The court states that the Federal Revenue Service must respect the principle of good faith and not go back on a commitment previously made with a taxpayer.
An arbitration court ruled in favor of a taxpayer in a dispute with the Tax and Customs Authoritydetermining that the Tax authorities cannot contradict binding information previously issued to charge a higher tax.
The decision concerns the application of VAT in urban rehabilitation and obliges AT to cancel an additional settlement exceeding 375 thousand euros, as well as the pay compensatory interestadvances .
The case was decided in the Administrative Arbitration Center and focuses on the interpretation of the rules applicable to the reduced VAT rate of 6% on urban rehabilitation works. At issue is the principle that tax administration should respect the commitments made to taxpayers.
The dispute dates back to legislative changes and changes in understanding on the part of the Federal Revenue Service over the last decade. Initially, the Tax Authorities considered it sufficient for a project to be located in an Urban Rehabilitation Area (ARU) to benefit from the reduced rate. More recently, also began to demand the existence of an Urban Rehabilitation Operation (ORU) approved by the municipality.
It was in this context that the real estate developer Propiso requested, in 2020, binding information on the application of the reduced rate to a project in Vila Nova de Gaia. AT responded favorably, indicating that the location in ARU and the classification of the work as urban rehabilitation would be sufficient. Based on this guidance, the company applied the 6% rate.
However, after the Supreme Administrative Court Having standardized jurisprudence in 2025 and started to require the existence of an ORU for the reduced rate, the AT initiated inspections and corrected several situations, including that of Propiso. The company was then target of additional liquidationbased on the standard rate of 23%.
Despite recognizing that, in light of the new jurisprudence, the reduced rate would not be applicable due to lack of ORU, the arbitration court understood that the previously issued binding information should prevail. According to the arbitrators, AT is legally obliged to act in accordance with these guidelines, under penalty of violating the principles of good faith, predictability and protection of trust.
The decision concludes that the additional assessment is illegal and must be annulled, holding the State responsible for an error by the tax services.
