Improvement, remodeling, renovation, restoration, repair, or conservation projects may benefit from a reduced VAT rate of 6%, with this discount applicable to the property owner, tenant (lessee), or condominium, as owners of the work. However, the reduction in value added tax can only be applied in the case of work on properties intended for residential use, as clarified by the Tax Authority in binding information published on the Finance Portal.

The exception applies in the case of cleaning work, maintenance of green spaces, and construction work on real estate covering all or part of the constituent elements of swimming pools, saunas, tennis courts, golf courses, mini-golf courses, or similar facilities.

“Provided that the work in question is the subject of a standard contract (...) concluded between the beneficiary as the owner of the work and the respective contractor, the reduced VAT rate may be applied under the aforementioned provision, provided that the other requirements thereof are met,” which are set out in an annex to the VAT Code, according to that information.


Are materials also eligible for a tax discount?

When the materials incorporated in the contract represent a value less than or equal to 20% of the total cost of the work, the applicable rate “will be, in full, the reduced rate” for VAT settlement, as indicated by the tax authorities in the same note.

However, if those materials represent more than 20% of the total value, the reduced rate shall apply to the services provided, and the standard rate shall apply to the materials used if the invoice issued separates the values of the service provided and the materials.

If the invoice is issued for the total price of the contract, the Tax Authority clarifies that the value shall be taxed globally at the standard rate.
“However, this amount does not cover purchases of materials acquired by the owner of the work, even if they are to be included in the contract, i.e., the supplier of the materials must pay VAT at the standard rate (23%),” warns the Tax Authority.


Source: idealistanews
Legislação e Finanças