Solange Dias Nóbrega comments on the Supreme Administrative Court ruling that changes the application of VAT in urban regeneration

Solange Dias Nóbrega, managing associate in the tax practice, commented to Idealista on the implications of the recent Supreme Administrative Court ruling that restricts the application of the reduced VAT rate of 6% to urban regeneration works.

The new interpretation requires the works to be carried out in urban regeneration areas with an approved Urban Regeneration Operation (ORU), and simply being located in an ARU is no longer sufficient. The tax authority will now be able to retroactively demand payment of the missing VAT, with an immediate impact on pending and ongoing cases.

The lawyer stresses that this change could increase legal and financial uncertainty for developers, who may have to revise their sales prices to reflect the 17% increase in construction costs. This cost pressure could be passed on directly to consumers at a time when access to housing is already severely restricted.

Although closed arbitration cases cannot be reopened, Solange Dias Nóbrega expects an increase in litigation and a strategic review by the sector's operators. This decision could slow down projects and jeopardise the viability of new urban regeneration initiatives in Portugal.

Read the full article in Idealista.

(The article is in english only)