6% VAT on construction: António Queiroz Martins and Francisco Loureiro Ferreira analyse the Portuguese Tax Authority’s guidance

António Queiroz Martins and Francisco Loureiro Ferreira analyse the rules governing the application of the reduced VAT rate to the construction and rehabilitation of properties.

António Queiroz Martins, Managing Associate, and Francisco Loureiro Ferreira, Associate at Morais Leitão, are the authors of the article “6% VAT on construction: revolution or continuation?”, published by idealista/news, in which they analyse one of the key tax measures introduced to support the housing market: the application of the reduced 6% VAT rate to certain construction or rehabilitation works involving properties intended for sale or rental at moderate prices.

The authors explain that, for most property developers, the reduction of the VAT rate from 23% to 6% may result in effective savings and provide a significant incentive for housing construction. However, the practical application of the rules involves several conditions and technical issues that have recently been clarified by the Portuguese Tax Authority.

In the article, António Queiroz Martins and Francisco Loureiro Ferreira examine the Circular Letters recently published by the Portuguese Tax Authority, highlighting the main guidance on the conditions for applying the reduced rate, the deadlines for the sale or rental of properties, the recovery of VAT incurred since January 2026 and the application of the reverse charge mechanism.

The analysis also covers the partial VAT recovery scheme available to individuals building their own permanent residence, including the Portuguese Tax Authority’s guidance on the applicable value threshold and the exclusion of rehabilitation works from this benefit.

According to the authors, the publication of these Circular Letters is an important contribution towards greater certainty and predictability in the application of these rules, although a number of practical situations remain without a clear answer.

Read the full article on idealista/news.