6% VAT: errors, fines and risks to avoid
Applying 6% where the law requires 23% is not a saving. It is tax owed, with interest
and with penalties. This page brings together the mistakes that a reading of Decree-Law No. 97/2026 and of the Tax Authority's circulars allows you to anticipate.
Mistake 1. Confusing item 2.42.1 with item 2.42.2
They are distinct items. Item 2.42.1 covers construction contracts for sale to an own permanent residence buyer or for exclusive residential letting, and takes effect on 1 July 2026. Item 2.42.2 covers buildings under the regime of investment contracts for letting, and takes effect on 1 September 2026.[1] Many press summaries mix them up.
Mistake 2. Thinking that self-build benefits, or that it is entitled to nothing
The item requires sale for the acquirer's own permanent residence, or exclusive residential letting.[1][2] Anyone building on their own land meets neither. But the mirror error also misleads: the private individual has a regime of their own for the partial refund of VAT, in annex ii of the diploma.[1] See the page on works on your own home.
Mistake 3. Applying the reduced rate to services that are not construction work
The Tax Authority excludes services that do not fall within the strict concept of construction or rehabilitation work on the built structure.[3] The boundary depends on how the service is contracted: site supervision contracted within an overall construction contract is absorbed into the construction contract regime.[3] Standalone design, brokerage and marketing services follow the general regime.
Mistake 4. Treating subcontracts as if they were construction contracts
The reverse charge provided for within item 2.42 applies exclusively to construction contracts and does not extend to subcontracts, without prejudice to the general reverse charge under article 2(1)(j) of the VAT Code being applicable to them.[3] Because the item refers to construction contracts, the dominant reading is that subcontracts do not benefit from the reduced rate, although the circulars do not expressly set the rate applicable to them.[4] Do not proceed without written confirmation from your chartered accountant.
Mistake 5. Forgetting accessory parts and value adding services in the price cap
The acquisition value includes movable goods, equipment and accessory parts materially attached to the property on a permanent basis, and the services that contribute to its enhancement, even where they are the subject of separate legal transactions.[1] Splitting finishes or the garage into a separate contract does not remove them from the calculation.
