Value Added Tax (VAT)
Exemptions
The exemption applicable to the transfer of the following is extended until 31 December 2025:
- fertilisers, soil conditioners, and other products for feeding cattle, poultry, and other animals, when used in agricultural production activities; and
- products, whether dry or wet, intended for feeding companion animals when taken in by legally constituted animal protection associations.
All these exemptions grant the right to deduction.
Legislative Authorization – Reduced rate for construction or rehabilitation of housing properties
The Government is authorized, during the year 2025, to amend item 2.18 of List I annexed to the VAT Code to:
(i) stipulate that these construction works are defined according to criteria established by the members of the Government responsible for finance and housing; and
(ii) exclude from its scope services related to housing properties whose value exceeds the limit compatible with the pursuit of the Government's social housing policies.
Refund of an amount equivalent to VAT
Entities holding forest fire brigades, which are part of the Integrated rural fire management system (“Sistema de Gestão Integrada de Fogos Rurais”), will be able to benefit from a refund of an amount equivalent to VAT when they cannot exercise the right to deduction.
Changes are expected to the reduced VAT rate for housing construction.
Excise Duties
Tax on Alcoholic Beverages and Non-Alcoholic Beverages Added with Sugar (IABA)
The reduction of the IABA rate (applying only 25% of the tax) on liqueurs and "crème de", distilled spirits, and fruit brandy (in certain categories and with specific characteristics indicated in Annex II of Regulation (EC) No. 110/2008 of the European Parliament and of the Council, of 15 January 2008) is extended until 31 December 2025, provided they are exclusively manufactured from arbutus fruits and produced and distilled in the municipalities already provided for in the current legislation.
Tax on Petroleum and Energy Products (ISP)
Petroleum and energy products harmful to the environment, when used in the production of electricity, electricity and heat (cogeneration), and city gas, both in terms of ISP and CO2 addition, in the Autonomous Regions of Madeira and the Azores, will now be taxed at 100%, putting an end to partial exemptions.
Certain products used in facilities subject to an energy consumption rationalization agreement (ARCE), previously taxed at a rate corresponding to 65% of the carbon tax rate, will now be taxed at 100%.
Natural gas used for the production of electricity, electricity and heat (cogeneration), and city gas by entities that carry out such activities as their main activity on the mainland will maintain the current level of taxation.
A transitional provision is introduced, under which, in 2025, colored and marked diesel can be consumed by vehicles used by forest fire brigades that are part of the rural fire management system. This measure is subject to the authorization of European institutions.
Considerable Increase in Tax on Petroleum and Energy Products and carbon Tax.
Tobacco Tax
It is foreseen that the total minimum reference tax on cigarettes will correspond to the national average taxation, disregarding, for this purpose, the European average taxation.
The minimum tax applicable to cigars has also been changed, now defined as 50% of the minimum tax on cigarettes, applicable to cigarettes sold at the weighted average price of the same, as provided for in Article 103 (5).
Circulation Tax (IUC)
The additional IUC remains in force.
Vehicle Tax (ISV)
Passenger cars with plug-in hybrid engines, whose batteries can be charged via connection to the electrical grid and have a minimum range in electric mode of 25 kilometers, registered in another EU Member State between 1 January 2015, and 31 December 2020, will no longer be taxed under the normal regime and will instead be taxed at an intermediate rate of 25%.
The period of use considered for the application of the reduction percentage related to the displacement and environmental components for used vehicles with definitive community plates assigned by other EU Member States is now harmonized.
The taxpayer is exempt from paying a fee to request the recalculation of the tax in cases where they disagree with the provisional assessment issued by customs.
2025 State Budget Law Proposal
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2025 State Budget
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