Labor & Taxes
6% VAT in construction risks litigation
New rules allow a reduced 6% VAT rate (down from 23%) for construction and rehabilitation of homes intended for primary residence or long-term rental. The benefit applies to sales under 660,982 euros or monthly rents under 2,300 euros. While the law includes safeguards for buyers who fail to meet residency requirements—imposing a 10% IMT penalty instead of retroactive VAT—experts warn that unclear definitions still risk creating future disputes between developers and the tax authority.
Why it mattersIf you are planning to buy or rent a new-build property, this VAT reduction could lower your costs, but be aware that if you do not use the property as your primary residence, you may face a 10% IMT penalty due to the new legislation's anti-fraud mechanisms.
