The VAT Group Regime – What are VAT Groups?

Legal Brief by Bruno Magalhães

Summary
Law no. 62/2025, of 27 October, creates the VAT group regime, allowing the consolidation of VAT payable/recoverable between closely linked entities.

What is a VAT Group?

• It is a set of companies with strong financial, economic and organisational links, acting as a single entity for VAT purposes.
• The controlling entity aggregates the controlled entities and consolidates the group’s VAT balances.

Who may join?
To join the group, companies must cumulatively:

• Have a registered office or permanent establishment in Portugal;
• Carry out transactions entitling them to deduct VAT;
• Be under the normal monthly VAT regime (or become so automatically at the time of the option);
• Have at least 75% capital participation and more than 50% of voting rights held by the controlling entity for over 1 year (except for newly incorporated group companies).

How is participation measured?

• Both direct and indirect holdings count, added or multiplied along the chain.
• Entities in the EU/EEA may be considered where equivalent administrative cooperation exists.

How to join and for how long?

• The option is exercised by the controlling entity via the returns referred to in Articles 31 and 32 of the VAT Code.
• The option is binding for 3 years. Termination, after this period, may occur by decision of the controlling entity, to be declared in January, taking effect that same month.

Practical benefits

• Internal offsetting: VAT payable by certain companies may be offset against VAT recoverable by others.
• Simplification: centralised VAT management within the group.
• Financial efficiency: reduced payment flows and greater cash-flow predictability.

Duties and limitations

• The controlling entity must prove compliance with the conditions.
• A company cannot belong to two groups simultaneously.
• The controlling entity cannot be controlled by another national entity that could itself be controlling, except in the case of a reorganisation with a valid continuity option within the required deadlines.

This VAT Group regime applies to tax periods starting from 1 July 2026. Plan accession in advance (corporate structure, monthly framework, proof of links).