Housing Package – Fiscal Measures

The Government presented this week a new fiscal package aimed at addressing the ongoing housing sector crisis.

The package includes amendments to VAT rules, Personal Income Tax benefits for leases at moderate rent levels, and an increase in the Property Transfer Tax rate for non-residents.

The proposed measures include:

Reduced VAT rate of 6% for construction/rehabilitation

• Applies to properties for sale up to €648,000 or to rental properties with monthly rent up to €2,300.
• For sale: the property must be sold within 24 months after the issuance of the occupancy licence.
• For rental: the lease must have a minimum duration of 36 months (continuous or interpolated) within the first 5 years after completion.
• For individuals building their own home: possibility of partial VAT reimbursement (difference between 23% and 6%).

Capital gains exemption if reinvested in housing for moderate-cost rental

• Exemption from Personal Income Tax on capital gains if the sale proceeds are reinvested in another property intended for rental at moderate prices.
• Reinvestment must take place between 24 months before and 36 months after the sale.
• The new property must be leased within 6 months and maintained for at least 36 months (within a 5-year period) to retain the tax benefit.

Reduced taxation for owners and deductions for tenants

• Rental income from owners practicing moderate rents will be subject to a reduced IRS rate of 10%.
• Corporate rental income from residential leases will be 50% taxable for Corporate Income Tax purposes
• Tenants will benefit from Personal Income Tax deductions on rent paid capped at €900 in 2026 and €1,000 from 2027 onwards.

New regimes and incentives for long-term rental

• Investment Contract for Rental (CIA): contracts up to 25 years for those investing in rental properties. Benefits include Transfer Tax and Stamp Duty exemption on acquisition, Municipal Property Tax exemption for up to 8 years, followed by a 50% reduction.
• Simplified Affordable Rental Regime (RSAA): moderate-price housing (rent up to €2,300) with rent exempt from Personal / Corporate Income Tax under certain conditions, facilitating affordable rental agreements.
• Reduced 5% taxation on income distributed to participants of investment funds when derived from properties included in affordable or moderate-price rental schemes.

Higher Transfer Tax rate for non-residents

Non-resident buyers will be subject to a flat Transfer Tax rate of 7.5%, with no exemptions or reductions.

• Exceptions: if the buyer becomes a tax resident within 2 years, or if the property is rented at a moderate price for at least 36 months within the first 5 years.

Limits and deadlines governing the incentives

• The reduced VAT regime remains in force only until 2029, after which the Government will reassess its effectiveness.

Incentives and corresponding obligations (sale/rental deadlines, maximum rent levels, minimum contract duration, etc.) must be complied with to secure the tax benefits.

For more information, please contact us via email at jcg@ccsllegal.com

[Photo by: Mircea Solomiea, available at unsplash.com]