Parliament has approved the 6% VAT rate for urban regeneration, with retroactive effect from 2008, to encourage the refurbishment of buildings.
Source: Adobe Stock
Author: Redaction
6% VAT strengthens support for urban regeneration
Parliament has approved, in principle, the bill that clarifies the application of the reduced 6% VAT rate to construction works carried out in Urban Rehabilitation Areas (ARU), even where there is no Urban Rehabilitation Operation (ORU). The proposal received the support of all parties represented in Parliament and will now proceed to detailed committee discussion.
The measure aims to strengthen incentives for urban regeneration by promoting the refurbishment of old and deteriorated buildings, particularly in urban areas where housing pressure continues to increase.
Measure will have retroactive effect from 2008
The bill establishes an interpretation of the legislation governing the application of the 6% VAT rate to urban regeneration, determining that the tax benefit may apply retroactively to 2008.
The initiative seeks to clarify how the rule should be applied, eliminating doubts that have led to differing interpretations over recent years while providing greater legal certainty for property owners, developers and companies in the sector.
Amendment addresses disputes with the Tax Authority
In recent years, the application of the reduced VAT rate to urban regeneration has led to several disputes between taxpayers and the Tax Authority. Although an Urban Rehabilitation Area may be designated independently since 2012, the tax administration later began requiring the approval of an Urban Rehabilitation Operation as well in order to recognise the tax benefit.
That interpretation resulted in additional VAT assessments on works that had already been completed, applying the standard rate instead of the reduced rate. With the approval of this bill, Parliament intends to standardise the application of the legislation and strengthen confidence in investment in urban regeneration projects
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