The Secretary of State for Fiscal Affairs, Cláudia Reis Duarte, admitted on Tuesday in Lisbon that the reduction in VAT to 6% on the construction of housing for sale or rent “is naturally constrained by the EC’s legal framework”.
The official explained that the European legal framework “only allows for a reduced rate of VAT in construction for social housing policies”, such as public housing or housing intended for affordable rental.
“VAT at 6% for all housing construction is not, according to the directive, a possibility,” she added, speaking at the opening of the seminar “Housing: New Incentives for Investment”, organised by Imojuris with the participation of jurists from law firm VdA Sociedade de Advogados.
The reduction in VAT from 23% to 6% in the construction of properties intended for rental or sale for permanent housing, at “moderate prices” (€2,300 in the case of rental and €660,982 in the case of sale), is allowed for under the law that authorises the government to approve tax relief measures to increase the supply of housing, published on March 6, granting it 180 days for publication.
Other measures provide for a reduction in the IRS from 25% to 10% to encourage owners to rent houses “at moderate prices” of up to €2,300 per month, the exclusion from taxation of capital gains on the sale of residential properties in the case of reinvestment in new properties intended for rent, the increase in the limit value for IRS income tax deductions of up to €1,000 per month, and the application of the IMT property transfer tax of 7.5% to non-resident citizens upon acquisition of housing.
Without providing further details on the issue of VAT, Cláudia Reis Duarte considers the diploma to be “a good example of the cooperation of all those involved in the implementation of public housing policies”.
“The goal is simple but ambitious: lower costs and increase supply, with a special focus on the middle classes which have been heavily penalised by the cost of housing (rents and mortgages) on the family budget,” said the secretary of state.
Cláudia Reis Duarte recalled that this is a “transversal tax package”, covering not only families but also companies and investors – “families looking to rent and buy, and who currently have difficulty doing so, investors who want to invest in the housing market and municipalities that need solutions to respond to local needs,” she explained.
Recognising that the new law aims to encourage the placing of empty housing stock on the market, she admitted the need to incentivize owners to make these properties available, particularly as rentals.
