With the publication of Decree-Law No. 97/2026, it became possible to apply the reverse charge mechanism for VAT purposes whenever the requirements of item 2.42 are met.
It’s being sold as simplification. But any simplification that rests on a future intention carries a hidden risk, and this one does.
Let me show you where it sits.
A property developer is going to build a beach house and contracts out the construction work. Since the developer intends to sell the property as a permanent primary residence, an operation exempt under Article 9 of the VAT Code, it informs the builder that the requirements of item 2.42 are met.
From that point on, the builder issues invoices under the reverse charge, without charging VAT. It now falls to the developer to account for and deduct the tax, at the reduced 6% rate, on the grounds that it is a permanent primary residence below the legal threshold.
On paper, it fits perfectly. And that’s exactly where the danger lies: taxation doesn’t live on paper. It lives in the real world and the real world doesn’t sign contracts with our intentions.
Consider what the law doesn’t control:
How long does a build like this take: months? years?
What if the first builder falls through and the project changes hands halfway?
And what if, being a beach house, an offer of €1,000,000 comes in, far above the threshold that allowed the 6% rate?
Just one of these scenarios is enough to bring the entire arrangement down. The requirements that supported it no longer hold, and what’s left isn’t a minor adjustment: it’s unpaid VAT, corrections to returns, interest, and penalties for late substitution. An entire tax structure built on an intention that, in the meantime, changed its mind.
And here’s the point few care to say out loud: a regime that depends on requirements only confirmable in the future: the buyer’s intention, the final price, the property’s actual use, is fertile ground for arranged pricing and for fraud to take hold, even where no one ever planned it. Because, on the ground, no one can guarantee whether the buyer wants the house to live in all year round or just for the month of August.
Item 2.42 is not, in itself, an open door to fraud. It’s a door with a fragile lock. Holding it shut requires foundations the law doesn’t demand but prudence does: documenting the intention, following the operation from the first brick to the deed, and anticipating every scenario in which things could turn on their head. Without that, it isn’t simplification: it’s deferred exposure.
Which leaves the question every developer should be asking before signing the construction contract, and not when the tax authority comes knocking:
If the intention changes / and in real estate it always does
Who ends up paying the tax bill for that change?
See you later,
Ana Coelho
