Many small businesses and independent professionals in Portugal benefit from the special VAT exemption regime under Article 53 of the VAT Code (CIVA). This simplified regime allows taxpayers with modest turnover to operate without charging VAT on their invoices. However, there are clear legal limits — and once these limits are exceeded, the business must transition to the normal VAT regime.
Understanding the VAT Exemption Threshold
The exemption applies to businesses whose annual turnover in Portugal does not exceed €15,000. This threshold is designed to reduce administrative burdens for small entrepreneurs and freelancers.
However, if a taxpayer exceeds the threshold by more than 25% (i.e., reaches €18,750 in the current year), the exemption immediately ceases to apply, and VAT becomes due from that point forward.
In other words:
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If your turnover stays below €18,750 during the year, the exemption can remain valid until year-end.
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If your turnover exceeds €18,750, you automatically move to the normal VAT regime from the date you cross that threshold.
When and How to Notify the Tax Authority
Once the exemption limit is exceeded, the taxpayer must file a declaration of changes (Declaração de Alterações) with the Tax Authority within 15 working days. This formal step ensures the business is correctly reclassified under the normal VAT regime.
If the change occurs because you passed the limit by more than 25%, VAT becomes immediately chargeable — starting with the invoice that caused the excess. Future invoices must include VAT, and the corresponding returns must be filed quarterly (or monthly, depending on turnover).
If the threshold is exceeded by a smaller margin (but not by more than 25%), VAT becomes due from January 1 of the following year.
Practical Implications
Once you transition to the normal VAT regime:
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You must start issuing invoices with VAT.
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You can deduct input VAT on eligible business expenses.
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You will have to submit regular VAT returns (normally quarterly).
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You are generally required to remain in the normal regime for at least five years, as established by Article 55 of the VAT Code.
System Limitations and Ongoing Updates
It’s important to note that the Finanças online system is still being updated to accommodate the latest legislative changes introduced by Decree-Law No. 35/2025. In some cases, the system may issue automatic warnings when submitting the declaration — these messages do not invalidate the process but are being gradually corrected by the Tax Authority.
Key Takeaways for Freelancers and Small Businesses
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Threshold: €15,000 (VAT exemption)
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Immediate loss of exemption: When turnover exceeds €18,750
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Deadline for notification: 15 working days from exceeding the limit
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VAT due: From the date of the invoice that caused the excess
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New obligations: Issue VAT invoices, submit periodic VAT returns, maintain regime for five years
At GoalSeek, we assist freelancers and small businesses in Portugal in managing these transitions smoothly — from verifying annual turnover to updating your VAT status and complying with all declaration and invoicing requirements.
If you’re approaching the exemption limit or unsure whether your business should remain under Article 53, we can help you plan the change strategically and avoid unexpected VAT liabilities.
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