Portuguese accountants warn of risks in reduced construction VAT

The Ordem dos Contabilistas Certificados (OCC) has issued an open letter to Prime Minister Luís Montenegro warning of significant risks regarding the application of a reduced VAT rate in the construction sector.

As part of a government fiscal package aimed at addressing the housing crisis, the VAT rate for certain construction and rehabilitation projects is being reduced from 23% to 6%. While the OCC acknowledges this as positive news for lowering housing costs, leadership warns that the legislation is overly complex and lacks clarity.

OCC President Paula Franco noted that the complexity could lead to extensive litigation with the Tax Authority in the coming years. Specific concerns were raised regarding multi-unit developments where not all properties are intended for permanent residence, making it difficult for developers to determine the correct tax rate for supplier invoices. The professional body is calling for legislative adjustments to minimize these legal and financial risks for developers and accountants.