ARU and ORU Areas in Portugal: Tax Benefits, 6% VAT and Urban Rehabilitation Incentives in 2026

Portuguese cities possess a vast built heritage that, in many cases, needs to be recovered and adapted to modern demands for comfort, energy efficiency, and quality of life.

To encourage this transformation, Urban Rehabilitation Areas (ARU) and Urban Rehabilitation Operations (ORU) were created. These instruments allow the coordination of urban interventions and create more favorable conditions for the recovery of buildings and public spaces.

For owners, investors, and property developers, these mechanisms can represent a significant opportunity for asset appreciation, access to tax benefits, and obtaining financing under more favorable conditions.

If you are thinking about acquiring, restoring, or investing in an old property, understanding how ARUs and ORUs work can make a significant difference in the viability of your project.

What is an Urban Rehabilitation Area (ARU)?

An Urban Rehabilitation Area (ARU) is a territorial zone delimited by a municipality where there is a need for intervention due to the state of degradation, obsolescence, or inadequacy of buildings, infrastructure, or public spaces.

By defining an ARU, the local authority officially recognizes that the area requires an integrated urban regeneration strategy, creating conditions to attract investment and promote the recovery of existing heritage.

In practice, the delimitation of an ARU can allow for:

• Tax benefits for owners and investors;
• Access to funding programs for rehabilitation;
• Additional municipal incentives;
• Real estate asset appreciation;
• Improvement of urban and environmental quality.

What is an Urban Rehabilitation Operation (ORU)?

The Urban Rehabilitation Operation (ORU) is the instrument that defines the intervention strategy within an ARU.

If the ARU identifies where it is necessary to intervene, the ORU establishes how that transformation will be carried out.

An ORU defines:

• The objectives of the intervention;
• The planned works;
• The management model;
• The execution deadlines;
• The public and private investment involved;
• The available support mechanisms.

This ensures that urban rehabilitation happens in a coordinated manner, aligned with an integrated vision for the territory.

What is the difference between ARU and ORU?

In simple terms, the ARU identifies the territory and the ORU establishes the plan for its regeneration.

What are the benefits of rehabilitating a property in an ARU?

One of the main advantages of Urban Rehabilitation Areas is the existence of incentives designed to promote the recovery of the built heritage.

Most Common Tax Benefits

Reduced VAT at 6%

The reduced VAT rate may apply to certain urban rehabilitation works covered by Item 2.23 of List I of the VAT Code.

The application of this benefit depends on the specific framework of the intervention, the property’s location, and compliance with the applicable legal requirements.

For this reason, each project must be analyzed individually by the responsible technicians.

IMI Exemption

Rehabilitated properties can benefit from a temporary exemption from the Municipal Property Tax (IMI), under the terms of the tax legislation in force and the conditions applicable in each municipality.

IMT Exemption

There are also situations where the acquisition of properties intended for urban rehabilitation, or their subsequent resale, can benefit from an exemption from the Municipal Property Transfer Tax (IMT).

Since tax regimes are subject to legislative changes, it is always recommended to confirm the applicable conditions with the local municipality and the Tax Authority.

Why is urban rehabilitation becoming increasingly important?

For many years, the growth of cities was associated with urban expansion and the construction of new buildings.

Today, the focus is progressively shifting toward the recovery and enhancement of existing heritage.

Rehabilitating means preserving resources, avoiding unnecessary demolitions, reducing waste production, and extending the lifespan of buildings. It also means protecting the collective memory of places and strengthening the identity of cities.

At MJARC, we believe that rehabilitation is not just about restoring structures. It is about understanding the existing building, its history, and its relationship with the context to give it continuity through a new use.

Projects like the Cicioso Boutique Hotel in Évora, the Riverside Condominium in Santa Comba Dão, or the Green View Tower in Covilhã demonstrate how reusing existing structures can generate environmental, economic, and cultural value, while contributing to urban regeneration and the preservation of architectural memory.

Urban Rehabilitation and Energy Efficiency

Today, urban rehabilitation plays a fundamental role in the transition to more sustainable cities.

A large part of the Portuguese building stock was constructed at a time when energy requirements were significantly different from today’s standards.

By rehabilitating a building, it is possible to:

• Improve thermal comfort;
• Reduce energy consumption;
• Decrease carbon emissions;
• Increase property value;
• Improve the quality of life for users.

For this reason, many support and financing programs place particular emphasis on interventions that promote improvements in energy performance.

The combination of heritage preservation and energy efficiency is one of the main challenges and opportunities in urban rehabilitation today.

Financing for Urban Rehabilitation Projects

In addition to tax incentives, financial instruments are available to support urban rehabilitation operations.

Among them, the IFRRU – Financial Instrument for Urban Rehabilitation and Revitalization stands out, continuing to provide financing solutions for rehabilitation and energy efficiency improvement projects.

Depending on the characteristics of the intervention, support can cover:

• Residential buildings;
• Tourism developments;
• Commerce and services;
• Collective facilities;
• Urban regeneration projects.

Eligibility and access conditions must be analyzed on a case-by-case basis.

Examples of ARU in Portugal

Currently, there are hundreds of Urban Rehabilitation Areas distributed throughout the national territory.

Lisbon

A large part of Lisbon’s historic center is covered by an ARU, allowing the recovery of historic buildings and the revitalization of neighborhoods like Alfama, Graça, or Baixa.

Porto

Porto has several urban rehabilitation areas that have contributed to the recovery of built heritage and the economic revitalization of the historic center.

Amarante

The delimitation of several ARUs has enabled the recovery of degraded buildings and the improvement of public spaces, contributing to the enhancement of the city’s urban heritage.

How do you know if your property is in an ARU?

Before starting a rehabilitation project, it is important to confirm whether the property is located within an Urban Rehabilitation Area.

The inquiry can be made through:

• The City Council (Câmara Municipal);
• Municipal Urban Planning Services;
• Housing Portal (Portal da Habitação);
• Territorial management tools available online.

This verification is essential to determine eligibility for tax benefits and support programs.

How to benefit from the available incentives?

1. Confirm the property’s location

Verify if the property is included in an officially delimited ARU.

2. Develop an appropriate rehabilitation project

The intervention must comply with the legal criteria applicable to urban rehabilitation.

3. Obtain recognition of the intervention

Depending on the municipality and the desired benefit, it may be necessary to obtain specific documentation proving the project’s eligibility.

4. Request the tax benefits

Incentives must be requested from the competent authorities by submitting the required documentation.

5. Evaluate financing programs

If the project is eligible, you may benefit from specific financial instruments for urban rehabilitation and energy efficiency.

Frequently Asked Questions

How do I know if a property is in an ARU?

The information can be checked with the local City Council or through the maps provided by municipalities and the Housing Portal.

Is it worth buying a property in an ARU?

In many cases, yes. The tax incentives, potential property appreciation, and support for rehabilitation can make the investment highly attractive.

Can I benefit from 6% VAT on a project outside an ARU?

Not all rehabilitation works automatically benefit from the reduced rate. Eligibility depends on the location of the property, the nature of the intervention, and compliance with the requirements set out in the applicable tax legislation.

How much can I save by rehabilitating a property in an ARU?

The amount depends on the characteristics of the property, the intervention carried out, and the specific benefits applicable to each situation.

Legal Framework

Urban Rehabilitation Areas and Urban Rehabilitation Operations are regulated by the Legal Regime for Urban Rehabilitation (RJRU), approved by Decree-Law No. 307/2009, of October 23, subsequently amended and republished by Decree-Law No. 66/2019, of May 21.

The tax benefits associated with urban rehabilitation are set out in Portuguese tax legislation, and their application must be confirmed at the date of the intervention.

Conclusion

ARUs and ORUs constitute fundamental instruments for the recovery of Portuguese built heritage and for building more sustainable, resilient, and qualified cities.

In addition to creating favorable conditions for urban rehabilitation, they promote property appreciation, preserve the identity of places, and reduce the environmental impact associated with new construction.

For owners, investors, and developers, they represent an opportunity to combine tax benefits, equity appreciation, and sustainability into a single investment.

Are you evaluating a property’s potential for rehabilitation?

The technical, urban planning, and tax viability of an intervention can significantly influence the success of an investment.

MJARC develops urban rehabilitation projects across different scales, balancing heritage preservation, energy efficiency, and real estate valuation.

Contact us to evaluate your property’s potential and discover the opportunities available in your ARU zone.