Consolidated VAT Arrives: Portuguese Holdings Gain Cash-Flow Breathing Room

Anyone running a company headquartered in Portugal will soon have a very different relationship with the country’s most ubiquitous tax. A brand-new framework quietly published in the Diário da República gives corporate groups the possibility to treat Value-Added Tax the way they already handle Corporate Income Tax—by looking at the group as a single economic organism rather than a collection of detached legal entities. For many finance teams that translates into easier cash-flow management, fewer refund requests, and a gentler learning curve than the one imposed by the last major VAT overhaul.

Why this sudden focus on group VAT?

Until now Portuguese holdings faced an odd paradox: they filed their IRC on a consolidated basis yet had to juggle separate VAT positions for each subsidiary, a practice Brussels abandoned years ago. The new Lei n.º 62/2025 closes that gap and brings Lisbon in line with Austria, Germany, the Netherlands and Spain, where similar systems are already part of the landscape. The Ministry of Finance argues that the change will boost liquidity, attract multinational treasuries to locate here and reduce the backlog of €-denominated refund claims clogging the desks at the Autoridade Tributária e Aduaneira (AT).

The core mechanics in plain English

Once a holding opts in, every entity it controls—so long as it is 75% owned, has more than 50% voting rights and is established on Portuguese soil—must join the same perimeter. Each subsidiary keeps filing its routine monthly return and calculating its own credit or debit balance. Behind the scenes, however, the dominant company adds those figures together and submits a single consolidated declaration. The end result is one net amount: either payable to or recoverable from the State, instead of a patchwork of divergent positions.

Choosing to participate: eligibility and red tape

Lawmakers insisted on voluntariness. Entering the scheme requires a formal request from the “entidade dominante” through the AT’s online portal. Auditors say groups should double-check three areas before clicking send: the financial link (shareholding threshold), the economic link (similar or complementary activities) and the organisational link (shared management or common strategy). Groups that clear those hurdles can expect the green light, although they must remain in the regime for at least three years unless a legal cause for exit arises.

Day-to-day impact on accounting teams

On paper the new model sounds straightforward, but ERP specialists are already flagging the need for system upgrades. Internal codes must distinguish between the individual ledger of each subsidiary and the group-level settlement. Controllers will also have to track pre-entry VAT credits separately; those historic balances are still deductible yet limited by the amount of tax the same entity charges after joining the regime. According to the Ordem dos Contabilistas Certificados, most mid-size groups should be able to adjust within a single reporting cycle, provided they map the flows early.

Where the financial upside shows up first

The headline benefit is cash-flow smoothing. Imagine a retail arm with sizeable input VAT on inventory and a services arm that invoices heavily at 23%. Under the old rules one waited months for a refund while the other wired money to the AT. Under the new regime those amounts are offset automatically, cutting reliance on working-capital credit lines and trimming interest expenses. Advisory firm VdA estimates that a medium conglomerate turning over €600 M could recapture low-six-figure sums annually, simply by eliminating timing mismatches.

Timing: what companies need to mark in their calendars

Although the law is already in force, its practical effects only kick in for tax periods starting on or after 1 July 2026. Accountants therefore have roughly eight months to run simulations, tweak treasury forecasts and — if they decide the numbers add up — lodge the option by the deadline the AT will announce next spring. After that, the regime renews automatically each year unless the group expressly withdraws.

Expert checklist before opting in

Consultancies like EY, Crowe and PwC Portugal advise setting up a cross-functional task-force composed of tax, treasury, IT and legal. The group should analyse whether any subsidiary still operates under the quarterly VAT regime, as that must switch to monthly reporting. They should also revisit transfer-pricing documentation, because inter-company flows will now influence a single VAT balance. Finally, boards are urged to draft an internal governance charter that spells out how disputes over intra-group balances will be resolved. Those who complete the checklist could find themselves not only compliant but more competitive in a single-market environment where VAT efficiency increasingly shapes location decisions.

In a country where SMEs and family-owned conglomerates dominate, the legislation may seem tailored to giants. Yet the Finance Ministry insists that even a duo of sister companies under common control qualifies. Whether Portugal’s corporate landscape seizes the opportunity or lets it pass will become clear once the first consolidated VAT returns hit the AT’s servers in summer 2027.