Lisbon, May 29, 2026 (Lusa) - Portugal's new partial Value Added Tax (VAT) refund scheme for self-build housing invites tax fraud and under-declaring real land costs, the head of the Notaries Association, Jorge Batista da Silva, told Lusa on Friday.
The official government gazette published tax relief measures on 20 May to increase housing supply.
These measures include reducing VAT from 23% to 6% for building and renovating properties intended for sale or long-term rent at “moderate prices.”
These prices cap at €2,300 for rent and €660,982 for sale. The decree applies a partial refund of VAT paid by individuals “on construction contracts for personal and permanent housing” in self-build projects.
People building their own homes will pay the standard 23% VAT rate on the contract but can later request a refund of the 17% difference from the Tax Authority (AT) to achieve the reduced 6% rate.
This applies as long as the combined cost of the property and land stays below €660,982.
The head of the association believes that “there will be a temptation to declare values below the real cost of the land, and for tax fraud” since this limit combines the land purchase price and the construction contract value.
Jorge Batista da Silva said “there is a risk of evading the real values declared in the land purchase deed because construction costs are always skyrocketing and nowadays, no one really knows how much a house will cost.”
The limit “will tempt land buyers to declare a lower value to avoid the risk of reaching the end of the work with a value above €660,982,” the president said.
The partial VAT refund will not occur if the total exceeds this limit.
If the total contract cost starts getting very close to the legal ceiling, “people may stop asking for house construction invoices,” he said.
“We are creating a sort of perfect storm, which will place great pressure on the Tax Authority's inspections,” he added.
The decree tasks the AT with analysing and approving self-build VAT refund requests when applicants present a set of documents, including the property use licence.
The association president also considers the 6.5% IMT (local council property transfer tax) rate on building land “very high.”
“If someone buys building land worth €100,000, they pay 6.5% IMT plus 0.8% stamp duty, or 7.3% in total. But if they acquire a house for the same €100,000, they only pay 0.8% stamp duty because the law exempts properties up to €106,000 from IMT,” he explained.
The 2026 state budget exempts residential property from IMT up to a value of €106,346, an amount that rises to €330,539 if the buyer is under 35 years old.
“I know that in Lisbon €100,000 is not enough to buy a house or even land, but perhaps in Braganca it is sufficient. Self-building has a much greater impact in the interior of the country than on the coast,” he said.
The association president does not understand why the government failed to use this legislative change to apply an equivalent scheme to land.
“Paying a 6.5% tax on land purchase is a lot of money. It discourages self-building. It is almost like building a house from the roof down and forgetting the foundations, which rest precisely on the land,” he said.
He explained that the previous and current governments consulted the Notaries Association during the initial phase of these legislative processes.
“The government has accepted some of the measures we proposed. But at the stage of implementation and legislative authorisation, authorities draft the decrees with virtually no consultation, or based on purely formal hearings,” he said.
CT/LYT // AYLS
Lusa
