2-3 minutes
The Housing Package (Pacote Habitação) created a scheme for the partial refund of VAT paid by individuals when constructing their own permanent home.
On the mainland, the benefit generally corresponds to the difference between the VAT paid at the standard rate of 23% and the amount that would result from applying the reduced rate of 6%.
The refund is not automatic. The interested party must submit a request to the Tax Authority and prove compliance with the conditions set out in the law.
What is meant by self-build?
For this purpose, self-build does not mean the owner has to personally carry out the construction work.
The scheme covers individuals who, outside the scope of any business or professional activity, contract a construction works agreement (empreitada) to build a property intended for their own permanent home.
Simply purchasing construction materials as the owner does not, on its own, qualify for this scheme.
Who can apply for the refund?
The following individuals may benefit:
- those who contract a construction works agreement;
- those who intend the property for their own permanent home;
- those who pay VAT at the standard rate;
- those who hold invoices issued and reported as legally required;
- those who comply with the maximum property value limit.
In 2026, the relevant value may not exceed €660,982.
To verify this limit, the property’s tax registration value (valor patrimonial tributário) is considered, or, if higher, the acquisition value of the land plus construction costs, excluding VAT.
How much can be refunded?
The refund amount corresponds to the difference between:
- the VAT actually paid at the standard rate;
- the VAT that would result from applying the reduced rate to eligible expenses.
For example, on an eligible construction works contract of €200,000, excluding VAT, the difference between the 23% and 6% rates could represent €34,000.
The actual amount, however, depends on the invoices submitted and the nature of the contracted work.
What are the main conditions?
The property must be allocated as the beneficiary’s own permanent home within a maximum period of six months after the issuance of the documentation relating to the start of occupancy.
This allocation must be evidenced through the beneficiary’s tax domicile and must be maintained for at least 12 months, except in exceptional circumstances provided for by law.
It is also essential that the invoices correctly identify the services rendered and have been reported to the Tax Authority.
What is the deadline to submit the request?
The request must be submitted electronically to the Tax Authority within 12 months of the issuance of the documentation relating to the start of occupancy of the property.
Contracts, invoices, and other supporting documents must be kept for at least five years.
The Tax Authority has a maximum period of 150 days to process the refund, counted from receipt of the duly completed request.
What construction does this apply to?
The scheme takes effect as of July 1, 2026.
It covers construction works agreements relating to urban development operations initiated between September 25, 2025 and December 31, 2029, provided that VAT becomes chargeable between January 1, 2026 and December 31, 2032.
Home Construction in the Algarve
The construction of privately owned homes carries significant weight in the Algarve real estate market, including in Almancil and the municipality of Loulé.
Taking advantage of this benefit requires that the construction works contract, the licensing, the invoices, the land ownership, and the actual use of the property be properly aligned. A documentation gap can reduce or prevent the refund.
How can URB Law Services help?
URB Law Services, with an office in Almancil, provides legal and tax support for home construction projects in the Algarve.
Our team can assist with:
- eligibility analysis for the benefit;
- review of the construction works contract;
- verification of documents and invoices;
- preparation of the refund request;
- responses to clarification requests from the Tax Authority;
- follow-up on any corrections or rejections.
Frequently Asked Questions
Is the refund automatic?
No. A request must be submitted to the Tax Authority.
Is purchasing construction materials enough?
No. The scheme applies to VAT paid on eligible construction works agreements.
Can a vacation home qualify?
No. The property must be intended as the beneficiary’s own permanent home.
What is the deadline to request the refund?
The request must be submitted within 12 months of the issuance of the documentation relating to the start of occupancy of the property.
Contact us to learn more.
17th of July, 2026
