In the proposal for the State Budget for 2026 (OE2026), the production of olive oil will once again be taxed at the reduced VAT rate of 6%. Currently, the highest rate of 23% is in effect.
During a joint parliamentary hearing with the committees on Agriculture and Budget, Minister José Manuel Fernandes addressed questions about this change, indicating it resulted from a “mistake in the transposition of a directive for reducing the tax burden.”
The minister stated that the Tax Authority (AT) interpreted the directive as applicable to the processing of olive oil.
“There is a difficulty in finding a solution at the current moment. If someone knows and succeeds, all the better,” he conceded.
Olive oil as a product was already subject to the VAT rate of 6%. The same applies to olive pomace, extracted during the production of olive oil.
The list for VAT at 6% already included a series of services provided under “agricultural production activities,” including “processing carried out by an agricultural producer on products primarily from their agricultural production using the means commonly used in agricultural and forestry operations,” according to OE2026.
However, the processing of olives was not explicitly specified there.
The extension of the reduced rate to olive oil production was the only change proposed by the Luís Montenegro executive (PSD/CDS-PP) in the area of VAT.
