On 25 September 2025, the Government announced in the Council of Ministers a reduction in VAT to 6% on the construction of new housing with a sale value of up to €648,000.00, and for rentals with rents of up to €2,300.00/month. The measure was presented as the necessary ‘housing shock’ to boost the supply of homes, reduce prices and relaunch private investment in the sector.
Vicente Caldeira Pires and Nuno Filipe Henriques have written an opinion article in Observador in which they argue that the ‘housing shock’ could turn into a legal and fiscal shock if the Government does not strictly define the operational boundaries of the regime.
VAT is a European tax, governed by neutrality and proportionality. These measures are welcome, but only if they are consistent with the mechanics of the tax and transparent in their practical application.
If the government is not cautious in implementing this regime, we run the serious risk of returning to the problems of the 2012 regime, when the attempt to apply differentiated rates to renovation works led to years of doubts, corrections and tax disputes.
The principle is commendable; however, its implementation will require much more in-depth legislative and regulatory work, otherwise the 6% rate may end up being nothing more than a theoretical incentive.