End of the VAT Exemption Regime for Non-Residents in Portugal – July 1, 2025
Overview
A major change is coming to Portugal’s VAT framework. As of July 1, 2025, non-resident taxpayers will no longer be eligible for the special VAT exemption regime established under Article 53(1) of the Portuguese VAT Code (CIVA).
This reform, introduced by Decree-Law No. 35/2025 of 24 March, aims to align Portugal’s VAT legislation with EU principles while tightening the eligibility criteria for exemption.
Key Legal Reference
Decree-Law No. 35/2025, published on 24 March 2025
Amendment to Article 53 CIVA (special exemption regime for small businesses)
Effective from 1 July 2025
What Changes
1. End of the VAT exemption for non-resident taxpayers
From July 1, 2025, businesses and professionals without tax residence or a permanent establishment in Portugal — even if established within the EU — will no longer be allowed to apply the simplified VAT exemption under Article 53.
This means that non-residents operating in Portugal (for example, property managers, consultants, or service providers) will have to either:
register for the standard VAT regime, or
operate through the EU One-Stop Shop (OSS/IOSS) mechanism for intra-EU operations.
Options Available to Taxpayers
Option | Action Required | Key Implications |
|---|---|---|
Maintain the exemption (residents only) | File a cessation of activity declaration before 30 July 2025, with the cessation date set to 30 June 2025 (no penalty). | Keeps compliance under the existing exemption until June 30, 2025. |
Switch to the OSS/IOSS system | After ceasing the current regime, register for the Union OSS or Import OSS scheme. | Simplifies VAT compliance for cross-border EU operations. |
Move to the standard VAT regime in Portugal | Submit a change-of-regime declaration and start issuing invoices with VAT from 1 July 2025. | Mandatory 5-year commitment to the standard regime and periodic VAT filings. |
No action taken | Automatic transition to the standard VAT regime by the Portuguese Tax Authority. | Taxpayers will be subject to standard VAT obligations by default. |
For Whom This Matters
EU-based but non-resident entities providing services or managing assets in Portugal.
Freelancers and small business owners who currently rely on Article 53 exemption status.
Foreign property investors and managers invoicing Portuguese clients without local VAT registration.
Summary
Starting July 1, 2025, only resident taxpayers in Portugal may continue under the Article 53 small-business VAT exemption regime.
Non-resident individuals or entities will have to update their VAT status — either through the OSS/IOSS or by registering for the normal VAT regime — to remain compliant.
Failure to regularize will lead to automatic VAT registration and full taxation obligations under the general rules.
References
Decree-Law No. 35/2025 of 24 March 2025
Article 53 CIVA – Portuguese VAT Code
Official communications from the Autoridade Tributária e Aduaneira (AT)
Share this post
