One day after the proposals were submitted, the Minister of Infrastructure and Housing, Miguel Pinto Luz, participated in the CNN Summit: Housing – Renting as a way of the future, where he detailed the Government's strategy to increase the supply of houses on the rental market and attract small owners who keep vacant properties or properties off the market for fear of legislative instability.

Learn about the main proposals of this package that the Minister categorizes as a true "fiscal shock".

VAT on construction drops to 6% with refund of the difference
A central aspect of the legislative package is the application of the reduced VAT rate of 6%, instead of the usual 23%, to construction or rehabilitation works intended for sale or rent at moderate prices, until 2029.

The reduction works by refund: the owner pays VAT at 23% and requests the Tax Authority to refund the difference. The Federal Revenue Service has 150 days to return the amounts, provided the request is complete. The refund covers the difference between the VAT paid and what would result from applying the reduced rate to eligible expenses.

The Minister of Housing clarified that the VAT will be paid by the seller of the house, not the builder. The seller of the house "at the end of the line" is the one who makes a commitment to the State.

The limits for benefiting from this incentive correspond to the moderate prices defined by the government, which will be updated annually:

– Sale up to €648,022: the incentive only applies if the sale does not exceed the maximum value of the 2nd IMT tax bracket, i.e., €648,022.

– Rent up to €2,300 per month: in the case of owners who build houses intended for rent, the rent charged cannot exceed "2.5 times the value of the minimum monthly wage projected for 2026", i.e., €2,300.

Miguel Pinto Luz also guaranteed that this VAT reduction does not violate any European directive, since it is a measure framed within a social housing policy.

Income Tax: exemptions on capital gains and reduced taxation on rentals
The tax package includes several incentives in the Income Tax to stimulate the placement of houses on the market:


Income Tax exemption on capital gains from real estate

Owners who sell a property are exempt from Income Tax on capital gains if they reinvest the gain in housing intended for rental with a rent of up to 2,300 euros per month.


10% tax rate on property income and 0% Income Tax

The autonomous tax rate applicable to property income drops from 25% to 10%, provided that the rent remains within the moderate limit, i.e., up to 2,300 euros. This applies to new and old contracts. Also noteworthy is the possibility of 0% IRS (Income Tax) for those who charge rents 20% below the median for that municipality, as defined by the INE (National Institute of Statistics).


Simplified Affordable Housing Regime (RSAA)

Those who join the RSAA are exempt from IRS on rental income, within the rent limits per type to be defined by decree and calculated based on 80% of the INE median for the municipality.

If the taxpayer opts for aggregation, the income remains exempt, but influences the applicable tax rate for other income.

Corporate Income Tax and Investment Organizations: Enhanced Incentives
The package also covers companies and investment organizations:
Companies that rent out properties with rents up to €2,300 will only pay 50% of their rental income in Corporate Income Tax.

Income distributed by alternative investment schemes will be taxed at 5%, proportionally to the amounts derived from affordable rentals.

Investment Contracts with benefits for up to 25 years
The package also creates Investment Contracts for Leasing (CIA), a new regime that ensures a set of tax benefits for up to 25 years for investments in the construction, rehabilitation or acquisition of properties where at least 70% are intended for leasing.

These investors can benefit from exemption from IMT (Property Transfer Tax) and Stamp Duty on acquisition, exemption from IMI (Municipal Property Tax) for up to eight years and a reduction of up to 50% of the IMI rate for the remaining period, as well as exemption from the Additional Municipal Property Tax (AIMI) and application of the reduced VAT rate on construction works.

Minister Miguel Pinto Luz confirmed at the CNN Summit the intention to exempt these contracts from AIMI, reinforcing predictability and stability for long-term investors. “We also eliminated AIMI in these investment contracts, meaning that in addition to the 0% IPTU, they also have 0% AIMI in these contracts of up to 25 years,” he said.
Deductions for tenants and incentives for home purchases
For tenants, the legislation provides for an increase in the limit for rent deductions in Income Tax:
– From 800 euros to 900 euros in 2026;
– To 1,000 euros from 2027 onwards.
In the area of ​​IMT and Stamp Duty, those who buy their first home at controlled costs may benefit from exemption. Municipalities may also exempt IMT on acquisitions up to 324,058 euros, subject to approval by the municipal assembly.
These exemptions do not apply to those who already own another residential property at the time of purchase or in the three years prior.
Detran tax rises to 7.5% for non-residents, but there are exceptions
One of the proposed measures is the increase in Detran tax for non-resident buyers. The Government proposes that the applicable rate should always be 7.5%, regardless of the property value, eliminating existing reductions and exemptions.

However, the legislation provides for two exceptions, in which the normal IMT rates remain applicable:
Becoming a tax resident in Portugal
The non-resident buyer can avoid the increased IMT tax if they become a tax resident within two years of the acquisition.
Placing the property on residential rental
The 7.5% ITBI tax does not apply if the property is placed on the rental market with moderate rent, within the limits defined by the Government, within six months of purchase. The contract must remain for at least 36 months, consecutive or intermittent, during the first five years.

In both cases, the taxpayer may request from the Tax and Customs Authority (AT) a refund of the difference between the tax paid and what they would have to pay at the regular rates.

The increase in IMT (Municipal Property Transfer Tax) was already foreseen in the guidelines of the "Build Portugal" program.

Government wants to simplify licensing and reduce construction deadlines
In parallel with the tax package, the Government presented a bill that amends the legal regimes for urbanization and building (RJUE) and urban rehabilitation, with the aim of accelerating urban planning processes and reducing construction deadlines in a context of "housing supply crisis".

The legislation stipulates that prior notification will become primarily informative, reinforcing the self-accountability of developers and municipal oversight, allowing works to begin only eight days after submission, without depending on any administrative act.

Global deadlines indexed to the gross construction area are eliminated, giving way to intermediate deadlines adjusted to the complexity of the project, while consultations with the competent authorities will be triggered simultaneously, avoiding bureaucratic blockages.

Urban planning fees will now be paid by self-assessment, with greater clarity on calculation rules, and the legislation clarifies the concepts of reconstruction, expansion and building works, maintaining exemptions from licensing or prior notification for reconstructions, operations promoted by public entities or intended for urgent housing, cooperatives and housing projects.

The changes to the RJUE (Legal Regime for Urban Planning and Building) depend on approval by the Assembly of the Republic, with completion scheduled for the first quarter of 2026.
Source: Lusa/Editorial Staff
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