By Hugo Ribeiro, Certified Accountant · Member of the Order of Certified Accountants · HVR Business Consulting
Introduction to the New VAT Paradigm in Housing The real estate sector in Portugal has been undergoing an unprecedented phase of legislative change, driven by the need to respond to the housing crisis and promote building sustainability. In 2026, the rules regarding Value Added Tax (VAT) in the housing sector consolidate structural changes affecting both real estate developers and final consumers. The complexity of the VAT Code (CIVA) now requires increased attention, especially regarding the application of the 6% reduced rate and new evidence requirements for tax benefits. The relevance of th…
Key Takeaways
The 6% rate applies to rehabilitation in ARU zones with documentary proof.
Materials above 20% in maintenance works require the 23% VAT rate.
Affordable housing requires strict compliance with area and price limits.
Reverse charge is common in civil construction services.
FAQ
What is needed to apply 6% VAT on rehabilitation?
The property must be in an Urban Rehabilitation Area (ARU) and the work certified by the City Council as rehabilitation.
How does the 20% materials rule work?
If materials cost more than 20% of the renovation total, the 6% rate only applies to labor; otherwise, 23% applies to the total.
What is the VAT rate for swimming pool construction?
Swimming pool construction is always taxed at the standard 23% rate as it is not considered a basic housing need.
When does the VAT reverse charge apply?
It applies when both parties are VAT taxable persons in Portugal and the service is civil construction (Art. 2, n. 1, j of CIVA).