Enactment of Tax Relief Measures in Housing

The President of the Republic promulgated yesterday, 12 May, the decree approving a set of tax relief measures aimed at boosting the supply of housing.

The tax package in question introduces significant changes, namely:

• The application of the reduced VAT rate of 6% to construction contracts for properties intended for primary and permanent residence or for residential rental at moderate prices;
• The reduction of the flat-rate IRS (personal income tax) applicable to rental income from 25% to 10%, applying to landlords who charge rents deemed moderate, in force until 31 December 2029;
• The exemption from capital gains tax on profits obtained from the sale of residential properties, provided that the proceeds are reinvested in properties intended for long-term rental at moderate prices;
• The increase of the IRS tax credit limit for rents paid by tenants, up to an annual amount of €1,000 from 2027 onwards;
• The application of an IMT (Property Transfer Tax) rate of 7.5% to non-residents acquiring residential properties in Portuguese territory.

For these purposes, a moderate sale price is currently defined as a value up to €660,982, and a moderate rent as a monthly amount of up to €2,300 

These measures aim to incentivise residential construction and rental, by reducing the tax burden associated with investment and the availability of properties on the market. 

The decree is expected to be published in the Official Gazette (Diário da República) in the coming days. 

For further information, please contact our team at jlp@ccsllegal.com 

[Photograph by Colin + Meg, available at unsplash.com]