The housing tax package has been enacted

The President of the Republic promulgated, on 12 May 2026, the Government decree approving a set of tax relief measures aimed at increasing housing supply in Portugal. The decree was approved under the authorisation granted by Law no. 9-A/2026, of 6 March. Let us examine what is at stake.

• What are the main objectives of these measures?

Although the objective is to increase supply, the concrete impact of the measures will depend on how landlords, property developers, and the construction market respond to the new incentives. For landlords, the tax relief in personal income tax (IRS) may make long-term rental more attractive; for developers, the reduction of VAT may lower costs in projects that fall within the defined limits. For tenants and buyers, the key question will be whether these benefits actually translate into more available housing and more moderate prices.

• What changes in VAT?

The package includes a reduction of VAT on housing construction from 23% to 6%, provided that the properties are intended for sale or long-term rental for permanent housing within the limits defined by the new concept of “moderate price”. In the case of renting, the stated limit is €2,300 per month, corresponding to 2.5 times the national minimum wage in 2026, set at €920; in the case of sale, the threshold is €660,982. It should be noted that when the measures were first presented in 2025, this value was €648,000, as this limit is expected to be updated annually and indexed to IMT tax brackets.

• What changes for tenants?

The cap on rental deductions in tenants’ personal income tax (IRS) is now set at €900, and is expected to gradually increase to €1,000 in 2027.

• And for landlords?

Among the main measures is the reduction of the autonomous IRS tax rate on rental income, which drops from 25% to 10% for landlords who charge “moderate” rents of up to €2,300 per month, aiming to encourage property owners to place more housing units on the rental market.

• Are there other relevant changes?

In addition to these measures, the decree provides for the exclusion from taxation of capital gains from the sale of residential properties when the amount is reinvested in new properties intended for rental.

Another relevant change is the application of a flat 7.5% IMT tax rate to non-resident citizens who purchase housing in Portugal, without access to exemptions or reductions applicable in other cases.

• With this promulgation, are the measures already in force?

With these measures, the Government aims to address the housing crisis through tax incentives that encourage construction, rental, and the availability of housing at more affordable prices. The promulgation by the President of the Republic represents one of the final steps in the legislative process, with entry into force now depending on publication in the Official Gazette (Diário da República).