Lisbon, Nov. 28, 2025 (Lusa) - The final version of the Portuguese draft state budget for 2026, which resulted from the committee stage debate and vote on the details, includes VAT reductions on new products from January and the extension of some exemptions from this tax.

The changes and extensions are expected to come into force on 1 January 2026, as they are included in the 2026 state budget (OE2026), which was approved on Thursday in a final overall vote, pending promulgation by the country's president, Marcelo Rebelo de Sousa.

From fertilisers to olive oil production and game meat, the lists of goods with special VAT rates will be different from next year.

Here are the five main measures approved:

+++ 6% VAT on olive oil production +++

From 1 January, the day on which the Budget is expected to come into force, olive oil production will be taxed at 6% VAT instead of the current rate of 23%.

This change was already provided for in the original version of the budget proposal presented by Luís Montenegro's Government on 9 October and was approved at the committee stage and vote.

The list I attached to the VAT Code - which lists the goods and services taxed at the reduced rate of 6% - now includes "the processing of olives into olive oil".

Olive oil itself, as a commodity, is already taxed at a VAT rate of 6%. The same applies to olive pomace, extracted during the production of olive oil.

+++ VAT exemption for fertilisers and soil improvers +++

The VAT exemptions that currently exist for those who purchase fertilisers, soil improvers, flours, cereals and seeds used in agricultural production activities have been extended for another year, until the 31st of December 2026.

The legislation ensures that transactions continue to confer "the right to deduct tax levied on goods or services purchased, imported or used by the taxable person for their performance".

This is an extension of a special measure for agricultural production, created at the proposal of António Costa's Socialist government in April 2022 to respond to rising fuel prices, which remained in place not only in that year but also in 2023, 2024 and 2025.

With the extension to 2026, aid to farmers will last for more than four and a half years.

This measure was proposed by the governing coalition Social Democrat (PSD) and Christian Democrat-Monarchist (CDS-PP) Party benches.

+++ 6% VAT in art galleries +++

From 1 January 2026, sales of works in art galleries will be subject to a VAT rate of 6%, instead of the 23% that currently applies.

Parliament approved two proposals, from the Socialists (PS) and far-right Chega Party, which converge on the same objective, guaranteeing tax relief, with the transition from the standard rate to the reduced rate.

The European directive regulating the special taxation regime for second-hand goods, works of art, collectors' items and antiques, which Portugal partially transposed into national law this year, already allowed a 6% VAT rate to be applied in galleries, but national legislation did not guarantee the application of the reduced rate.

At present, the reduced rate (6%) is only applied when the transaction is carried out by artists or rights holders.

+++ 6% VAT on game meat +++

Also from 1st January, the VAT applicable to the sale of game meat will fall from 23% to 6%.

This is a proposal from the PSD and CDS-PP. In their justification for the initiative, the parties point out that "edible meat and offal, fresh or frozen" from various species are already taxed at the reduced rate (6%), but that, despite this, the rule "unjustifiably excludes large and small game meat, keeping it subject to the standard rate of 23%".

The parties presented this relief arguing that it will stimulate the sale of game meat in the country.

At present, they say, "all meat from large game hunted in Portugal is immediately transported to Spain, where it is processed, packaged and marketed, without generating any tax revenue for our country", returning to the Portuguese market as a final product "leaving in Spain all the added value associated with the value chain, from processing to marketing".

+++ VAT exemption for pet food +++

The VAT exemption currently in force "on the purchase of pet food by legally constituted animal welfare associations" will remain in place for another year, until 31 December 2026.

The maintenance is the result of a proposal by the People-Animals-Nature Party to extend the rules of Article 4 of Law No. 10-A/2022 of 28 April for another year, the same legislation that includes the VAT exemption for fertilisers, created during the rise in inflation following Russia's invasion of Ukraine.

The PAN justified the extension with the need to support animal welfare associations in coping with the "increase in the cost of living", allowing them to direct resources towards "feeding, caring for and sterilising the animals they take in, contributing to population control" and "reducing the abandonment of animals".

PCT/AYLS // AYLS

Lusa