Lisbon, Sept. 25, 2025 (Lusa) - Portugal's prime minister announced on Thursday that the government will lower the VAT rate to 6% for the construction of houses for sale up to €648,000 or, if they are for rent, with rents of up to €2,300.
Luís Montenegro was speaking during the cabinet meeting, which took place at his official residence in São Bento, in a statement without the right to questions.
Montenegro admitted that the reduced VAT for the construction of houses for rent up to €2,300 may be a figure that "sounds a bit high", but he defended it as "a maximum ceiling" and that it is intended to cover the construction of houses for families in areas of greater pressure, such as the Lisbon and Porto Metropolitan Areas.
This tax regime, he explained, will be in force until 2029.
"It's a shock policy, we want to shake up the construction and rental market," he said.
After announcing other housing measures with an impact on personal income tax on Wednesday, Montenegro said that the government felt it needed "a bigger push", with "more daring, more ambition".
"It's not just a plan for those who have greater difficulties, it's a plan for all workers, for all agents in our society who also want to build their future in Portugal," he said.
The Prime Minister referred to the Ministers of Infrastructure and State Reform for more details on simplifications of various "legislative instruments of reference, particularly in the legal regime for urbanisation and building", and detailed the tax measures himself.
'Firstly, the application of a VAT rate of 6% for housing construction processes with a sale value of 648,000 euros,' he began by announcing.
For the Prime Minister, this figure will cover the market "in the majority of the country", including the areas with the greatest price pressure, arguing that the government is "acting for the whole territory".
"At this price, in the vast majority of municipalities, practically all constructions will be covered by this tax rate and in the areas with the greatest pressure, in Lisbon, in Porto, this value integrates the concept that we bring to our housing policy, which is access at moderate prices," he said.
On the other hand, the minimum VAT rate of 6% will also apply "to the construction and rehabilitation of buildings" for rentals up to the value of 2,300 euros.
"The value, I know, is going to sound a bit high. It's going to be said that we're at a very high level. The maximum limit of 2,300 euros is a limit that basically applies to these areas of greater pressure," he explained, saying that in areas like Lisbon and Porto there is "a practice of higher rental amounts".
At the root of this decision, he explained, is the desire for this tax regime to apply "to all buildings for rent, globally, in the vast majority of the country".
"We're talking about a ceiling that gives the middle class, families with some economic capacity, a new opportunity to settle down and build up the human resources that our public administration and our companies need to be competitive," he said.
Montenegro admitted that “for a citizen of Bragança or Freixo de Espada à Cinta, a rent of €2,300 is a fortune”.
"But a family with two or three children, in Lisbon or Porto, often can't afford housing at a price lower than this," he said, insisting that this is a project that "leaves no one out" except those with a much higher income.
The tax regime will be in force until the end of the legislature, and should be evaluated by the next government, "whether it is made up of the same political forces or others".
"That's when we'll be able to assess the results of this tax policy initiative and see if it has produced the desired effects, which are to increase supply, contain and reduce prices," he said.
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