The Liberal Party’s proposal will be discussed and voted on during the detailed stages of the State Budget for the upcoming year.
While the government plans to reduce VAT on construction to the lowest rate by the end of the first quarter of next year, the Liberal Initiative seeks its implementation starting January 1.
“Given the social emergency in the housing market in Portugal, it is feasible, even under European directives limiting the minimum VAT application, to apply a 6% VAT rate for all construction in Portugal as a social policy to tackle this unavoidable housing crisis,” affirms the Liberal Initiative.
The Liberals argue that “the taxes and fees paid by construction companies are passed on to homebuyers, thereby increasing property prices.”
“Therefore, it is crucial for the state to fulfill its role in promoting price reductions by lowering VAT, granting essential status at a 6% tax, and not extending the 23% rate applied to non-essential and luxury goods. The aim of this change is to provide a real incentive for construction, avoiding the dirigiste policies or failed attempts of the past,” states the rationale for this IL proposal.
The budget text, according to the IL, should specify that “the contracts for improvement, remodeling, renovation, restoration, repair, conservation, or reconstruction of properties or autonomous parts thereof allocated to housing” should have a reduced VAT rate.
Exemptions include construction contracts on real estate covering whole or parts of elements for pools, saunas, tennis courts, golf or mini-golf courses, or similar facilities.
“The reduced rate does not cover incorporated materials, unless their value does not exceed 40% of the total value of the services provided,” it adds.
