Portugal Announces Tax Incentives to Boost Supply of Moderately Priced Housing Units
The government has introduced a broad package of tax relief measures intended to increase housing access and the supply of moderately priced housing. These measures include tax incentives for construction, rehabilitation, sale and long-term residential lease.
In particular, the new tax benefits are set out below.
Personal Income Tax
Personal income tax (PIT) on rental income arising from residential leases and subleases earned by individuals is reduced for both existing and new lease contracts (i.e. the PIT rate is reduced from 25% to 10%).
In addition, a PIT exemption for capital gains arising from the sale of properties is available where the proceeds are reinvested in residential properties intended for lease at moderate rents (i.e. rents up to EUR 2,300). The reinvestment must occur between 24 months before and 36 months after the sale, and the lease contract must remain in place for at least 36 months during the first 5 years.
Furthermore, an increased PIT deduction is available to tenants for residential rent payments, from EUR 800 to EUR 900 in 2026 and to EUR 1,000 from 2027 onwards.
Corporate Income Tax
Corporate income tax (CIT) on rental income arising from residential leases and subleases earned by companies is reduced for both existing and new lease contracts (i.e. the CIT rate is reduced from 19% or 15% to 10%).
Value Added Tax
The reduced value added tax rate of 6% (instead of the standard rate of 23%) applies temporarily to qualifying construction and rehabilitation works for residential properties.
Additionally, a partial VAT reimbursement is available for the construction of residential properties intended as the owner's permanent residence, reducing the effective tax rate from the standard 23% to 6%.
Other Taxes
As for other taxes, long-term tax benefits (up to 25 years) - such as property transfer tax and stamp duty exemptions on the acquisition of properties and an annual property tax exemption or reduction - are available for qualifying investments involving the construction, rehabilitation and acquisition of properties intended for residential leases or subleases.
Furthermore, an exemption from property transfer tax and stamp duty is available for first-time buyers of "controlled-cost" housing (i.e. housing priced up to EUR 330,982) intended as the buyer's own permanent residence, if located in municipalities adopting this benefit (which is subject to each municipality's decision). Reduced progressive rates may also apply for "moderately priced" housing (i.e. housing priced between EUR 330,539 and EUR 660,982) under the same conditions.
Finally, for non-residents – who are generally subject to a property transfer tax of 7.5% on the acquisition of properties in Portugal, usually resulting in a higher tax burden than for residents, to whom the progressive rates generally apply – may now also be taxed at those same rates as residents. This benefit applies where the investment concerns properties intended for affordable residential leases (i.e. with rents up to EUR 2,300), provided that the properties are effectively rented as such within 6 months and remain rented for at least 36 months over a 5-year period.
Decree-Law No. 97/2026 of 20 May 2026, providing for this update, is available here (in PDF and in Portuguese only).
Report from our correspondent Rita Botelho Moniz, Tax Lawyer at RBM Tax & Legal. Follow our reporting on this via our daily Tax News Service (subscribers only).