Portugal Gazettes Supreme Administrative Court Judgment on Reduced VAT Rate for Urban Rehabilitation Contracts

The Portuguese Official Gazette March 17 published Supreme Administrative Court Judgment No. 3/2026, clarifying the application of the reduced VAT rate to urban rehabilitation contracts. The taxpayer, a resident private limited company, contracted the construction of a new building located within a designated Urban Rehabilitation Area (ARU) and applied the reduced 6 percent VAT rate. The Tax Authority rejected the application of the reduced rate, contending that eligibility requires not only execution within an ARU but also the existence of a previously approved Urban Rehabilitation Operation (ORU). On appeal, the Supreme Administrative Court upheld the Tax Authority’s interpretation, finding that: ...