Foundy
Get started

VAT exemption for small businesses: the 15,000 € limit and what changed in 2025

People starting a small business often ask whether they must charge VAT to clients. Portugal has a special exemption regime for small businesses, set out in article 53 of the VAT Code, which was changed in 2025 by Decree-Law no. 35/2025 of 24 March.

This article explains in plain language who can use the exemption, how turnover is counted and what happens if you exceed the limit. It is based on the instructions of the Tax and Customs Authority (AT). The limits are set by law and may change, so always check the official source.

What the article 53 exemption is

It is a regime in which the taxable person does not charge VAT on invoices. In return, according to the AT, those in this regime are excluded from the right to deduct VAT on their purchases. Invoices must always carry the exemption wording set by the AT, for example «IVA – Regime de Isenção».

It is not an exemption forever: it depends on conditions that are checked over time.

Who can benefit

According to the VAT Code (version in force since 2025) and the AT circular, taxable persons with their registered office or residence in Portugal can benefit if they do not carry out exports or related activities and did not exceed, in the previous calendar year, annual turnover in Portugal above 15,000 €.

The AT clarifies that the regime does not apply to those without a registered office or residence in Portugal, even if they have a permanent establishment or a VAT registration here. It also does not cover operations carried out occasionally (the so-called isolated act).

How turnover is counted

According to the AT, annual turnover in Portugal is the total value, net of VAT, of the supplies of goods and services made in Portugal during the calendar year. Transactions on capital goods are not counted.

Those who carry out activities that both do and do not confer the right to deduct count only those that do. There are specific rules for other situations, so if in doubt consult the circular or a certified accountant.

In the first year of activity

Those starting activity state in the start declaration an estimate of turnover for the current calendar year. According to the AT, if the period is shorter than a year, the estimate is the foreseeable value from the start of activity to year end, with no conversion into an annual amount.

In the AT's official example, someone starting in July 2025 and expecting 10,000 € by year end is under the exemption that year. If they end up invoicing 16,000 € for the year, they can no longer use it in 2026 and move to the normal regime.

What happens if you exceed the limit

The AT distinguishes two situations, with different consequences:

Exceeding 15,000 € in a year

If turnover exceeds 15,000 € in a year, you can no longer benefit from the exemption the following year. You must file a declaration of changes on the Portal das Finanças within 15 working days of the last day of the year, and move to the normal regime from 1 January.

Exceeding 18,750 € in the same year

If, in the current year, you exceed the limit by more than 25%, that is 18,750 €, the move to the normal regime is immediate. The invoice that goes over that amount already carries VAT and the declaration of changes is filed within 15 working days.

What changed in 2025

According to the AT, Decree-Law no. 35/2025 approved a new special exemption regime for small businesses. Among the changes the AT highlights, the scope was widened to those with organised accounting, those who import, and those carrying out Annex E operations of the VAT Code, provided they meet the conditions, and the first-year estimate is no longer converted into an annual amount.

The transitional rules allowed those in the normal regime who met the conditions to request the exemption during June 2025, with effect from 1 July 2025. See the circular for the detail of these rules and of the excluded cases.

Exemption or normal regime: how to decide

Those who meet the conditions can waive the exemption and opt to charge VAT. According to the AT, that option requires staying in the chosen regime for at least five years. Since exempt businesses do not deduct VAT on purchases, the choice depends on your business and your clients. Ask a certified accountant for advice before deciding.

Key takeaways

  • The article 53 exemption of the VAT Code depends, among other conditions, on not having exceeded 15,000 € of turnover in the previous calendar year.
  • Exempt businesses do not charge VAT on invoices but also do not deduct VAT on purchases.
  • If you exceed 18,750 € in the same year, the normal regime applies right from that invoice.
  • The regime was changed in 2025 and the limits are set by law: always check the version in force.

Frequently asked questions

Official sources

Ready to get started?

Tell us what you need and we will point you to the next steps.

Get started

Keep exploring