2025 Portugal State Budget Proposal – VAT key measures

Obligation to use Qualified Electronic Signatures only in 2026   

• 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.

Renewal of VAT exemption on the supply of compost, fertilizers, soil improvers and animal food connected to agricultural production

• 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.

Reduced rate of VAT  for housing construction works

• 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.

Next steps

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.

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