6-Month Wait for 6% VAT Concerns Sector

Housing construction will be stopped for six months waiting for VAT to be lowered and that “is the worst that can happen”.

In reaction to the announcement by the Minister of Infrastructure and Housing that the entry into force of the 6% VAT rate in construction will be in force until the first quarter of 2026, the president of the Portuguese Association of Real Estate Developers and Investors (APPII), Manuel Maria Gonçalves, calls for greater “urgency” in the application of the measure.

“In the worst case scenario, we will have to wait six months for the measure to be implemented, until the end of the first quarter of next year. This is the worst that can happen because nothing will move forward until then”, he explained, speaking to the Lusa agency.

Emphasizing that “the market will stop” and “wait” for the drop, which will be 17 percentage points in the VAT rate for housing construction (from the current 23% to 6%)the president of APPII reinforced the need for a “faster consensus” to avoid a halt in the construction of new housing.

Manuel Gonçalves also welcomed the “investment” that the Minister of Infrastructure and Housing is making in this matter, but reinforced that the reduction in VAT “must happen as quickly as possible”.

“We believe that by the first quarter of next year, we will have VAT at 6%, for projects that enter after that date, completed, but it will also depend a lot on this house, on the discussion and approval process”, stated Miguel Pinto Luz, who this Friday (31) was heard in parliament as part of the discussion on the specialty of the State Budget for 2026 (OE2026).

The government official explained that joint work is being done with the Ministry of Finance to prepare the proposal that must be sent to parliament.

Last week, the Minister of Finance, Joaquim Miranda Sarmento, said he expected the “great effect” of reducing VAT on construction from 23% to 6% to only emerge from 2027.because the impact is not immediate.

At the Budget, Finance and Public Administration Committee (COFAP), Joaquim Miranda Sarmento explained that the 6% VAT will apply “to new projects entered into the chambers”, which will happen “at the moment the law comes into force”, scheduled for 2026. However, he stressed, the impact will not be immediate.

“The great effect will begin to be felt in 2027, due to this ‘delay’ [diferimento] that exists between the presentation of projects, their approval and the start of works”, he said.

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 rent, with rents up to 2,300 euros.

This tax regime will be in force until 2029, said the head of Government at the time.

The measure is part of the “Build Portugal – Leasing and simplification” package, designed to reinforce the supply of affordable housing, integrating measures in conjunction with the Recovery and Resilience Plan (PRR).

The proposed VAT reduction law has not yet been entered into parliament, and is not part of the OE2026 initiative.