“This is a very important measure, but for the medium to long term. It will not have very significant effects by 2026. Projects take some time to get approval, and then builders can start construction,” stated Joaquim Miranda Sarmento during a parliamentary hearing today regarding the State Budget proposal for 2026 (OE2026).
In the Budget, Finance, and Public Administration Committee (COFAP), Joaquim Miranda Sarmento explained that the VAT of 6% will apply “for new projects submitted to the councils,” which will occur “when the law comes into force,” scheduled for 2026. However, he emphasized that the effect will not be immediate.
“The significant impact will begin to be felt in 2027, due to the ‘delay’ that exists between the submission of projects, their approval, and the start of construction,” he noted.
The Prime Minister announced on September 25 that the Government will propose to Parliament the reduction of the VAT rate to 6% for the construction of houses for sale up to 648,000 euros or, in the case of houses intended for renting, with rents up to 2,300 euros.
This tax regime will be in effect until 2029, the head of Government stated.
Luís Montenegro acknowledged that the reduced VAT for housing construction intended for rental up to 2,300 euros might “sound a bit high,” but argued that it is “a maximum ceiling” intended to cover the construction of homes for families in high-pressure areas, such as the Lisbon and Porto Metropolitan Areas.
The measure is part of the “Build Portugal – Rental and Simplification” package, designed to enhance the supply of affordable housing, integrating measures in coordination with the Recovery and Resilience Plan (PRR).
The VAT reduction law proposal has not yet been submitted to Parliament and is not part of the OE2026 initiative.
