Raquel Maurício, managing associate at Morais Leitão, is the author of the article “VAT on urban rehabilitation in Portugal: one step forward, two steps back”, in which she highlights the shortcomings and contradictions of the recent changes to the VAT regime applicable to urban rehabilitation. Although these changes aim to improve access to housing, they maintain legal uncertainties that risk undermining their effectiveness.
The reduced VAT rate of 6% theoretically applies to construction works carried out in urban rehabilitation areas (ARUs), but for years the Portuguese Tax Authority imposed a restrictive interpretation, requiring that the works be part of an officially approved urban rehabilitation operation (ORU). Despite divided case law, this requirement has limited access to the tax benefit and created instability in the sector.
The Programa Mais Habitação, approved in 2023, formally eliminated the ORU requirement but maintained the exclusion of new constructions, restricting the benefit to reconstruction only. The lack of legal clarification for ongoing projects, combined with a recent decision from the Supreme Administrative Court reinstating the ORU requirement, has contributed to an atmosphere of legal uncertainty and lack of confidence among developers. According to the lawyer, these ambiguities represent two steps back in a fiscal policy that should be clear, consistent, and effectively aligned with the goals of addressing the housing crisis.
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