VAT at 6% on Housing: What Changes (and What Stays the Same)
The promise of lowering VAT from 23% to 6% across all housing construction raised considerable expectations in the sector. However, the Secretary of State for Tax Affairs, Cláudia Reis Duarte, clarified the real scope of this measure: the EU legal framework imposes limits that Portugal cannot ignore.
What Brussels Says
The European VAT directive "only allows a reduced rate on construction within social housing policies". In practice, this means the 6% rate can only be applied in very specific contexts - public housing or properties intended for affordable rental - and not broadly across the market.
"VAT at 6% for all housing construction is not, under the directive, a possibility."
Cláudia Reis Duarte - Secretary of State for Tax Affairs
The Tax Package in Detail
Nevertheless, the law published on March 6, 2026 provides a significant set of benefits. The reduced 6% VAT applies to the construction of properties for sale or permanent rental at "moderate prices".
| Measure | Value | Description |
|---|---|---|
| Rental | €2,300 | Maximum monthly rent for reduced VAT access |
| Sale | €660,982 | Maximum property value for 6% rate |
| IRS Landlords | 10% | Reduced rate (vs. 25%) for rents up to €2,300/month |
| IMT Non-Residents | 7.5% | New IMT rate for non-resident citizens |
These measures also include capital gains tax exemption on the sale of residential properties when the value is reinvested in new rental properties, and an increase in the rent deduction limit in IRS up to €1,000 per month.
Objective: Middle Class and Market Supply
The estimated cost of the measures is between 200 and 300 million euros, with expected validity until the end of 2029.
What This Means For You
For those looking to buy a home below 660 thousand euros, the tax conditions on new construction could, over time, contribute to more supply and more competitive prices. Grupo Your closely monitors all legislative developments so our clients can make the best decisions at the right time.
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