Portugal to offer €500 per household for environmental investments

  • Lusa
  • 14 April 2022

The Government wants to allow a portion of the VAT paid on the purchase of equipment or works aimed at energy efficiency to be deducted from personal income tax.

Portugal’s Government wants to create deductions of an environmental nature, allowing a portion of the VAT paid on the purchase of equipment or works aimed at energy or water efficiency to be deducted from personal income tax, up to a maximum of €500.

This measure is signalled in a legislative authorisation in the new State Budget proposal for 2022 (OE2022)and, when implemented, will operate identically to that provided for in the current regime of deduction by invoice requirement in sectors such as catering, workshops, gyms or hairdressers.

This legislative authorisation “is intended to allow the deduction from personal income tax (IRS) payable by taxpayers (…) of an amount corresponding to a portion of the value incurred by VAT on such expenses and contained in invoices documenting purchases of goods and services to entities with the appropriate economic activity classification, with a maximum overall limit of €500 per household, when the difference is related to environmental expenses,” the budget proposal states.

This category of IRS deductible environmental expenses includes the replacement of inefficient windows with windows of class ‘A+’, the application of thermal insulation to roofs, walls or floors, space and/or water heating and/or cooling systems that use class ‘A+’ renewable energy or the installation of photovoltaic panels or other renewable energy equipment.

According to the draft law, expenses aimed at water efficiency will also be eligible, such as installing rainwater harvesting systems or solutions that allow more intelligent control of water consumption, interventions to incorporate bioclimatic architecture solutions, or even purchasing household containers for selective waste collection.

The legislative authorisation “lasts for the economic year” to which the budget for 2022 refers, the document states, and this environmental deduction for personal income tax is one of the new features compared to the initial budget proposal, which was voted down during the general vote on October 27.

The proposed budget for 2022 will be presented for the first reading in parliament on April 28 and 29, with the final overall vote scheduled for May 27.