Portugal Confirms 6% VAT for Urban Rehabilitation Without Prior ORU Approval

• Portugal enacted Law No. 48/2026 on 17 August 2026, providing an authentic interpretation of item 2.23 of List I annexed to the Portuguese VAT Code.  [mcs.pt], [pwc.pt]
• Urban rehabilitation works on properties or public spaces situated within a legally delimited Urban Rehabilitation Area qualify under the relevant reduced-rate provision regardless of whether an Urban Rehabilitation Operation has been approved. [mcs.pt], [pwc.pt]
• The interpretation has retroactive significance because it takes effect from the entry into force of the provision introduced by the 2009 State Budget Law. Whether an earlier assessment or dispute can be reopened depends on its procedural status and the applicable limitation periods. [mcs.pt]

Extended article

Portugal has resolved a long-running controversy concerning the reduced VAT rate for urban rehabilitation works.

Law No. 48/2026 provides an authentic interpretation of item 2.23 of List I annexed to the Portuguese VAT Code. Under that interpretation, the relevant urban rehabilitation works include works carried out on buildings or public spaces located within an Urban Rehabilitation Area, or ARU, delimited in accordance with the law. [mcs.pt], [pwc.pt]

Approval of a corresponding Urban Rehabilitation Operation, or ORU, is not required for the application of the provision.

The legislation reverses the restrictive approach under which both designation of the ARU and prior approval of an ORU were considered necessary. The controversy had led to disputes over whether works should bear the reduced 6% rate or the standard 23% rate. [mcs.pt]

The law is an authentic interpretation rather than merely a prospective rate amendment. The IBFD report states that it takes effect from the entry into force of the 2009 State Budget Law, which introduced the relevant wording.

This does not mean that every historic invoice or assessment is automatically reopened. Taxpayers must examine applicable limitation periods, whether assessments have become final, the status of pending proceedings and the mechanisms available to correct invoices or reclaim VAT.

External sources: PwC Portugal analysis of Law No. 48/2026 and detailed analysis of the reduced-rate clarification. [pwc.pt], [mcs.pt]