Portugal has confirmed the 6% reduced VAT rate for urban rehabilitation works in designated Urban Rehabilitation Areas (ARUs), without requiring prior approval of an Urban Rehabilitation Operation (ORU), with the clarification applying retroactively from 31 December 2008.
Portugal has clarified the conditions for applying the reduced VAT rate to urban rehabilitation works, confirming that the 6% rate applies where properties or public spaces are located within legally designated Urban Rehabilitation Areas (ARUs), without requiring prior approval of an Urban Rehabilitation Operation (ORU).
Law No. 48/2026 published on 17 August 2026, provides an authentic interpretation of entry 2.23 of List I annexed to the Portuguese VAT Code. The law confirms that an ARU designation is sufficient for urban rehabilitation works to qualify for the reduced rate.
The legislation entered into force on 18 August and applies retroactively from the entry into force of Law no. 64-A/2008 of 31 December. This means the clarification covers the period since the original provision took effect.
The measure also reverses the interpretation set out by the Administrative Supreme Court in Decision No. 3/2026, which had required both an ARU designation and prior approval of an ORU.
The clarification settles the issue in favour of the reduced VAT treatment where the ARU requirement is met. Its retroactive effect may also be relevant to past assessments and pending disputes concerning the application of the reduced VAT rate.
