2025 Portugal State Budget Proposal – VAT key measures

State Budget Proposal for 2025 was presented last week at National Parliament.

Here are the main takeaways in what regards VAT:

Qualified Electronic Signatures in electronic invoices were expected to be mandatory as of January 1, 2025.

The proposal for the State Budget indicates that until December 31, 2025, PDF invoices will continue to be accepted and considered as electronic invoices for all purposes under fiscal legislation.

This means that the requirement for Qualified Electronic Signatures in electronic invoices will be (again) postponed. The new expected date is now 1 Jan 2026.

Currently, there is a temporary VAT exemption (with right of deduction), up until 31.12.2024, on the following operations, for goods normally used within the scope of agricultural production activity: (a) supply of compost, fertilizers and soil improvers and (b) flours, cereals and seeds, including mixtures, residues and waste from the food industries, and any other products suitable for feeding livestock, poultry and other animals listed in the Codex Alimentarius, irrespective of breed and live functionality, including farmed fish, intended for human consumption.

This exemption will be renewed up until 31.12.2025, considering it levels the playing field of the agricultural sector currently dealing with drought.

Currently, new construction, even if done in urban rehabilitation areas is subject to 23% VAT (please see more on this subject here). There is ongoing debate if housing buildings should beneft from the reduced rate of VAT, 6%.

The government, within the bracket destined for low-cost housing or affordable housing, is given one year to regulate which type of new construction and rehabilitation work falls within the 6% VAT rule being expected that there is a cap to the services which may benefit from the VAT reduced rate .

It is therefore expected for a wider range of housing construction works to benefit from reduced VAT rate in 2025 within the scope and policy of low-cost housing and/or affordable housing.

The State Budget Proposal will be discussed in national parliament and its final vote will be held on 29.11.2024.

Adjustments can be made but we expect for the above measures to remain and enter into force on 01.01.2025.

We are a law firm based in Portugal, specialising in Portuguese tax and customs law.

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