Tax relief measures to promote the Portuguese housing supply
A set of tax relief measures to promote and boost the housing supply in Portugal was published on 20 May, in the Official Gazette (Diário da República).
Among the main measures are:
- Reduced VAT rate of 6% on construction and renovation works: Construction and rehabilitation works on properties for Own Permanent Residence or affordable residential rental are subject to a reduced VAT rate of 6%, in force until 31 December 2032.
- Reduction in the tax rate on property income: Income arising from residential lettings at moderate prices, received since 1 January 2026 until 31 December 2029, will now be taxed as follows:
- At an autonomous taxation rate of 10%, instead of the previously applicable rate of 25%, when received by individuals subject to personal income tax under the simplified regime; or
- Considering only 50% of such income, when received by entities subject to corporation tax, or by individuals subject to personal income tax with organised accounting, under Category B.
- Exclusion of real estate capital gains from personal income tax: Capital gains on property are excluded from personal income tax where the proceeds are reinvested in properties intended for residential rental at a moderate rent.
- Simplified Affordable Rental Scheme (RSAA): The RSAA is approved, replacing the Rental Support Programme (PAA), with the aim of promoting a rental supply with rents below 80% of the median rent per m² in each municipality. These measures take effect from 1 September 2026.
- Increase in the IRS rent deduction limit for tenants: The annual personal income tax deduction limit for rents paid by tenants under residential tenancy agreements is progressively increased to € 900.00 in 2026 and to € 1,000.00 from 2027 onwards.
- Alteration to IMT rates for non-residents: The IMT rate applicable to non-residents on the acquisition of an autonomous fraction of an urban building intended exclusively for residential use is set at 7.5%.
This diploma also establishes an Investment Contracts for Rental (CIA) scheme, which provides a set of tax benefits to investors who enter into a contract with the State, for a period of up to 25 years, for the construction, rehabilitation or acquisition of properties intended for residential rental or residential sub-letting. This scheme takes effect on 1 September 2026.
For the purposes of this diploma, the following reference values apply:
- Moderate monthly rent: € 2,300.00 (corresponding to 2.5 times the national minimum wage for 2026);
- Moderate sale price: € 660,982.00 (corresponding to the upper limit of the second bracket of the IMT rate table).
For further information, please contact our team at jcg@ccsllegal.com
[Photograph by Jakub Żerdzicki, available at unsplash.com]