Portugal’s government has unveiled a wide-ranging fiscal package designed to alleviate its housing crisis, introducing tax cuts for residents and new regulations for non-resident property investors.
The comprehensive set of fiscal incentives for housing was approved by the government last Friday and has since been submitted to Parliament. It details measures including reductions in value-added tax (VAT) and income tax, along with exemptions from municipal property transfer tax (IMT) and stamp duty.
Among the key changes is a new, single IMT rate of 7.5% for housing acquisitions by non-residents. An exception applies if the property is rented out for at least 36 months, continuously or intermittently, within five years of purchase.
To stimulate construction and rehabilitation, a reduced VAT rate of 6% will apply to eligible projects. This rate benefits properties intended for permanent owner-occupation or for residential rental.
Conditions for the reduced VAT include rental prices not exceeding approximately $2,500 USD and a maximum sale value of about $703,000 USD. Properties must be sold or rented within 24 months of receiving their occupancy license.
Additionally, a partial VAT refund system will be available for individuals investing in the construction of their own permanent residence.
For landlords, income tax (IRS and IRC) on rental and sub-rental agreements will be reduced until the end of 2029. The autonomous tax rate on rents will drop to 10% for contracts with monthly rents below approximately $2,500 USD, provided the agreements are for at least three years.
The government is also introducing a new regime for Investment Contracts for Renting (CIA). This scheme provides fiscal benefits for investment in the construction, rehabilitation, or acquisition of properties specifically for residential rental or sub-rental. Benefits are expected to last up to 25 years for housing that adheres to the established rent and sale value caps.
Tenants will also see increased annual income tax deductions for rents paid. The limit will rise to approximately $975 USD in 2026 and to about $1,085 USD starting in 2027.
Moreover, tenants of controlled-cost housing who purchase their residences will benefit from reductions in IMT and stamp duty.
The proposed package includes a new Simplified Accessible Rental Regime (RSAA), which will replace the existing Accessible Rental Program. The government stated the new regime aims for greater “simplification and efficiency” to overcome the complexities of its predecessor.
Under the RSAA, rents must be below a limit based on 80% of the median rent per square meter in each municipality. The proposal also clarifies rules for accessible rental initiatives undertaken by public entities.