New VAT Rules for Businesses in Portugal: What Sole Traders and Companies Need to Know to avoid penalties

July 9, 2025
#Business

Introduction

This article outlines the latest changes in the VAT regime in Portugal, specifically impacting Portuguese tax residents and non-resident businesses, including sole traders (Empresário em Nome Individual) and companies operating in Portugal.

What Has Changed and Why

As of July 1, 2025, the Portuguese government has implemented updated VAT regulations through Decree-Law No. 35/2025 and Ofício-Circulado No. 25062 (March 26, 2025). These changes affect how Value-Added Tax (VAT) is applied and calculated for both resident and non-resident businesses.

Under the previous regime, many businesses operated under the VAT exemption scheme in Article 53 of the CIVA.

The new rules shift the focus of the VAT exemption regime toward all businesses based in Portugal, rather than just individual sole traders (Empresário em Nome Individual).

 

✅ Key changes:

 These updates aim to increase VAT compliance in Portugal, prevent misuse of exemption status, and ensure alignment with EU tax regulations.

When the VAT Regime Change Must Be Made

The deadline to change your VAT status is July 21, 2025. After this, all businesses must continuously monitor their invoice amounts to ensure they remain compliant with Portuguese VAT legislation and after initial verification must submit the declaration to change within 2 weeks when the conditions are met.

Penalties for Non-Compliance

Failure to comply with the updated VAT obligations in Portugal may result in:

Remaining compliant with Portuguese tax law for small businesses is crucial to avoid penalties and maintain good legal standing both in general and for immigration cases.

How to Stay Compliant with VAT in Portugal

The easiest way to stay compliant is by using Kilobanan Tax Bot, an automated invoicing and VAT compliance application for sole proprietors and small businesses in Portugal.

With Kilobanan:

👉 Book an Initial Consultation

Need help? Schedule an accounting consultation with one of our licensed experts. We’ll guide you through your obligations and set you up for full fiscal compliance in Portugal.

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During Consultation we will:

  • study your current situation
  • determine your tax regime
  • answer your questions
  • deliver recommendations regarding next steps
  • provide quote for monthly services