VAT reduction in credits destined to first home

In framework of the program for promotion of first homes and actions taken by the government aimed at reducing the housing deficit, the Executive Power issued Decree No. 3476/20 whereby the VAT rate is reduced to 5% applicable to interests, commissions, and surcharges perceived by banking entities that grant credits with the funds obtained from the AFD to that end.

In effect, the Executive Power laid out through Decree 3430/20 the new guidelines for the program destined to first homes, promoted by the Financial Agency for Development (Agencia Financiera de Desarrollo – “AFD”).

This way, it is intended to promote the use of these credits, destined to the acquisition of a first home through the reduction of the VAT levied on these financings to the reduced rate of 5%, in place of the general rate of 10%.

It is worth mentioning that in the past, the Government enacted similar measures to the aforementioned, thereby it is expected, that after the health emergency, this provision will have a positive impact on the national economy.