Technical opinion prepared by the OCC’s consulting department.
Due to Storm “Kristin,” part of the roof of a certain owner-occupied residence was damaged, and a company was hired to carry out the repairs. Since the house is a permanent residence, it is not located within the ARU area of the municipality of Tomar. Since these are construction/renovation services for an end consumer, can the 6% VAT rate apply to the construction services? Or is the rate 23% across the board?
Technical opinion
You have asked about the VAT rate applicable to roof repair work on private individuals’ primary residences following Storm “Kristin.”
Specifically, as part of the measures adopted to mitigate the effects of Storm “Kristin,” there have been no changes to VAT rates. You can view all the measures under “Natural Disasters 2026” at this link.
Without prejudice to the tax, we must mention item 2.27 of List I attached to the VAT Code, which may apply in certain cases.
Pursuant to item 2.27 of List I annexed to the CIVA, by reference to Article 18(1)(a) of the CIVA, the reduced VAT rate applies to the following transactions:
«2.27 – Construction projects involving the improvement, remodeling, renovation, restoration, repair, or maintenance of residential properties or separate units thereof, with the exception of cleaning work, the maintenance of green spaces, and construction projects on real estate that cover all or part of the components of swimming pools, saunas, tennis courts, golf courses, mini-golf courses, or similar facilities.
“The reduced rate does not apply to materials incorporated into the work, unless their value does not exceed 20 percent of the total value of the services provided.”
With regard to the application of item 2.27 of List I annexed to the CIVA, which has not undergone any changes, and which appears to be the case here, it is important to verify the provisions of Circular Letter 30.135, dated September 26, 2012. The circular states that:“That amount covers only services performed on a property or independent unit, provided that—since it is not licensed for other purposes—it is designated for residential use; this includes any property or independent unit that is being used as a residence at the start of the work and that, after the work is completed, continues to be effectively used for the same purpose.”
This budget item does not include real estate properties or separate units that are vacant before or after the construction work, specifically because they are intended for lease or sale.
However, in cases where the property or separate unit was occupied prior to the construction work and, following the work, is the subject of a new residential lease, this project may be eligible for this funding, provided there is no period during which the property stands vacant—that is, when the new lease begins immediately after the work is completed.
In addition, the properties in question may not be used for professional, commercial, industrial, or service activities.
As noted, the reduced rate cannot be applied to services related to equipment such as elevators, escalators, or other components of swimming pools, saunas, or golf facilities, even if these are an integral part of the property, nor to garden maintenance and cleaning services.
A mesma instrução administrativa indica ainda que são beneficiários da taxa reduzida:
The same administrative instruction further states that the following are eligible for the reduced rate:
“The reduced rate applies regardless of whether the project owner is the owner or the tenant of the property.
In cases where the owner of the work is a condominium, whether the latter is a taxable person or a non-taxable person, the condominium is also eligible for the reduced rate, provided that the work is carried out on a property used for residential purposes.”
In other words, provided that the other requirements are met—namely, that the work is carried out on a residential property—condominiums may also benefit from the reduced VAT rate.
Now, the key to applying item 2.27 of List I attached to the CIVA lies fundamentally in the concept of housing. Although the circular does not mention the need to verify that the property is a permanent residence, it stipulates that a property is considered to be used for residential purposes when it is designated as such at the beginning and end of the construction work—and may not be vacant.
Decree-Law No. 159/2006, of August 8, as amended by Decree-Law No. 67/2019, of May 21, defines in Article 2 a vacant property as “a building or independent unit that has been unoccupied for one year (…)”, stating that the following are indications of vacancy:
«a) The absence of active contracts with telecommunications companies and water, gas, and electricity suppliers;
b) The absence of bills for water, gas, electricity, and telecommunications services.
c) The cumulative existence of low water and electricity consumption, defined as consumption for which the related billing does not exceed, in each year, 7 m³ for water and 35 kWh for electricity;
If the property was already occupied and has not been vacant during the period between the completion of the renovation and the renovation work, and is used for residential purposes immediately after the renovation, you may verify whether it falls under item 2.27 of the aforementioned list and, consequently, benefit from the application of the reduced VAT rate provided for in Article 18(1)(a) of the VAT Code.
Point 10 of the aforementioned circular states that invoices must include the following: “Reduced rate pursuant to item 2.27 of List I annexed to the CIVA,” as well as the identification of the project owner and the property or separate unit where the services were performed, in addition to the other information required under paragraph 5 of Article 36 of the CIVA.
Accordingly, provided that all other requirements are met, repair work on properties damaged by Storm Kristin may qualify under item 2.27 of List I attached to the CIVA and, consequently, be subject to the reduced VAT rate of 6 percent.
Outside this scope—specifically, because they are not residential properties—the service cannot be classified under item 2.27 of List I attached to the CIVA and is subject to the VAT rate set forth in Article 18(1)(c) of the CIVA.
https://www.occ.pt/pt-pt/noticias/iva-taxas-aplicar-na-reconstrucao-de-habitacao