1 July 2025 · 3 min read
Non-resident holiday-let owners and VAT
The small-business exemption no longer reaches operators without a Portuguese base. For them, VAT applies from the first euro of turnover.
By ATLANTIC’s property tax team
Since 1 July 2025, holiday-let operators with no seat or tax domicile in Portugal have been excluded from the small-business VAT exemption. They are in the normal VAT regime regardless of how little they invoice.
The exemption in question is the one most small operators rely on, which removes the obligation to charge VAT below an annual turnover threshold. It is not available to a person without a base in Portugal, and that is the whole of the change: the threshold did not move, the exemption simply stopped reaching this group.
The practical consequences are three. VAT has to be charged on the letting. Periodic VAT returns have to be filed. And the operator has to be registered for it, which is a step that is often discovered after the first season rather than before it.
The owners this catches are rarely running a business as they understand the word. They own one apartment, let it through a platform for part of the year, and invoice well under the threshold that would have exempted a resident doing exactly the same thing. The rule turns on where the operator is, not on the scale of what they do.
There is a second effect that is easier to miss. Being inside the normal regime is not only a cost — it also allows input VAT to be recovered on expenses connected with the activity. Whether that offsets the charge depends on the numbers, and it is worth calculating rather than assuming.
Key takeaways
- Operators with no seat or tax domicile in Portugal cannot use the small-business VAT exemption.
- VAT applies from the first euro, with registration and periodic returns.
- Input VAT on activity expenses becomes recoverable, which changes the arithmetic.
Source: Decreto-Lei n.º 35/2025.
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This article provides general information and does not constitute tax advice.