Solange Dias Nóbrega and Tomás Mendonça Viçoso analyse the impact of the new STA ruling on VAT in urban regeneration contracts

In the article “SAC Ruling of 26.03.2025 on VAT Applied to Urban Regeneration Projects”, published in Vida Imobiliária magazine, our lawyers analyse the implications of the recent ruling by the Portuguese Supreme Administrative Court, which standardises case law on the application of the reduced VAT rate to urban regeneration contracts and may have a significant impact on projects carried out in recent years.

Solange Dias Nóbrega, managing associate in the tax team, and Tomás Mendonça Viçoso, associate in the corporate real estate and tourism team, are the authors of the article published in Vida Imobiliária magazine, where they analyse the recent ruling of the Portuguese Supreme Administrative Court (STA), dated 26 March 2025, which standardises case law on the application of the reduced VAT rate to urban regeneration contracts.

The ruling in question (case no. 12/24.9BALSB) upholds the interpretation of the Portuguese Tax Authority, under which the application of the reduced 6% VAT rate depends on two cumulative requirements: the contract must be located within an Urban Regeneration Area (ARU), and there must be a previously approved Urban Regeneration Operation (ORU) for that ARU. In the absence of an approved ORU, the standard VAT rate of 23% must be applied.

In their analysis, our lawyers point out that this decision may have significant implications for works carried out over the past four years, potentially encouraging the Tax Authority to broaden its inspection activity, and affecting projects currently underway or about to begin. They also underline that this ruling does not definitively close the legal debate, as each case must be assessed individually, especially when municipal certificates were issued recognising the works as urban regeneration operations.

The article concludes with a reflection on the principle of legitimate expectation for private parties who acted on the basis of public certificates, and on the potential liability of municipalities in such cases. In light of unfavourable decisions by the Tax Authority or the courts, the authors recommend analysing possible administrative or judicial responses on a case-by-case basis.

Read the full article in the attachment below.