Porta da Frente Christie’s International Real Estate - 22/07/2026, 10:51:21
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The €660,982 cap in VAT at 6%: how it works | Porta da Frente Christie’s International Real Estate
The price cap in VAT at 6%: the €660,982 of 2026
VAT at 6% on housing construction has a value cap. Above it, the property is not
eligible and the corresponding part of the construction contract is taxed at the standard rate. It is the criterion that excludes the most units from the regime in upper-middle and high-end product.
eligible and the corresponding part of the construction contract is taxed at the standard rate. It is the criterion that excludes the most units from the regime in upper-middle and high-end product.
The figure is not written into the law
Article 2(2)(b) of Decree-Law no. 97/2026 does not set a figure. It cross-refers to the upper limit of the second bracket of the table in article 17(1)(b) of the IMT Code, in the wording given by Law no. 73-A/2025, which approved the State Budget for 2026.[1] That limit corresponds to €660,982 in 2026, a figure that rose from the €648,022 of the version initially presented.[2][3]
Article 2(3) allows both caps to be updated by ministerial order
(portaria) of the members of the Government responsible for finance and
housing, in accordance with the updating factor of article 24 of the New Urban
Lease Regime (NRAU).[1] Do not treat €660,982 as a permanent figure. Confirm the value in force in the year of the operation.
(portaria) of the members of the Government responsible for finance and
housing, in accordance with the updating factor of article 24 of the New Urban
Lease Regime (NRAU).[1] Do not treat €660,982 as a permanent figure. Confirm the value in force in the year of the operation.
The same cap applies to the partial VAT refund regime for self-build. Annex ii of the diploma cross-refers to article 2(2) and (3), assessing the taxable asset value, or the land value plus construction costs without VAT if higher, against the same limits.[1] See the page on works on your own home.
What goes into the value calculation
Article 3 is explicit. The acquisition value is taken to be the whole of the value paid for the urban property, mixed property or autonomous unit within the transaction, plus the value corresponding to the movable goods, equipment or ancillary parts that, by their nature, are materially attached to the property on a permanent basis, as well as the services that add to its value, even where, in any case, these are the subject of separate legal transactions.[1]
The final phrase is decisive. Splitting the garage, the finishes or the kitchen into a separate contract does not remove those values from the calculation. The law anticipated that engineering and closed it off expressly.[1]
In the terminology of article 40 of the IMI Code, garages, parking spaces and storage rooms are dependent gross areas of the unit.[4] The decree does not list them. It states a
criterion, that of material attachment on a permanent basis, within which these fall naturally.
criterion, that of material attachment on a permanent basis, within which these fall naturally.
In co-ownership or joint ownership, and where there are several tenants, the cap is assessed by the whole of the value, not by each party's share.[1]
Illustrative example
Hypothetical development of six units. Indicative figures, purely to demonstrate the mechanism, with the 2026 cap.
Unit | Home | Ancillary parts and extras | Total | Eligible |
A | €480,000 | €20,000 | €500,000 | Yes |
B | €610,000 | €30,000 | €640,000 | Yes |
C | €645,000 | €25,000 | €670,000 | No |
D | €655,000 | €0 | €655,000 | Yes |
E | €700,000 | €35,000 | €735,000 | No |
F | €700,000 | €18,000 | €538,000 | Yes |
Four eligible units out of six. The construction contract is apportioned by area between the eligible part, taxed at 6%, and the non-eligible part, taxed at 23%.[1][5] The effective saving is far below the 17 percentage points that a superficial reading suggests.
The rent cap, for the letting branch
In the residential letting branch, the cap is not on price but on rent: 2.5 times the guaranteed minimum monthly wage set for 2026, that is, €2,300 per month.[1] This
cap is also indexed and can be updated by ministerial order. For letting, the annual value divided by the number of months elapsed in each year is taken.[1]
cap is also indexed and can be updated by ministerial order. For letting, the annual value divided by the number of months elapsed in each year is taken.[1]
Common mistakes
- Assessing the cap by the value of the construction contract instead of the value of the property.
- Excluding the garage, the storage room or the value-adding extras from the calculation.[1]
- Assessing by the average value of the units and not unit by unit.[5]
- Splitting finishes into a separate contract believing they fall outside the calculation.[1]
- Treating €660,982 as a permanent value. It can be updated by ministerial order.[1]
Commercial implications
The cap creates a threshold effect. A unit positioned at €665,000 loses the eligibility of the corresponding construction contract. A unit at €655,000 keeps it. It is worth testing the sensitivity of the sales plan to this cap before setting the price list, especially when the product clusters at the threshold.
Frequently asked questions
Is the cap on the sale price or on the taxable asset value?
On the acquisition value, that is, the whole of the value paid, plus ancillary parts and value-adding services, even where these are the subject of separate legal transactions.[1]
If I sell the garage separately, does the cap fall?
No. The law requires the ancillary parts materially attached to the property on a permanent basis to be added in, even where they are the subject of separate legal transactions.[1][4]
Does a unit above the cap contaminate the whole development?
No. The construction contract is apportioned by area between eligible and non-eligible units.[1][5]
Is the cap updated every year?
It can be updated by ministerial order, in accordance with the factor of article 24 of the NRAU. The figure of €660,982 is the 2026 one.[1][2]
Call to action
Do you have a construction, refurbishment or home-purchase project and want to understand the real impact of VAT at 6%? The Porta da Frente Christie’s International Real Estate team supports developers, owners and buyers at every stage of the operation, from the initial assessment to the deed. Talk to us and arrange a conversation with no obligation.
Sources
All sources were verified on the date shown at the top of this page.
[1] Decree-Law 97/2026, full text (PDF, Diário da República, series I no.97). https://files.diariodarepublica.pt/1s/2026/05/09700/0001400040.pdf
[2] 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
[3] 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
[4] 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/
[5] 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
This content is informational and does not constitute tax or legal advice. The legislation referred to may change. Always confirm your specific situation with a certified accountant or lawyer. Porta da Frente Christie’s International Real Estate.
