The year 2025 brought significant changes to the VAT regime in Portugal. These amendments, which reflect alignment with European directives and the modernization of the Portuguese tax system, are being implemented gradually and directly impact the tax management of companies.
1. Cash Accounting Scheme: More Companies Eligible
What changed?
The turnover threshold for adherence to the Cash Accounting Scheme has been significantly increased from EUR 500,000 to EUR 2,000,000 per year. This change entered into force on 1 July 2025.
What does this mean in practice?
Under the Cash Accounting Scheme, companies only remit VAT to the State after effectively receiving payment from their clients, instead of doing so at the time of invoicing. This measure substantially improves companies’ cash flow.
2. Exemption Scheme for Small Enterprises: Significant Simplification
What changed?
The VAT exemption scheme has been revised and broadened, allowing more businesses with an annual turnover in Portugal below EUR 15,000 to benefit from this exemption.
Entities eligible for exemption:
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Taxable persons with organized accounting (previously excluded).
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Operators carrying out imports.
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Taxable persons performing supplies/services listed in Annex E of the VAT Code (CIVA).
Important developments:
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If turnover exceeded EUR 18,750 (25% above the threshold) in the first half of 2025, entry into the normal VAT regime is mandatory from 1 July 2025.
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If, during the year, turnover exceeds EUR 18,750, the entity immediately transitions to the normal VAT regime, and the invoice that determines the excess must already include VAT.
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If only the EUR 15,000 threshold is exceeded, transition to the normal regime occurs at the beginning of the following year.
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Communication obligations: the change of regime must be notified to the Tax Authority (AT) within 15 working days after exceeding the limits.
3. Operators from Other Member States: Greater Integration
What changed?
The exemption scheme has been extended to also cover operators established in other EU Member States, subject to new reporting obligations, provided they comply with national rules and do not exceed EUR 100,000 in turnover at the European level.
Practical meaning:
A small German company that occasionally sells in Portugal may benefit from the Portuguese exemption scheme if it complies with the turnover requirements.
4. Online Cultural Services: New Place of Supply
What changed?
Cultural services provided through virtual participation are now subject to specific place-of-supply rules for VAT purposes.
Practical rule:
When these services are supplied to VAT taxable persons, taxation occurs at the place where the recipient has its head office, permanent establishment, or domicile.
Practical example:
A Portuguese company organizing a virtual concert for a Spanish company:
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VAT will be due in Spain (the recipient’s location) and not in Portugal.
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This avoids double taxation and simplifies cross-border obligations.
Impact on Companies
Advantages:
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Improved cash flow through the extended Cash Accounting Scheme.
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Administrative simplification for small businesses.
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Reduction of tax costs in specific sectors.
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Increased competitiveness in the European market.
Obligations:
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New reporting obligations for certain operators.
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Need to assess the applicable regimes.
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Possible need to adjust accounting systems.
The content of this information does not constitute any specific legal advice; the latter can only be given when faced with a specific case. Please contact us for any further clarification or information deemed necessary in what concerns the application of the law.