6% VAT on housing construction rejected by parliament

A government bill which would have reduced VAT on construction projects for affordable housing to 6% has been rejected by the Portuguese parliament.

The measure was part of other measures contained in the State Budget for 2025 which was voted in favour overall on Thursday, 29 November in Portugal’s parliament.

The ‘request for legislative authorisation on VAT for housing construction projects’ was rejected with votes against from the PS, PCP, BE and Livre parties, abstention from Chega and PAN, and votes in favour from the PSD, CDS PP and IL parties.

In a statement, the Portuguese Association of Real Estate Developers and Investors (APPII) expressed its “enormous indignation” at the rejection of legislation aimed at reducing VAT from 23% to 6% on affordable housing construction.

“This decision seriously undermines’ all efforts made so far to combat the crisis of access to housing in Portugal and will annul all measures previously announced by the Government for this national priority “.

APPI reiterates that “as long as there is no political courage to reduce the VAT rate on the construction of housing, the Portuguese will continue to face a housing market with properties that they cannot afford”.

And added: ”The rejection of this measure shows a huge lack of common sense from the opposition. The Portuguese can now blame the PS, PCP, BE, Livre and also now Chega and PAN for the considerable deterioration of the housing crisis that will be felt from now on,” said Hugo Santos Ferreira, President of APPII, adding that “after all the wrong ideological measures that the PS and the Left created in recent years, which have only resulted in increasing prices and decreasing the number of houses built.

“The truth is also that all the measures that the current Government has implemented will be good for nothing if there is no structural measure to lower VAT which would have a (positive) impact on the market”.

Measures such as the Simplex in licensing, or the even more recent measure of converting rustic land into urban land for the creation of more houses, “which, although they may seem, and in some cases are even positive, will not have any consequence or impact on the construction of more houses, both for sale or for rent without a structural measure such as the reduction of VAT on construction”, the association emphasises.