Parliament clarifies 6% VAT rate for urban rehabilitation
Parliament has approved a Social Democratic Party (Partido Social Democrata or PSD) initiative to clarify that a reduced 6% value-added tax (Imposto sobre o Valor Acrescentado or IVA) rate applies to urban rehabilitation works. This measure resolves disputes with the Tax and Customs Authority (Autoridade Tributária e Aduaneira or AT) regarding the retroactive application of the standard 23% rate.
The Social Democratic Party ('Partido Social Democrata' or 'PSD') is a liberal-conservative political party in Portugal that is the leading partner of the The Democratic Alliance (AD) which is the country's ruling party, with Prime Minister Luís Montenegro.
The Social Democratic Party, despite its name, occupies the centre-right of Portugal's political spectrum. Luís Montenegro, who became Prime Minister in April 2024, leads Portugal's current minority government. The PSD has been one of Portugal's two dominant parties since 1974, having formed nine governments including four with absolute majorities. Montenegro, a former party leader from 1996-1999, was elected with the highest approval rating among party leaders at 10.7 points out of 20.
The Democratic Alliance is a centre-right coalition that includes the smaller CDS – People's Party, a Christian democratic party that has historically been the PSD's coalition partner. Together, they govern without a parliamentary majority, requiring case-by-case support from opposition parties to pass legislation.
