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VAT for urban rehabilitation: a situation that needs clarifying urgently

The consultancy EY organised a webinar on 21 July on the subject: “VAT and urban rehabilitation”.

Those taking part in this discussion, which is so important for the sector, included Fernanda Paula Oliveira, professor at Coimbra University’s Law Department, Aniceto Viegas, engineer and General Manager of Avenue, and José Cardoso Botelho, CEO of Vanguard Properties.  

The developers were unanimous in recognising that a reduction in VAT to 6% had had a fundamental role in the renovation of part of the residential heritage in the main cities, namely in renovating and refurbishing the shells of historic buildings in which the greater costs and risks associated with rehabilitation were offset by the reduction in VAT in comparison to new build.  

They were also in agreement as to the huge difficulties that the uncertainty surrounding the application of VAT at 6% is causing when it comes to project management and communicating with investors. They find it even stranger that on a topic as important as this one, there are still doubts surrounding the tax that is legally applicable. That is why they are calling on the government to urgently not only simplify the rules governing the VAT regime, but also to make things clearer and remove any doubts by stating that renovating buildings within the Urban Rehabilitation Area (URA) will benefit from VAT at 6%.  

On this point, Aniceto Viegas mentioned that when paying a bill in a restaurant no one is in any doubt as to the VAT that is applicable for each type of product consumed, and doesn’t understand why there are these doubts and uncertainties in the case of rehabilitation and called for events to be organised to debate the matter.

It was also emphasised that non tax deductible VAT at 23% represents the second or third major cost for a real estate project in Portugal, while in Spain, for example, the tax is deductible.

José Cardoso Botelho also made a point of adding that in his opinion architecture and engineering projects should also join rehabilitation projects in being covered by 6% VAT since without projects there is no rehabilitation. 

Watch the Webinar here.


EY Edited

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