Portugal’s PSD party to push for VAT at 6% for Urban Regeneration retroactively to 2008

Portugal’s centre right PSD party, which is currently part of the Democratic Alliance coalition government, has presented a proposal to the Portuguese parliament for VAT at 6% on refurbishment works within Urban Rehabilitation Areas without requiring previous planning permission in a bid to end years of bitter tax wrangling between developers, construction companies, the municipal authority, and the inland revenue.

The measure includes an interpretation rule allowing its retroactive application to 2008, this proposal has arisen in a context of disagreements within the sector.

According to the business daily Jornal de Negócios, in recent years the understanding followed by the tax authorities and backed by the Supreme Administrative Court required that works had to be located in Urban Rehabilitation Areas (ARU), as well as having an approved Urban Rehabilitation Operation (ORU) for the area in question. If approved, the legislative amendment could then reverse this understanding and end legal disputes.

The main difference between an ARU (Urban Rehabilitation Area) and ORU (Urban Rehabilitation Operation) boils down to the delimitation of the area versus the action plan. The ARU is the territory ( defined on a map); the ORU refers to the project within it.

This would, if passed, put an end to a tug-of-war that has dragged on for years between the tax authorities and taxpayers, with the Tax and Customs Authority (AT) slapping additional tax claim assessments worth millions of euros on construction companies.

Source: Negócios.