have been part of the group for more than one year.
2.3 Option and duration of the scheme
Application of the scheme is optional and must be exercised by the parent company.
Once adopted, the scheme entails a minimum commitment of three years, meaning it is not a decision that can be reversed in the short term.
The option takes effect immediately in the relevant VAT period; there is no need to wait for a new tax year.
2.4 Advantages and practical implications
The main advantages of the scheme include:
• elimination of VAT on intra-group transactions, with a positive impact on cash flow
• the possibility of offsetting VAT balances between different entities
• simplification of the overall tax calculation
However, the scheme also entails additional risks and liabilities.
Firstly, group companies become jointly and severally liable for the payment of VAT, meaning that any entity may be held liable in the event of non-compliance.
Furthermore, tax management is centralised within the parent company, increasing its responsibility and the group’s exposure to potential tax audits.
It is also worth noting that VAT credits accrued prior to joining the scheme remain with the entity that generated them and are not fully transferable within the group.
2.5 A decision requiring careful consideration
The introduction of the VAT group scheme is likely to prompt many companies to reassess their corporate structures and internal operational flows.
Despite the potential advantages, this scheme is not suitable for all situations. In certain cases, it may lead to significant efficiency gains; in others, it may entail additional risks or reduced flexibility.
For this reason, the decision to join should always be preceded by a detailed legal and tax analysis, taking into account the specific circumstances of each group.
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