Portugal is going to reduce VAT on housing construction and renovation

What has happened

Portuguese Prime Minister Luis Montenegro has presented a plan to combat the crisis in the real estate market. One of the measures is to reduce VAT on new housing construction and renovation to 6%. Note that today this tax is 23%.

With the new initiative, the authorities aim to stimulate investment and build more homes. The date of the introduction of the new measure is not yet known. But Montenegro has assured that it will happen before the end of his term, which started in April 2023.

Finance Minister Miranda Sarmentobelieves the initiative "should have an effective impact on housing prices."

The background

The high tax burden that is applied to construction in Portugal has been one of the main factors holding back the development of affordable housing in recent years. And  the shortage of housing supply on the market continues to worsen.

“It is estimated that around 45,000 houses need to be built per year in order to fill the housing shortage in Portugal” said Manuel Reis Campos, president of the Civil Construction and Public Works Companies Association (AICCOPN).

The expert believes that reducing VAT to 6% in construction and renovation “is the measure that will have the greatest impact on resolving the crisis in the real estate market.”

Hugo Santos Ferreira, president of the Portuguese Association of Real Estate Developers and Investors (APPII), agrees with his colleague.

Possible positive effects

• Reduction in the cost of construction
• Increase in supply of new buildings
• Reduction of prices for housing purchase and rentals
• Housing stock renewal

Source : Idealista

Photo by Scott Blake on Unsplash

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