Flash News NA 2025/04/04
Changes to the VAT Exemption Regime for Small Businesses: Opportunities and Challenges in Portugal
Decree-Law No. 35/2025, of March 24, introduced significant modifications to the VAT exemption regime applicable to small businesses in Portugal.
Introduction
Small businesses play a crucial role in the Portuguese economy, representing a significant part of the business fabric. Recognizing the need to simplify tax obligations and promote competitiveness, the Portuguese government implemented changes to the VAT exemption regime through Decree-Law No. 35/2025. These changes aim to expand the scope of the exemption and adjust the eligibility criteria, reflecting an adaptation to current economic dynamics.
Key Changes Introduced by Decree-Law No. 35/2025
1. Expanded Scope of Application
Previously, the VAT exemption regime only applied to taxpayers who did not have, nor were required to have, organized accounting for IRS or IRC purposes. With the new legislation, this restriction has been removed, allowing any taxpayer, regardless of the obligation for organized accounting, to benefit from the exemption, provided they meet the established criteria.
2. Inclusion of Taxpayers from Other EU Member States
The regime now also covers taxpayers with a registered office or domicile in other EU Member States. To benefit from the exemption in Portugal, they must:
o Have an annual turnover in the European Union not exceeding €100,000.
o Notify in advance the Member State where they are established of their intention to benefit from the exemption in Portugal and obtain a tax identification number with the suffix “EX.”
3. Adjustments to Turnover Thresholds
o For taxpayers with a registered office or domicile in Portugal: Annual turnover in Portugal must not exceed €15,000.
o For taxpayers from other Member States: Annual turnover in the European Union must not exceed €100,000.
4. Right to Deduction and Refund
Taxpayers covered by the exemption regime remain without the right to deduct or request a refund of VAT incurred on their purchases, maintaining the administrative simplification logic associated with this regime.
5. Declarative and Invoicing Obligations
Businesses benefiting from the exemption must comply with invoicing obligations, ensuring that issued invoices include the mention “VAT — exemption regime,” as stipulated in Article 57 of the VAT Code.
Conclusion
The changes introduced by Decree-Law No. 35/2025 represent an opportunity for many small businesses to benefit from a more simplified tax regime. However, adapting to this new framework requires a clear understanding of the changes and careful management of tax obligations.
Nominaurea, with its extensive experience in accounting and tax consultancy, is prepared to assist small businesses in this transition process. Its services include:
• Personalized Tax Consultancy: Detailed analysis of the company's tax situation and guidance on eligibility and advantages of the new exemption regime.
• Management of Declarative Obligations: Ensuring timely and accurate compliance with tax obligations, including issuing invoices in accordance with the new requirements.
• Continuous Support: Providing ongoing assistance to clarify doubts and adapt tax strategies to legislative changes.
By partnering with Nominaurea, small businesses can confidently navigate the new tax provisions, ensuring compliance and optimizing operational efficiency.
