The Portuguese Tax Authority, through Binding Ruling no. 29830, issued by order dated 29 April 2026, clarified the VAT treatment of a simple demerger involving the transfer of an autonomous economic unit operating in the restaurant sector.
Transaction background
The applicant company, subject to the monthly VAT regime, intended to carry out a simple demerger under Article 118 of the Portuguese Commercial Companies Code, transferring part of its assets to form a new company.
The economic unit to be transferred consisted of the operation of a “Pizzeria”, including:
- tangible and intangible fixed assets;
- inventory of goods and raw materials;
- the trademark associated with the business;
- employees assigned to the activity;
- liabilities related to the transferred business unit.
The new company would independently continue the operation of a broader business involving restaurant and event-related activities.
Question submitted to the Tax Authority
The applicant asked whether the transfer of the above-mentioned economic unit, within the context of the demerger, would qualify for the VAT non-taxation regime provided for in Article 3(4) of the Portuguese VAT Code.
Tax Authority’s position
The Tax Authority recalls that Article 3(4) of the VAT Code excludes from the concept of supply of goods:
“the transfer, whether for consideration or free of charge, of a going concern, the whole of an enterprise or part thereof, which is capable of constituting an independent business activity.”
The Tax Authority also reaffirmed the case law of the Court of Justice of the European Union, in particular the judgment delivered on 27 November 2003 in Case C-497/01 (Zita Modes Sàrl v Administration de l’enregistrement et des domaines), according to which this regime covers the transfer of a set of tangible and intangible assets which, together, constitute a business or part of a business capable of carrying out an autonomous economic activity, and does not cover the mere transfer of assets such as the sale of stock.
Essential requirements for the application of the regime
According to the Tax Authority, the application of the VAT neutrality regime is subject to the cumulative fulfilment of the following conditions:
- transfer of a going concern or an independent business unit;
- ability of the transferred unit to carry out an autonomous economic activity;
- the transferee must be a VAT taxable person with full deduction rights.
In the present case, the new company will carry out taxable and non-exempt activities and will be subject to the standard VAT regime.
Conclusion
The Tax Authority concluded that, as the transaction involves the transfer of an autonomous economic unit capable of carrying out an independent activity, the demerger is not subject to VAT under Article 3(4) of the VAT Code.
This binding ruling reinforces the importance of properly structuring corporate reorganisations, confirming that the transfer of a genuine business unit may benefit from VAT neutrality, avoiding unnecessary tax costs in restructuring operations, such as the VAT payment on the transaction.