VAT rates for building and renovation work in Portugal

Portugal has three VAT rates on the mainland: 6%, 13% and 23%. Most building and renovation work is taxed at 23%, and the 6% rate applies only when the work fits a specific item in the law.

How the three rates work

Article 18 of the VAT Code (Código do IVA) sets 6% for the items in Lista I, 13% for the items in Lista II and 23% for everything else. The Tax Authority (AT) reads the lists strictly: if one condition is missing, the standard 23% applies. The rate is the one in force when the VAT falls due.

Where 6% can apply to building work

Rehabilitation of a building in an urban rehabilitation area, or ARU (verba 2.23), done under a works contract (empreitada).
Repair and renovation of a home that is lived in (verba 2.27), with limits on materials.
New homes sold as a main home or let at capped values, and rehabilitation for the same purpose (verba 2.42.1, new in 2026).
Controlled-cost and affordable housing certified by the housing institute IHRU (verba 2.18), housing cooperatives (verbas 2.25 and 2.26), works ordered directly by local authorities (verba 2.19) and rehabilitation under IHRU-supported schemes (verba 2.24).

The home repair rule and the 20% limit

Verba 2.27 covers a works contract to repair, renovate or maintain a home that is lived in when the work starts and afterwards. It leaves out cleaning, upkeep of green spaces and works on pools, saunas and tennis courts. Additions, extra floors, empty homes and business premises are also outside it.

The reduced rate does not cover materials unless they are 20% or less of the total. Above 20%, labour is taxed at 6% and materials at 23% if they are shown separately. A single global-price invoice is then taxed wholly at 23%.

What changed in 2025 and 2026

Decreto-Lei n.º 97/2026 of 20 May added verba 2.42. For the sale case, the home must be sold as the buyer's main home for up to EUR 660,982 within 24 months of the use document. For the letting case, the rent must not exceed EUR 2,300 a month. The planning procedure must start between 25 September 2025 and 31 December 2029. The AT reads the start of the rate as 1 July 2026, with an earlier start from 1 January 2026 if contractor and customer jointly opt for it.

A private person who builds their own home is invoiced at 23% but may claim a partial refund under the same act. Lei n.º 48/2026 of 17 August, as cited by the AT, confirmed that an approved rehabilitation operation (ORU) is not required for the older wording of verba 2.23.

The 6% items for solar and other alternative-energy equipment (verba 2.37) and for biomass heaters and pellets (verbas 2.40 and 2.41) ceased on 30 June 2025. These now follow the 23% rate. Acts and dates on this page are given as shown on the Portal das Finanças on 5 November 2026.

Madeira and the Azores

The autonomous regions can set their own reduced rates (article 18(3) of the VAT Code). AT rulings cite standard rates of 22% in Madeira and 16% in the Azores. The pages on this site give mainland rates.

What your municipality decides

Each municipality (câmara municipal) sets the boundaries of its ARUs and decides whether works count as building rehabilitation. The national rule is the same everywhere, but the proof you need comes from your town hall.

How to use this site

Pick the type of work that matches yours. Each page gives the mainland rate, the condition that decides it and the official source. These pages are a general summary and not tax advice, so check your own case with a certified accountant (contabilista certificado) or the AT.