Parliament has approved a specialised version of a government bill that creates a VAT group scheme for economic groups to consolidate the amounts of tax they have to pay or recover from the state.
In today’s vote in the Budget, Finance and Public Administration Committee, the initiative received support from the PSD, CDS-PP and CHEGA. As indicated earlier today, PS abstained.
The proposal by Luís Montenegro’s AD coalition introduces the new regime, “which consists of consolidating the VAT balances to be paid or recovered by the members of a group of entities, united by financial, economic and organisational ties”.
The new model is aimed at companies belonging to the same economic group, based on “the consolidation of tax balances to be paid or recovered by the members of a corporate group”.
For this to happen, companies must be linked to each other “by close financial, economic and organisational ties”, says the government in the bill’s explanatory memorandum.
According to the explanation, consolidation takes place “in a VAT return made available by the Tax and Customs Authority and confirmed by the member of the group considered to be the dominant entity (the parent company in other words)”.
In the proposal, the government emphasises that companies in the group will “continue to submit their respective periodic returns, calculating the respective balance, credit or debit, which is then shown in the group’s return”.
“The consolidation thus carried out does not affect the normal functioning of VAT activities of the taxable persons who make up the group, who will continue to pay tax on their active transactions and deduct tax on their passive transactions, whether these occur between themselves or with third parties.”
When drafting the proposal, the government says it took into account the “experience acquired in the taxation of corporate groups” in IRC and “the contributions obtained within the framework of the Large Taxpayers Forum” – a dialogue group between the Tax and Customs Authority (AT) and the largest national companies.
Also today, approval was ratified for the slow fall of IRC (corporate tax) – by 1% per year until 2028.
This means that 2026 will see IRC fall from the current 20% to 19% (reaching 17% in 2028).
In addition to the decrease in the general rate, a reduction in the rate that applies to the first slice of profits of small or medium-sized companies – and companies with a small or medium capitalisation – to 15% from 2026, was also approved.
Again, PS abstained on this reduction, with PSD, CDS-PP and CHEGA voting in favour.
What we’re doing today is giving a signal to all those who are entrepreneurs that it’s worth investing in our country, that they’ll have the support of this reduction in corporate income tax so that they can continue to invest and create jobs and improve salaries,” said PSD MP Hugo Carneiro, pointing out that it has been a battle” for “probably more than a decade” to reach this point.
Corporate tax relief will begin in the 2025 tax period with a drop in the general rate from 21% to 20%, and will affect next year’s public accounts. The government expects that reducing the rate by 1 percentage point will result in a loss of revenue of €300 million.
Source material: LUSA
