Building Portugal – Package Of Tax Measures To Support Housing (Bill no. 47/XVII/1)

I. Key-Measures

a)     Reduced VAT on residential construction and rehabilitation: application of the reduced VAT rate (6%) to construction works relating to properties intended for own and permanent residence (PPR), provided that they are placed on the market for sale or rental at affordable prices. For 2026, the reference thresholds are set at €648,022 for sale and €2,300 per month for rental.

b)    Favourable taxation of affordable rents under PIT and CIT: until 31 December 2029, rental income arising from affordable rents will benefit from a flat PIT rate of 10%, while for CIT purposes only 50% of such income will be taken into account in determining taxable profit.

c)     Reinvestment of capital gains in rental properties: the capital gains reinvestment regime is extended to allow the proceeds from the sale of an own and permanent residence to be reinvested in the acquisition of properties intended for rental at affordable rents.

d)    Strengthening of the PIT tax credit for tenants: increase in the PIT tax credit relating to rents, with the ceiling set at €900 for 2026 and €1,000 from 2027 onwards.

e)     Investment Contracts for Rental Housing (CIA): a new legal and tax instrument aimed at structured rental housing projects. These contracts may benefit from IMT and Stamp Duty exemptions on acquisition, as well as an IMI exemption for a period of eight years, subject to municipal approval. Additionally, a refund of 50% of the VAT incurred on architectural projects and technical studies is foreseen. An exemption from the additional IMI tax is also provided for the duration of the CIA.

f)     Protection of the economic and financial balance of CIAs: express recognition of the right to compensation in the event of legislative or regulatory changes that jeopardise the economic and financial balance of CIAs.

g)    Alternative Investment Undertakings (AIUs): AIUs whose assets are allocated to affordable rental housing will benefit from an enhanced tax framework. Income distributed to investors will be taxed at a 5% rate, in proportion to the rents generated, and a reduction in the Stamp Duty rate levied on the global value of the assets is also envisaged.

h)    Simplified Affordable Rental Scheme (RSAA): a regime replacing the previous rental support programme. This scheme is based on rent caps set at 80% of the median determined by Statistics Portugal (INE) and provides for full exemption from PIT and CIT on the covered income.

i)      IMT exemption and Stamp Duty tax credit on the acquisition of cost-controlled housing (PPR): possibility of IMT exemption where the value that would serve as the taxable base does not exceed the maximum threshold of €106,346 (for 2026). Where the acquisition value exceeds this threshold, a 2% rate may still apply.

Such acquisitions will also benefit from a Stamp Duty tax credit capped at the amount of tax that would result from applying the 0.8% rate up to €850.77.

j)      Increase of IMT for non-residents: increase of the IMT rate to 7.5% on the acquisition of property by non-residents, except where the property is intended for rental at affordable rents or where the purchaser becomes a Portuguese tax resident within two years.

II. Summary table: current framework vs. projected framework

III. Final remarks

The “Building Portugal” tax package introduces significant incentives, albeit subject to strict compliance with legal requirements and the continued allocation of the properties to the qualifying purposes.

For investors, the package creates a clearly more favourable tax framework for long-term rental, reducing the taxation of rental income and allowing greater flexibility in the reinvestment of real estate capital gains.

For developers and constructors, the key measures include the reduction of VAT on construction, the incentives associated with CIAs and increased economic predictability for projects aimed at affordable housing, although this remains conditional upon strict compliance with the applicable legal requirements.

For families and private individuals acquiring or constructing an own and permanent residence, particular emphasis is placed on the reduction of construction-related tax costs through the reduced VAT rate, as well as on the strengthening of PIT deductions applicable to rents.

That said, the actual impact of these measures will largely depend on how they are ultimately regulated and applied in practice.