Portugal promotes sustainable construction through a combination of tax incentives (tax reductions or exemptions) and direct financial support (subsidies). The focus of these policies is rehabilitation, decarbonization, and improvement of energy and water efficiency. Below are the main incentive mechanisms:
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Tax Incentives (Tax Reductions and Exemptions):
- Reduced VAT (6%): The 6% VAT rate applies to certain urban rehabilitation works and interventions aimed at improving energy efficiency in residential properties, in accordance with VAT Code legislation.
- IMI Exemption or Reduction (Municipal): Many Portuguese municipalities offer exemptions or reductions in Municipal Property Tax (IMI) for buildings that:
- Achieve high energy efficiency (Energy Certificate A or higher).
- Are subject to urban rehabilitation, this being a benefit provided for in the Tax Benefits Statute (Art. 45, no. 2, of EBF).
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Direct Financial Support (Subsidies):
- Environmental Fund and PAES: Programs such as the Environmental Fund and the Support Program for More Sustainable Buildings (PAES) are not tax incentives. They are mechanisms that grant non-refundable subsidies (direct financial support) for specific interventions, such as window replacement, installation of thermal insulation and solar panels, aiming to reduce the initial investment cost for the owner.
In summary, the promotion of sustainable construction in Portugal is based on direct tax benefits (VAT and IMI) and government financial support (subsidies), and it is essential that owners and developers consult municipal rules and Environmental Fund opening notices to optimize their tax burden and investment costs.