This law introduced a significant readjustment in the size criteria that determine the classification of companies as micro, small, medium or large.
The aim is to bring Portugal into line with European standards and reflect recent economic developments, in accordance with the new Decree-Law No. 126-B/2025, which transposes Directive (EU) 2023/2775.
This amendment arises from the need to update the financial limits to the current economic reality and to strengthen harmonization with the other Member States of the European Union.
What is behind the amendment?
The limits applicable to total balance sheet and turnover, which were already outdated, are now adjusted to ensure that the categorization of entities remains representative of their true economic size, in accordance with Directive (EU) 2023/2775, which was approved with the aim of reflecting accumulated inflation and developments in the European business fabric and has now been transposed into Portuguese law with this Decree-Law.
With this legislation, Portugal is now fully aligning its accounting and financial reporting structure with the new European criteria.
What remains unchanged in the regime?
Despite the update of the limits, the category structure of the National Accounting System remains unchanged.
Entities:
Regarding the entities, four categories of entities continue to be provided for, as follows: Micro-entities; Small Entities; Medium-sized Entities; Large Entities.
The classification logic also remains unchanged, i.e. entities are classified based on three fundamental criteria, namely total balance sheet, net turnover and average number of employees.
Classification depends on whether two of the three applicable thresholds are exceeded.
For micro-entities, until 2025 the thresholds were €350,000 total balance sheet, €700,000 turnover and 10 employees. From 2026 onwards, the thresholds will be €450,000 total balance sheet, €900,000 turnover and 10 employees.
For small entities, the limits until 2025 were €4,000,000 in total assets, €8,000,000 in turnover and 50 employees. From 2026 onwards, these will change to €5,000,000 and €10,000,000 and 50 employees, respectively.
Until 2025, medium-sized entities had a total balance sheet of €20,000,000, a turnover of €40,000,000 and 250 employees. From 2026 onwards, the limits will increase to €25,000,000, €50,000,000 and 250 employees.
Large entities are those that exceed two of the three limits for medium-sized entities, both until 2025 and from 2026 onwards.
DL 126-B/2025 also confirms the maintenance of continuity rules, which are essential to ensure stability in the business environment, i.e., the assessment is always made with reference to the immediately preceding period.
A change in category is only consolidated if, during two consecutive periods, two of the three limits are exceeded (or no longer exceeded). The change in category only takes effect from the third period.
For groups, the classification is now three categories, based on the company’s consolidated balance sheet.
Group categories:
Small groups consist of the parent company and subsidiaries included in the consolidation, which do not exceed two of the three limits indicated below:
Total balance sheet: €25,000,000; Turnover: €50,000,000; Average number of employees: 250.
Medium-sized groups are those groups that are not small and which, on a consolidated basis, do not exceed two of the three limits applicable to medium-sized groups.
Large groups are those that exceed two of the three limits for medium-sized groups.
What is the practical impact for companies?
The update of the thresholds may influence several obligations and frameworks, namely in the financial statement models to be adopted, the disclosure and reporting requirements to be adopted, the requirement for statutory audit of accounts, the rules applicable to groups and consolidations, and tax planning, framework and reporting obligations.
Companies that change their category due to the new thresholds may benefit from simplifications or, conversely, be subject to more detailed requirements, depending on the specific case.
It is therefore essential that all companies and groups reassess their classification as soon as the next financial year begins, to ensure full compliance with the applicable rules and to anticipate any accounting, corporate and tax adjustments.
The impact is direct on financial reporting, accounting obligations, audits and tax planning.
Companies and groups should reassess their category now to ensure compliance.
Belzuz Advogados, S.L.P. continuously monitors national and European legislative developments and has a team specializing in tax and corporate law ready to assess the impact of DL 126-B/2025 on your company or group, determine the correct framework in accordance with the new limits and support you in the practical transposition of the new accounting rules.
If you want to ensure a safe and legally sound adaptation to the new requirements, we are here to help.