FAQ and glossary | Porta da Frente Christie’s International Real Estate

We have gathered the questions we receive most often about 6% VAT on housing construction, and a glossary of the terms that appear in the legislation and in the Tax Authority's instructions.

It is the application of the reduced VAT rate to certain construction and rehabilitation contracts for housing, created by Decree-Law No. 97/2026 through item 2.42 of List I of the VAT Code.[1][2][3]

Item 2.42.1 covers construction contracts for properties intended for sale to an own permanent residence buyer, or exclusively for residential letting. Item 2.42.2 covers buildings under the regime of investment contracts for letting, the CIA regime.[2]

Item 2.42.1 takes effect from the quarter following the decree's entry into force, that is, 1 July 2026. The CIA regime, and therefore item 2.42.2, takes effect on 1 September 2026.[2][4]

No. The transfer of property is exempt from VAT.[5] The 6% falls on the construction contract engaged by the works owner.

€660,982 in 2026, by reference to the upper limit of the second band of article 17 of the IMT Code. It can be updated by ministerial order.[2][6]

Yes. Accessory parts materially attached to the property on a permanent basis count, as do value adding services, even where they are the subject of separate legal transactions.[2][7]

2.5 times the guaranteed minimum monthly wage set for 2026, which corresponds to €2,300 per month.[2]

The procedural initiative must begin from 25 September 2025 to 31 December 2029.[2]

Item 2.42.1 ceases to be in force on 31 December 2032.[2]

Not under item 2.42.1, which requires a sale or a letting.[2][8] The builder invoices at the standard rate, but you may then claim a partial refund of the difference down to the reduced rate, under annex ii of the diploma.[2] Renovation works on the home where you live may benefit from item 2.27.[3]

Annex ii of Decree-Law No. 97/2026 lets private individuals building for their own permanent residence claim from the Tax Authority the difference between the VAT borne at the standard rate and what would result from the reduced rate. The claim is electronic, within 12 months of the start-of-use documentation, and the Tax Authority makes the refund within a maximum of 150 days.[2]

The specific reverse charge of item 2.42 does not extend to subcontracts.[9] The
dominant reading is that they do not benefit from the reduced rate, but the circulars do not state this expressly.[10]

It is the rule whereby, in civil construction services, the VAT is charged by the acquirer and not by the supplier. There is no reverse charge when the acquirer is not a taxable person for VAT.[9]

Services that do not fall within the strict concept of construction or rehabilitation work are excluded from the scope.[9] Site supervision contracted within an overall construction contract is absorbed into the construction contract regime.[9]

By area, with reference to the gross construction area and the area in excess of the footprint, field A of article 40 of the IMI Code.[2][7][8]

In Madeira, a standard rate of 22% and a reduced rate of 4%. In the Azores, 16% and 4%.[11][12]

An IMT surcharge of 10% applies on the property's taxable
value, save in exceptional circumstances.[2][13]

No. The law reduces the VAT cost on the construction contract, it does not regulate the sale price.

Item 2.42.1 covers rehabilitation under the conditions of the decree.[2] There are dedicated items for rehabilitation, namely 2.23 and 2.27, which the decree did not repeal.[3][14] A clarification bill for item 2.23 was approved only at first reading on 6 July 2026.[15]

The Government estimated between €200 million and €300 million per year. The Budget Support Technical Unit pointed to a higher figure.[16]

In the Diário da República, Decree-Law No. 97/2026 of 20 May, and in circulars No. 25116/2026 and No. 25117/2026 of the Tax Authority.[1][2][8][9]

Movable goods, equipment or parts that are materially attached to the property on a permanent basis. They count towards the price cap.[2][7]

Transfer of the promissory buyer's position to a third party before the deed. It may trigger IMT and has its own treatment for VAT.[17][18][19]

A regime approved as an annex to Decree-Law No. 97/2026, with tax benefits for a period of up to 25 years for investment in properties intended for residential letting. It is the scope of item 2.42.2 and takes effect on 1 September 2026.[2]

A contract by which one party undertakes to carry out works for a price. It is the object of item 2.42.[3]

The sum of the gross construction area and the area in excess of the footprint, under article 40 of the IMI Code. It is the key for apportioning the construction contract.[7][8]

Municipal Tax on Transfers of Property for Consideration, due on purchase.[17][20]

A surcharge of 10% on the property's taxable value, applicable to the buyer who does not use the property as an own permanent residence within the legal deadlines.[2][13]

A document that certifies the works carried out in a period and that serves as the basis for invoicing the construction contract.

A pre-existing item of List I, applicable to construction contracts for improvement, remodelling, renovation, restoration, repair or conservation of properties used for housing. It does not cover incorporated materials, unless their value does not exceed 20% of the total value of the service.[3]

The item of List I of the VAT Code that applies the reduced rate to construction contracts for properties intended for sale to an own permanent residence buyer or exclusively for residential letting.[2][8]

The item applicable to urban buildings for residential letting covered by the CIA regime.[2]

Use of the property as the acquirer's habitual residence, proved through their tax domicile.[2]

Submission of the licensing application, the prior notification, the prior opinion or the notice of commencement of works. Its date determines eligibility.[2][21]

The obligation of the taxable person to regularise the tax owed when any of the conditions of item 2.42.1 ceases to be met, under article 11 of the decree.[2]

The same as the reverse charge. The acquirer accounts for the VAT instead of the supplier.[9]

A contract between the contractor and a third party for the execution of part of the works. The specific reverse charge of item 2.42 does not extend to it.[9]

Taxable asset value, determined by the tax valuation of the property.[7]

A natural or legal person with VAT obligations. A private individual is not a taxable person, and so there is no reverse charge on the works they engage.[9]

[1] Decree-Law 97/2026 of 20 May (Diário da República, Portuguese official gazette). https://diariodarepublica.pt/dr/detalhe/decreto-lei/97-2026-1124493227

[2] Decree-Law 97/2026, full text (PDF, Diário da República, series I no. 97). https://files.diariodarepublica.pt/1s/2026/05/09700/0001400040.pdf

[3] Portuguese VAT Code, full List I (items 2.18, 2.23, 2.25, 2.27 and 2.42). https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/civa_rep/Pages/c-iva-listas.aspx

[4] Portuguese Order of Certified Accountants, technical summary of the Housing Package (PDF). https://www.occ.pt/sites/default/files/public/2026-05/HABITACAO_22maioa.pdf

[5] Portuguese VAT Code, article 9 (exemption on property transfers) and annexed List I. https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/civa_rep/Pages/iva9.aspx

[6] Idealista, the moderate sale price cap is updated to €660,982 for 2026 (23 February 2026). https://www.idealista.pt/news/imobiliario/habitacao/2026/02/23/74062-pacote-fiscal-preco-moderado-de-venda-atualiza-para-660-mil-euros

[7] Portuguese Property Tax Code (CIMI), article 40 (types of building area). https://informador.pt/legislacao/lexit/codigos/direito-fiscal/codigo-do-imi/capitulo-vi-do-valor-patrimonial-tributario-dos-predios-urbanos/seccao-ii-das-operacoes-de-avaliacao/artigo-40-o-tipos-de-areas-dos-predios-edificados/

[8] Tax Authority Circular 25116/2026 of 23 June (item 2.42.1, with worked examples). https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/legislacao/instrucoes_administrativas/Documents/Oficio-Circulado-25116-2026.pdf

[9] Tax Authority Circular 25117/2026 of 24 June (reverse charge). https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/legislacao/instrucoes_administrativas/Documents/Oficio-Circulado-25117-2026.pdf

[10] Cuatrecasas, analysis of item 2.42.1 and the reverse charge (25 June 2026). https://www.cuatrecasas.com/pt/portugal/art/iva-6-habitacao-at-clarifica-verba-2-42-1-e-inversao-sujeito-passivo-1

[11] APCMC, VAT rates applicable in the Autonomous Regions. https://apcmc.pt/legislacao/iva-taxas-aplicaveis-as-regioes-autonomas/

[12] Tax Authority Circular 25045/2024 (Madeira reduced rate, Regional Decree 6/2024/M). https://at.madeira.gov.pt/ficheiros/Oficio_circulado_25045_2024.pdf

[13] ECO, 10% penalty for buyers who benefit from the 6% rate and change residence (20 May 2026). https://eco.sapo.pt/2026/05/20/quem-comprar-casa-com-iva-a-6-e-mudar-de-residencia-tem-penalizacao-de-10-em-imt/

[14] Doutor Finanças, reduced VAT in construction and 2026 IMT brackets. https://www.doutorfinancas.pt/impostos/taxa-reduzida-de-iva-na-construcao-civil/

[15] Idealista, Parliament approves at first reading, unanimously, a bill clarifying the 6% rate for urban rehabilitation (6 July 2026). Awaiting committee stage and publication. https://www.idealista.pt/news/imobiliario/habitacao/2026/07/06/76380-parlamento-aprova-por-unanimidade-iva-a-6-na-reabilitacao-urbana

[16] ECO, estimated fiscal cost of 200 to 300 million euros, with UTAO pointing to a higher figure. https://eco.sapo.pt/2026/01/07/medidas-fiscais-para-habitacao-custam-ao-estado-200-a-300-milhoes-de-euros/

[17] Portuguese Property Transfer Tax Code (CIMT), articles 2, 4, 12 and 17. https://info.portaldasfinancas.gov.pt/pt/informacao_fiscal/codigos_tributarios/cimt/Pages/cimt2.aspx

[18] CAAD arbitration ruling P540/2024-T (broad application of CIMT article 2(3)). https://caad.org.pt/tributario/decisoes/view.php?l=MjAyNTAxMjcxMjA4MDMwLlA1NDBfMjAyNC1UIC0gMjAyNC0xMi0wOSAtIEpVUklTUFJVREVOQ0lBLnBkZg==

[19] Portuguese Order of Certified Accountants, VAT on assignment of contractual position. https://www.occ.pt/pt-pt/noticias/iva-cedencia-da-posicao-contratual-0

[20] Tax Authority Circular 40129/2026 of 6 January (2026 IMT rate tables). https://at.madeira.gov.pt/ficheiros/Oficio_circulado_40129_2026.pdf

[21] Portuguese Urbanisation and Building Legal Regime (RJUE), Decree-Law 555/99 of 16 December. https://diariodarepublica.pt/dr/legislacao-consolidada/decreto-lei/1999-34448575