I am building my own house. Am I entitled to the benefit?

Yes, through the self-build mechanism: the contractor invoices VAT at 23% and the individual asks the Tax Authority to refund the 17-percentage-point difference. The request must be filed within 12 months of the use permit being issued, and the Tax Authority has 150 days to refund. The house must be your own permanent home for at least 12 months.

Are materials and architecture or engineering services covered?

No. The benefit applies to works contracts, not to buying materials directly in shops; and, according to the known technical guidance, materials invoiced separately should not exceed around 20% of the total contract value. Architecture and engineering services keep the standard rate, with only a 50% VAT refund foreseen for those services under the CIA.

Insights

6% VAT on housing construction: who benefits, what is excluded and how not to lose the benefit

Q: Which works benefit from the 6% VAT?

Construction or rehabilitation contracts for properties intended for sale as the buyer's own permanent home, priced up to €660,982, and those intended for residential rental with rents up to €2,300 per month and contracts of at least 36 months, plus contracts under the Investment Contracts for Rental (CIA) with the IHRU. The measure covers contracts whose procedural initiative occurs between 25 September 2025 and 31 December 2029.

Q: What penalties exist?

Anyone who buys a home that benefited from 6% VAT and does not use it as their own permanent home for at least 12 months is subject to a significant increase in the transfer tax (IMT) rates applicable to the purchase, as provided for in the housing tax package. In self-build, failing the minimum residence period forfeits the refund. If the property is sold above the price limit, the developer must regularise the 17% difference.

Q: Until when does the measure apply?

The regime covers contracts whose procedural initiative — the licensing application or the submission of the prior notification — occurs between 25 September 2025 and 31 December 2029, with the reduced rate applying to the VAT chargeable while item 2.42.1 of List I remains in force (until 31 December 2032), which accommodates longer projects.

24 July 2026

House under construction with concrete structure and cranes in a Portuguese residential development

House under construction with concrete structure — enlarged version

It is the most talked-about tax measure of recent years in the sector: the VAT rate on housing construction and rehabilitation contracts dropped from 23% to 6% — but not for everyone, not in every case, and with conditions worth knowing before signing the works contract. The regime was approved by Law 9-A/2026, of 6 March (legislative authorisation), and enacted by Decree-Law 97/2026, of 20 May, as part of the housing tax package. The reduced rate is applied under the new item 2.42.1 of List I annexed to the VAT Code, in force until 31 December 2032.

In this article we explain who benefits, what is excluded, how the self-build refund works and which deadlines and penalties can turn a benefit worth tens of thousands of euros into a tax problem. A preliminary note: CertiAmb does not provide tax advice — each case should be confirmed with your accountant or tax adviser. Our role is the usual one: the design, the licensing and the works that make the benefit possible.

What the 6% rate covers

The reduced rate applies to construction or rehabilitation works contracts for residential properties in three main situations:

Sale as own permanent home — new or rehabilitated properties intended for sale, priced up to €660,982 (the 2026 value, matching the 2nd bracket of the young buyers' IMT), with the property to be sold or rented within 24 months of the use permit being issued;
Moderate-rent residential rental — construction or rehabilitation for rental with rents up to €2,300 per month and contracts of at least 36 months, consecutive or interpolated, in the first five years after the use permit is issued;
Investment Contracts for Rental (CIA) — works under these new long-term contracts signed with the IHRU (up to 25 years), a regime that also provides for a 50% VAT refund on architecture and engineering services.

The time horizon is generous but closed: the benefit covers contracts whose procedural initiative — the licensing application or the submission of the prior notification — occurs between 25 September 2025 and 31 December 2029, with the reduced rate applying to the VAT chargeable while item 2.42.1 of List I remains in force (until 31 December 2032). These limits — €660,982 for the price and €2,300 for the monthly rent — may be updated by ministerial order, so they should be confirmed at the date of the project. The date your file enters the municipality has therefore acquired tax value — one more reason for a well-run, delay-free licensing process.

Self-build: how you recover the difference when building your own home

If you contract works directly to build your own permanent home, you do not pay 6% upfront: the contractor invoices VAT at 23% and you then ask the Tax Authority to refund the 17-percentage-point difference on the VAT incurred on the works contracts. The essential rules:

the request is filed within 12 months of the use permit being issued;
the Tax Authority has 150 days to refund;
the house must be your own permanent home and you must live in it for at least 12 months — otherwise the benefit is lost.

Note the decisive detail: the refund clock only starts with the use permit. Works that drag on without their documentation in order — as-built drawings, terms of responsibility, site logbook — delay a refund worth tens of thousands of euros.

What is excluded

properties intended for commerce, services or industry, and residential properties above the price or rent limits;
buying materials directly in shops — the benefit applies to works contracts; and, according to the known technical guidance, materials invoiced separately should not exceed around 20% of the total contract value, on pain of losing the reduced rate;
architecture and engineering services, which keep the standard rate — with only a 50% VAT refund foreseen for these services under the CIA;
cleaning works, garden maintenance and the construction of swimming pools, saunas and similar facilities;
properties that change purpose after the works, ceasing to be housing.

Penalties: where the benefit can be lost

The legislator designed the regime with safeguards — and shifted part of the risk to the buyer:

anyone who buys a home that benefited from 6% VAT and does not use it as their own permanent home for at least 12 months is subject to a significant increase in the IMT rates applicable to the purchase, as provided for in the housing tax package — responsibility for the property's use lies with the buyer, not the developer;
in self-build, failing the minimum residence period (or changing the property's purpose) forfeits the refund, and the Tax Authority may demand back the VAT already refunded;
if the property is sold above the price limit, the developer must regularise the 17% difference.
on the sale, the application of the 6% rate must be expressly stated in the acquisition deed, to avoid discrepancies in the tax interpretation.

For landlords and investors, the package also includes complementary measures — 10% income tax on rents up to €2,300, partial corporate tax exclusion and exemption of capital gains reinvested in moderate-rent housing — which reinforce the case for rehabilitation for rental.

What this changes in project decisions

The VAT cut reopens calculations that seemed closed. Building instead of buying becomes viable again in many scenarios; postponed rehabilitations regain feasibility; and the €660,982 threshold creates an objective incentive to design for the moderate-price segment. At the same time, the regime rewards rigour: well-drafted works contracts (with materials inside the right perimeter), licensing submitted within the time window and use permits obtained without delay. That is the kind of documentary and procedural discipline an integrated architecture and engineering team guarantees by method.

Frequent mistakes and risks

assuming «the works are at 6%» without checking the property's purpose, the price or rent limits and the time window;
buying materials directly to «save money» — and stepping outside the benefit's perimeter;
not formalising the works contract in writing, making the framing hard to prove;
delaying the use permit and, with it, the self-build refund;
selling or moving out before the 12 months, ignoring the IMT surcharge;
deciding without professional tax advice — this article informs, it does not replace your accountant.

Frequently asked questions

Which works benefit from the 6% VAT?
Construction or rehabilitation contracts for sale as own permanent home (up to €660,982), for rental with rents up to €2,300 (36-month contracts) and under the CIA with the IHRU — with procedural initiative between 25 September 2025 and 31 December 2029.

I am building my own house. Am I entitled?
Yes, by refund: the contractor invoices at 23% and the Tax Authority returns the 17-point difference. The request is filed within 12 months of the use permit; the refund takes up to 150 days; minimum residence is 12 months.

Are materials and design services covered?
No. Direct purchase of materials stays at 23% (and, per the known technical guidance, separately invoiced materials should not exceed around 20% of the contract); architecture and engineering services keep the standard rate, save for the 50% refund under the CIA.

What penalties exist?
A significant increase in the IMT rates for buyers who fail the own-home condition, under the housing tax package; loss of the refund in self-build; regularisation of the 17% by developers on sales above the limit.

Until when does the measure apply?
Procedural initiatives until 31 December 2029; the reduced rate applies to the VAT chargeable while item 2.42.1 of List I remains in force, until 31 December 2032.

Closing notes

The 6% VAT is potentially the biggest tax stimulus to housing construction in decades — but it is a conditional benefit, with limits, time windows and penalties that demand informed decisions from day one of the project. If you are planning to build or rehabilitate for housing — your own, for sale or for rental — talk to the CertiAmb team: we deliver the feasibility study, the full design and the licensing within the deadlines the benefit requires, in coordination with your tax adviser.

This article is provided for information purposes only and does not constitute legal, tax or technical advice. Each situation should be assessed individually by a qualified professional.

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