In the government’s proposals submitted to parliament to address the housing crisis, the fiscal benefit of reducing VAT from 23% to 6% in construction is granted directly to real estate developers. However, unlike current practices, these developers will now be required to settle the tax, a responsibility that previously could lie with the contractor.
In a written response, the leader of the Portuguese Association of Real Estate Developers and Investors (APPII) emphasized the need for a detailed evaluation of the practical impacts of the measures proposed by the government in the draft law.
“We are analyzing the two legislative proposals, which are extensive, to understand whether this solution is feasible and fair for all parties,” he explained.
The draft law to reduce VAT on the construction of houses for sale or rent at moderate prices gives the tax authorities 150 days to refund the difference between the VAT rates of 23% and 6%, provided that owners construct or refurbish properties intended for housing and sell the house for up to 648,000 euros or rent the property at a monthly rent not exceeding 2,300 euros.
According to the legislation, developers will also ensure that properties benefiting from the reduced VAT are indeed sold or rented at the values defined by the government as moderate within two years.
While the APPII CEO acknowledges that “the objective is understandable,” he maintains that “any control mechanism must be clear, simple, and proportionate, avoiding additional obstacles to investment. It is crucial to ensure that these conditions do not result in more bureaucracy or uncertainty, which could undermine the positive effect of the measure.”
Another provision stipulates that the reduced VAT rate of 6% will only apply to constructions whose administrative procedure occurs after September 23, 2025. This is “a point that deserves reflection,” with the APPII official advocating that “any temporal criterion should be transparent and justified.”
“We are analyzing whether this date does not penalize projects already underway, which could create situations of inequality. This is an aspect we will monitor closely,” said Manuel Gonçalves.
The APPII CEO highlights “positive signals” from this legislative package, particularly the reduction of VAT on construction and the decrease in fiscal taxation of rents. However, he believes these measures “do not, by themselves, resolve the structural problems of housing.”
“It is urgent to proceed with profound reforms: the simplification of licensing, the provision of public lands, and a stable national strategy. Only then can we increase supply and ensure affordable prices,” he asserted.
The same official advocates for “the definitive implementation of PEPU — Plataforma Eletrónica dos Procedimentos Urbanísticos,” considering it “crucial for ensuring transparency and monitoring processes.”
“Without robust digital tools, it will be difficult to ensure that these measures meet the defined objectives,” he concluded.
In a statement, the APPII president, Hugo Santos Ferreira, emphasized that the decision to proceed with a package of fiscal measures to stimulate housing supply is “a bold decision long awaited by the sector, but it does not, by itself, resolve the structural problems of housing in Portugal.”
The measure that increases the IMT rate for non-residents to 7.5% is deemed “counterproductive for the country’s international credibility” and “concerning, as it could send a contrary signal to foreign investment,” he noted.
The Association reinforces that “these measures are an important political signal but are not sufficient to lower prices immediately.”
“It is urgent to advance with structural solutions, including the provision of public lands for affordable housing construction, the modernization of licensing processes,” and the “implementation of PEPU — Plataforma Eletrónica dos Procedimentos Urbanísticos, which will be crucial to simplifying and accelerating urban planning and construction processes,” the statement added.
