What is the IVA reverse charge in construction?
Normally, a service provider issues an invoice with IVA — Portugal’s VAT — and then pays that tax to the State. In civil construction, certain situations work differently.
When the conditions for the reverse charge are met, the supplier issues the invoice without IVA and adds the wording “IVA – Autoliquidação”. The client receiving the invoice becomes responsible for accounting for the IVA in its own periodic return.
With circular letter (Ofício Circulado) n.º 25117/2026 of 24 June, the Portuguese tax authority (Autoridade Tributária e Aduaneira, AT) clarified the changes introduced by Decreto-Lei n.º 97/2026 of 20 May. The new rules apply, as a rule, from 1 July 2026.
The big change: no alvará or certificate, no reverse charge
This is probably the change with the biggest practical impact for companies in the sector.
The AT clarified that, for this rule, civil construction services are works carried out within the construction activity by legally licensed entities, under Lei n.º 41/2015. In practice, the supplier must hold a valid alvará or contractor certificate — the alvará is the Portuguese contractor’s licence.
A company or professional carrying out construction-sector works without that licence cannot apply the reverse charge: the invoice must be issued with IVA, under the general rules. The nature of the works, on its own, is no longer enough.
| Supplier with a valid alvará or certificate | Supplier without a licence | |
|---|---|---|
| Invoice | Without IVA, wording “IVA – Autoliquidação” | With IVA, general rules |
| Who pays the IVA to the State | The client, in its periodic return | The supplier |
Example. A company carries out painting and repair works in another company’s building. If it is duly licensed and the other conditions are met, it invoices without IVA, with the wording “IVA – Autoliquidação”. If it carries out exactly the same works without an alvará or certificate, it invoices with IVA.
What are the conditions for the reverse charge?
In simplified terms, three requirements must be met:
- the supply is a civil construction service;
- the supplier is legally licensed for the construction activity, through a valid alvará or certificate;
- the client is an IVA-registered business established in Portugal carrying out operations that give a full or partial right to deduct.
There is, however, one important exception for certain housing contracts.
What about housing contracts at the 6% rate?
The other major change relates to the new Verba 2.42 of Lista I annexed to the IVA code. Decreto-Lei n.º 97/2026 now allows the reduced 6% rate on certain construction or rehabilitation contracts for residential buildings, provided the legal requirements are met — including contracts for buildings intended:
- for sale as a primary permanent home; or
- exclusively for residential letting.
In these cases, the reverse charge was extended: it can apply even when the buyer has no right to deduct IVA. This matters in particular for certain property developers, whose operations are IVA-exempt and who therefore cannot deduct the tax they bear.
In practice, when a contract meets the Verba 2.42 requirements:
- the contractor issues the invoice without IVA, with the wording “IVA – Autoliquidação”;
- the buyer self-accounts for the IVA in its own periodic return;
- with no right to deduct, the IVA becomes a real cost of the operation.
Doors, windows, HVAC, solar panels, kitchens: covered too?
Yes. The circular letter gives several examples of works that can qualify as civil construction services when the goods are permanently incorporated into the building and the other requirements are met:
- HVAC and climate-control systems;
- boilers and heat pumps;
- photovoltaic solar panels;
- alarm, security and fire-detection systems;
- lifts and goods hoists;
- doors, gates and windows;
- kitchens and bathrooms;
- built-in wardrobes;
- stairs and handrails.
In these cases, looking at the goods supplied is not enough: you need to assess whether there is a genuine construction service and whether the installed element is permanently incorporated into the building. Simply selling goods with incidental or easily reversible assembly does not automatically become a construction service.
What should companies do now?
Companies in the sector should tighten their checks before issuing or accepting a reverse-charge invoice. In particular, we recommend:
- confirm the validity of the alvará or contractor certificate;
- check the client’s IVA status;
- assess the actual nature of the works performed;
- confirm whether the installed goods are permanently incorporated into the building;
- check whether housing contracts meet the Verba 2.42 requirements;
- review invoices issued since 1 July 2026 whenever the treatment applied is in doubt.
Why confirm the IVA treatment before invoicing?
The wording “IVA – Autoliquidação” should not be used automatically just because the works relate to a building. Applying the rule depends on the nature of the service, the supplier’s licence and the buyer’s IVA status.
An incorrectly issued invoice may need to be corrected and can lead to IVA differences, interest or other tax consequences. So before construction, installation or repair works, or a supply with assembly, confirm the IVA treatment before issuing the invoice — the EA Contabilidade team can review your specific situation.