The national real estate sector is facing a turning point. With the new measures approved as part of the State Budget and the recent entry into parliament of legislative proposals focused on the housing crisis, new doors have opened for significant tax reductions, but these require unprecedented technical rigor on the part of architectural teams.
At Atelier Tiago R. Correia, we believe that an excellent architectural project must be financially intelligent in order to increase the supply of quality housing on the market. We’ve analyzed the new 6% VAT rules and the changes in IMT for non-residents to help you plan your project with confidence.
Reducing VAT to 6% in construction and rehabilitation: what will change in 2025?
The most significant measure for those planning to build a house in 2025 is the extension of the reduced VAT rate (6%) to new construction and renovation situations. This change represents a significant relief for Portuguese families, allowing them to channel funds into better finishes or energy efficiency.
However, unlike in the past in Urban Rehabilitation Areas (ARU), the correct application of the reduced rate now depends on maximum value ceilings and time limits for use.
Requirements to benefit from the reduced rate:
1. price limits (the decisive factor):
In order to benefit from the 6% rate (or the refund of the difference, in the case of self-build), the finished property must fall within the concept of ‘moderately priced’ construction:
Sale of the property: the transaction value may not exceed 648,022 euros.
Renting: rental contracts must have a monthly rent of 2,300 euros or less.
The Architect’s view: This ceiling of 648,000 euros makes cost control at the design stage crucial. A detailed execution project and a rigorous bill of quantities are the only ways to guarantee that the work doesn’t go over budget or lose the right to tax relief.
Often, the choice of an unsuitable construction system can make the work 15% to 20% more expensive, pushing the final purchase price outside these limits. The architect’s role is to design strategies to maintain quality within the eligible budget.
2. Time to market
The tax benefit aims to combat vacant properties. Thus, the law requires that the property is actually sold or rented out within a maximum of two years from the date of issue of the use license. Failure to comply with this two-year deadline can lead to the need to return the amount of tax saved, plus compensatory interest.
This requires commercial planning that must begin during the construction phase. It’s not just a question of building, but of ensuring that the house enters the market quickly and efficiently.
In the case of affordable rentals, it is common to require stable contracts, often with a minimum duration of 36 months, to ensure the security of tenants and compliance with long-term tax requirements.
Refund system: how does the VAT refund work?
Many of our clients come to us to design their own permanent home (self-build). In this scenario, the proposed model is a posteriori repayment. This mechanism, although advantageous, requires initial financial liquidity on the part of families, something that must be taken into account in mortgage loans.
The process works as follows:
- The owner pays invoices for construction work at the standard rate of 23%.
- Once the work has been completed and the license has been obtained, you request a refund of the 17% differential from the Tax Authority. The refund can be total or partial, depending on the eligibility of the invoices submitted.
In order for this refund system to work smoothly, the organization of the accounts is vital. Each invoice must be properly itemized according to the VAT code and linked to the building permit, proving that the materials and services were actually incorporated into that specific home, something we support in our project management.
Energy efficiency in house building
Another factor that will become more important in 2025 is sustainability. The value of an asset increasingly depends on its energy performance. Building housing with A or A+ certification not only reduces the monthly energy bill, but also guarantees greater liquidity in the event of a future sale.
In our studio, we integrate passive climate control solutions that help reduce the cost of mechanical equipment. This approach allows us to free up budget for other finishes, keeping the total value of the work within the acceptable limits for rate reduction.
Efficient housing is now synonymous with a safe investment. The market is increasingly penalizing properties with poor thermal performance, making them obsolete within a few years.
Urban regeneration: renewed opportunities
The rehabilitation of old buildings continues to be a priority. Unlike new construction, rehabilitation operations in historic areas (ARU) already benefited from incentives, but the new rules broaden the spectrum.
Restoring existing buildings is often more technically complex, but fiscally worthwhile if the project respects the original design and improves thermal performance.
New IMT of 7.5% for non-residents: what investors should know
Portugal is still on the radar of international investment, but the rules have changed for non-residents. From 2025, house purchases by foreigners (non-tax residents) will have a single IMT rate of 7.5%, eliminating the progressive brackets.
Are there any exceptions to avoid this aggravation? Yes, namely:
- If the buyer establishes tax residence in Portugal within 24 months.
- If the property is intended for the long-term residential rental market.
For investors, this reinforces the importance of betting on high value-added architectural projects. Any rehabilitation or new construction operation focused on design quality, energy efficiency or sustainability will offer more protection in terms of long-term asset appreciation.
Bureaucracy and licensing your home in 2025
Despite promises of administrative simplification, licensing remains a critical stage. The legal framework for urbanization and building requires a solid process with the Town Halls to avoid time slippages that can compromise tax deadlines.
A delay in issuing a license can jeopardize compliance with tax benefit deadlines. That’s why our team maintains a constant dialog with the licensing authorities, anticipating problems and resolving technical issues proactively.
Success in building houses in Portugal depends to a large extent on this procedural management capacity. It’s not enough to have a good project; it needs to be approved in good time.
The architect’s role in the viability of your project
Navigating the new legislative changes requires more than a builder; it requires a project partner. Architecture must be seen as the tool that aligns the client’s wishes with the country’s financial and legal reality.
At Atelier Tiago R. Correia, our approach integrates these variables from the very first sketch:
Feasibility studies: we analyze whether the land and the desired program allow for construction within the cost limits for VAT at 6%.
Cost optimization: we design intelligent solutions that maximize the usable area without wasting materials, focusing the budget where it adds the most value to the home.
Compliance with deadlines: we coordinate the licensing and construction phases to meet the 24 months required by law for occupation.
Our commitment is to deliver not just the house you want, but a safe and profitable real estate asset. Reducing risks at the design stage is the best investment you can make. The new rules bring challenges, but offer unique windows of opportunity for those who plan ahead.
Do you want to take advantage of the 2025 tax benefits for your project?
Don’t let legislative complexity stand in the way of your dream. Schedule a strategy meeting with our Atelier and we’ll define the best path for your new home.
Tiago R. Correia Arquitectura assists developers and investors in structuring projects that take advantage of reduced VAT – from feasibility to licensing. Contact us to analyze the fiscal framework of your project.
