New VAT Exemption Rules in Portugal (From July 1, 2025)
- INLIS Consulting
- Aug 4
- 3 min read
For Freelancers & Small Businesses
From July 1, 2025, Portugal introduces new rules for small businesses and freelancers under the VAT Exemption Regime (Article 53 of the CIVA). Whether you're a self-employed consultant or run a small business, this update affects how you charge VAT, or if you can avoid it altogether.
What Is the VAT Exemption Regime?
It allows small businesses to avoid charging VAT if their sales in Portugal are below €15,000 annually.
But starting July 1, 2025, there are new conditions, updated thresholds, and cross-border options.
Old vs New Regime
Criteria | Before July 1, 2025 | From July 1, 2025 |
Residency | Residents and non-residents are allowed | Only Portuguese residents are allowed |
Accounting | No organized accounting needed | Organized accounting required |
Allowed to Import | ❌ Not allowed | ✅ Allowed |
Allowed to Export | ❌ Not allowed | ❌ Still not allowed |
Annex E Activities (e.g., scrap) | ❌ Not allowed | ✅ Allowed |
Turnover Calculation | Annualized for new businesses | No annualization for new businesses |
Cross-Border Option (EU only) | ❌ Not available | ✅ Available via “Transfronteiriça” route |
Non-EU Residents | Allowed | ❌ Must register under normal VAT regime |
Thresholds & Turnover Limits
Turnover Type | Amount | Action Required |
Annual turnover in Portugal | Up to €15,000 | ✅ Eligible for exemption |
Annual turnover (15k–18.75k) | €15,001–€18,750 | ⚠️ Remain exempt for the rest of the year, then switch |
Annual turnover exceeds €18,750 | Over €18,750 | ❌ Must switch immediately to VAT regime |
Note: Turnover only includes operations located in Portugal. Exports are not counted toward this threshold but are not allowed under the exemption.
Invoicing Rules
Type of Operation | Invoice Requirement | VAT Code to Use |
Exempt under Article 53 | Must issue invoice | M10 |
Exempt under Article 9 (e.g., education) | Must issue invoice | M07 |
Sales outside Portugal (e.g., to the EU) | Must issue invoice | M40 (Self-liqu.) |
Simplified invoices allowed? | ✅ Yes, for any amount | As above |
Conditions to Enter the Regime
Condition | Requirement |
Residency | Must be a resident in Portugal |
Export activities | ❌ Not allowed |
Previous year turnover (Portugal only) | Must be ≤ €15,000 |
New Volume of Business Definition
Includes (if done in Portugal):
Sales and services (even exempt)
Imports and Annex E activities
Some free or suspensive operations
Excludes:
Exports and operations outside Portugal
Investment sales (e.g., property)
Certain exempt operations under Article 9
Changing Between Regimes
From Exempt to Normal VAT
Trigger | What to Do |
Turnover > €15,000 but ≤ €18,750 | File change in January, switch from Jan 1 |
Turnover > €18,750 (25% excess) | Switch immediately from the invoice that exceeds it |
Start exporting goods | Switch within 15 days of first export |
From Normal VAT to Exempt
When Allowed | What to Do |
All 3 conditions met (residency, turnover, no exports) | File in January, switch from Jan 1 |
Re-entry after 5 years in the normal regime | ✅ Allowed if conditions met |
New Cross-Border Option (EU Residents)
EU-based businesses can now use the Portuguese VAT exemption if:
Requirement | Limit / Rule |
Total EU turnover | Must be ≤ €100,000/year |
Turnover in the target EU country (e.g., Portugal) | Must be below that country's exemption cap |
Must have Portuguese VAT number | With the suffix “EX” |
File quarterly returns | Using a new online system |
Special Rules for 2025
Situation | Action |
Already exempt, turnover > €15,000 by June | Must switch to VAT regime on July 1, 2025 |
New business (now eligible under new rules) | Can join the exemption from July 1, 2025 |
Closed & restarted within 12 months | Must use normal VAT for 1 year |
Example Scenarios
1. Maria – Portuguese Consultant
2024 turnover: €12,000 (Portugal)
Has organized accounting
✅ Stays in the exemption regime from July 2025
2. Pedro – Spanish Short-Term Rental Owner
Property in Porto, lives in Spain
2024 turnover: €10,000
✅ Can apply for cross-border exemption via NIF-EX
3. Jane – UK Local Host
Property in Lisbon, lives in the UK
❌ Must switch to normal VAT regime from July 1, 2025
Summary Table
Do You… | VAT Regime After July 1, 2025 |
Live in Portugal + turnover < €15k | ✅ Exempt under Article 53 |
Exceed €15k but under €18.75k | ⚠️ Switch to VAT from next Jan 1 |
Exceed €18.75k | ❌ Switch to VAT immediately |
Live outside the EU | ❌ Not eligible for exemption |
Live in EU + total EU sales < €100k | ✅ Eligible for cross-border exemption |
Final Tip
Keep track of your turnover every month and issue correct invoices with the appropriate exemption codes. When in doubt, talk to your accountant — and if you’re starting or restarting your business, check if January is the right month to make a regime change.