Recovery of 17% VAT in self-build projects: Solange Dias Nóbrega explains the new regime

In the article “Self-build: how to recover 17% VAT on construction works”, published on idealista/news, Solange Dias Nóbrega analyses the new tax regime that allows individuals to recover 17% of VAT on the construction of their primary and permanent residence, reducing the overall cost of building.

“If you are building – or planning to build – your own home, the new housing tax incentives have created a special regime that allows part of the VAT incurred in self-build projects to be recovered,” explains the Coordinating Associate from the tax team at Morais Leitão.

How VAT recovery works in self-build projects

The regime applies where an individual directly contracts construction services to build their primary and permanent residence. VAT continues to be paid at the standard rate of 23% at the time of invoicing, with the possibility of subsequently requesting from the Tax Authority a refund of the difference to the reduced rate of 6%, corresponding to a saving of 17% on the VAT already paid.

Although the measure has not yet been implemented, the article already highlights key considerations based on the Tax Authority’s approach in similar situations.

Deadline to request VAT refund on construction

The refund request must be submitted within 12 months of the issuance of the property’s use permit. Failure to comply with this deadline may result in the rejection of the request.

In addition, the refund depends on the property being used as the individual’s primary and permanent residence, making it essential to update the tax domicile accordingly.

Requirements to recover VAT in self-build

The process requires the submission of detailed documentation, including construction contracts, proof of the land value, the use permit, and invoices covering all construction costs.

Invoices must clearly identify the services provided and the property concerned; otherwise, they may be rejected by the Tax Authority.

What to do if the VAT refund is refused

The Tax Authority may refuse the refund, in whole or in part, if it considers that the legal requirements have not been met, particularly regarding the eligibility of expenses or the use of the property.

In such cases, the taxpayer may resort to the available remedies, including administrative complaints or judicial challenges.

The VAT recovery regime in self-build projects represents a relevant opportunity to reduce construction costs, but it requires strict compliance with deadlines, requirements and documentation obligations, making careful planning essential from the outset.

Read the full article on idealista/news.