The government's housing tax package was approved by the members of the Budget and Finance Committee.
This includes measures such as a reduction in personal income tax (IRS) and corporate income tax (IRC) on property income, and a reduced VAT rate of 6% for the construction of permanent owner-occupied housing within the limits considered “moderate” (€2,300 for rents and €648,000 in the case of sale).
Only a few changes were made to the initial proposal with regard to VAT. According to Negócios, an amendment was proposed to make property buyers liable if the property is not subsequently used as their own permanent residence for at least one year. In such cases, the buyer will be penalized with a 10 percentage point increase in the IMT (property transfer tax) they paid.
On the other hand, the reduced VAT rate no longer applies if the property is not used as the purchaser's own permanent residence or, if it is, if the purchaser does not remain in the property for a minimum period of 12 months. The rule does not apply in cases of “exceptional circumstances” already provided for in the IRS code, such as changes in the household due to marriage, civil partnership, dissolution of marriage or civil partnership, or an increase in the number of dependents.
In the case of self-builds, taxpayers are also entitled to claim a partial refund of VAT on construction, benefiting from the 6% rate. The approved proposal stipulates that, for one year, the house must be used as the owner's permanent residence, with the same exceptional circumstances also applying.
These VAT measures continue to apply to “urban development operations whose procedural initiative begins between September 25, 2025, and December 31, 2029, and for which the tax becomes payable from January 1, 2026,” according to the same source.
In this context, the definition of what should be considered a “procedural initiative” is clarified, removing any possible doubts regarding future application. In the case of works subject to licensing, the procedural initiative coincides with the submission of the license application; in the case of works subject to prior notification, it will be the submission of the prior notification. When the works are exempt from prior control, the date of submission of the prior opinion of the municipal council will be taken into account, when applicable, or, in other cases, the submission of information on the start of the works.
Still with regard to VAT, there is a refund of up to 50% of the amount equivalent to VAT paid on architectural services, projects, and studies related to construction or renovation in the case of so-called investment contracts for rental, and this possibility is also extended to engineering services.
Image credits: © Jakub Zerdzicki | Unsplash
Translated with DeepL.com (free version)
