The VAT group scheme is one of the most significant changes to the Portuguese tax system in recent years. From 1 July 2026, it will be possible for several entities belonging to the same group to be treated, for VAT purposes, as a single taxable person.
This scheme allows for the consolidation of tax calculations, eliminating VAT on internal transactions and calculating the tax based on the group’s overall result.
- How it works
In practice, each company continues to calculate its VAT individually, but the results are subsequently aggregated. The group thus has a single VAT calculation, with the tax settled on an aggregate basis.
One of the main consequences is that there are no longer any VAT settlements between companies within the same group, which can have a significant impact on cash flow management.
- Who can apply
For the scheme to apply, the following must exist:
• a parent entity
• one or more subsidiary entities
• financial, economic and organisational links between the entities
The parent company must hold, directly or indirectly, at least 75% of the share capital and more than 50% of the voting rights of the subsidiaries.
Furthermore, the entities must have their registered office in Portugal, be subject to the standard VAT regime and file returns on a monthly basis.
- Optional scheme with a minimum commitment period
Opting into the scheme is optional, but entails a minimum commitment period of three years, which requires careful prior consideration.
The option is exercised by the parent company and takes effect immediately in the relevant VAT period.
- Advantages and implications
The main advantages of the scheme include:
• elimination of VAT on intra-group transactions
• possibility of offsetting VAT balances between companies
• simplification of the overall tax calculation
However, there are also significant implications:
• joint and several liability among group companies
• centralisation of tax management within the parent company
• greater exposure to risk in the event of non-compliance
It is also important to bear in mind that VAT credits accrued prior to joining the scheme remain with the entity that generated them, and there is no free movement of credits within the group.
- A strategic decision
Adopting the VAT group scheme is not merely a tax decision. It is a strategic decision that may involve the reorganisation of corporate structures, a review of cash flows and a careful assessment of risk.
In certain cases, the scheme can deliver significant efficiency gains. In others, it may not be the most appropriate solution.
Therefore, its implementation should always be preceded by a detailed legal and tax analysis.
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