The publication of Law No. 48/2026, of August 17, brings an end to a complex dispute between the Portuguese Tax and Customs Authority (AT) and, primarily, developers of real estate transactions located in Urban Rehabilitation Areas (ARU). 

Background to the issue 

This litigation arose from a change in the AT's interpretation of the requirements for applying Portugal's reduced VAT rate (Section 2.23 of List I attached to the VAT Code). The mere location of a property within an ARU was no longer considered sufficient by the Tax Administration. The authority began to require, cumulatively, that the works be part of an Urban Rehabilitation Operation (ORU) formally approved by the municipality. 

This requirement, combined with procedural disparities between municipalities, caught the market off guard. The uncertainty was further exacerbated when, in 2026, the Supreme Administrative Court established case law supporting the AT's position. Its ruling paved the way for tax adjustments and significant additional tax assessments. 

Given the risk of disruption to the sector, the legislature intervened by expressly granting interpretative status to Section 2.23. By clarifying the scope of the provision with retroactive effect to 2009, the new law removes the legal basis for additional assessments issued by the AT based on the requirement for prior ORU approval. 

What strategy should be adopted now? 

For those who have undertaken or are planning to undertake urban rehabilitation works, a reassessment of their tax position is now necessary: 

• Pending litigation: in ongoing administrative proceedings (e.g., tax appeals) or judicial/arbitration proceedings relating to Section 2.23, the interpretative law should be invoked immediately to determine whether the claim should be upheld or whether the dispute has become moot. 

• Ongoing tax audits: in tax inspection and investigation proceedings that are still underway, companies should ensure that the inspection takes the new law into account in its final report or assessment. This should prevent any proposed tax adjustment on these grounds. 

• Tax assessments that are not yet final: for additional tax assessments that have already been notified and paid, the feasibility of challenging them through administrative and/or judicial proceedings should be assessed, provided the applicable statutory deadlines have not expired. 

• Ongoing and future projects: tax files and operational documentation should be aligned with the evidentiary criteria now clarified, ensuring compliance with the required formalities. 

The entry of a multinational company into Portugal can be structured appropriately to support the development of a successful commercial project. Our local experts in the Lisbon office specialize in the Portuguese tax system. In addition, Auxadi offers its MySPV technology platform to help unify your international financial management. 

About Auxadi

With 26 subsidiaries across Europe, the United States, and Latin America, Auxadi is today the leading Spanish accounting firm serving multinational companies and real estate investment funds. Through its technology-driven approach and strong client-focused culture, Auxadi acts as an extension of its clients' finance departments worldwide, providing accounting, tax, payroll, transfer pricing, and corporate legal services.

Its proprietary MySPV technology platform, more than 300 employees, and over 1,700 clients have positioned Auxadi as a benchmark in the tech-enabled services sector, not only in Spain but internationally.

Auxadi can become your ideal partner. We offer a one stop shop value added outsourcing services in the areas of accounting and reporting, tax compliance, payroll management and representation services, among others.