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We are looking for people who aim to go further and face the future with confidence.
On 25 September at a Council of Ministers meeting, the government approved a package of measures aimed at boosting the residential housing market.
These measures still need to be presented to and approved by the the Portuguese Parliament. However, given their importance, we are providing a brief summary of the main tax changes currently under discussion.
It is proposed that landlords benefit from a reduction in the autonomous Personal Income Tax (PIT) rate, from 25% to 10%. This would apply to rental contracts with monthly rents of up to €2,300, which are classified as ‘affordable rents’.
Additionally, it is proposed that capital gains would be exempt from PIT in cases of reinvestment in properties intended for rental at affordable rates.
Furthermore, the Additional Municipal Property Tax (AMPT) would be waived for properties with monthly rents of up to €2,300, even if the official taxable value (valor patrimonial tributário – VPT) exceeds €600,000. This would be an exception to the current rules under which the AMPT is payable whenever the VPT of a property exceeds €600,000.
For tenants, the income tax deduction for rental costs would increase from €500 to €900 in 2026 and to €1,000 in 2027. Despite this increase, the deduction will continue to be calculated at 15% of the annual costs incurred.
It is proposed that the Value Added Tax (VAT) rate on construction should be reduced from 23% to 6% in the following cases: (i) construction of dwellings for sale at a price of up to €648,000; and (ii) construction of dwellings for rent at a monthly rent of up to €2,300. This measure is temporary and, if approved, will remain in force until 2029.
It should be noted that the announced measure appears to exclude owner-occupied and permanent housing from the scope of the reduced VAT rate. If this is confirmed in the draft law to be presented to the Portuguese Parliament, it could compromise the consistency of the package of measures adopted. It would be difficult to justify why construction for an individual’s own permanent residence should not benefit from the same VAT rate as construction for sale or rent.
It is proposed to increase the burden of tha tax rate of the Real Estate Transfer Tax (RETT) for the purchase of residential property by non-resident individuals in Portugal, with emigrants being excluded. The higher rates to be applied are not yet known.
Although the details of this measure remain unclear, there are serious doubts regarding its compatibility with the principle of non-discrimination nder European tax law, as well as with the constitutional principle of equality.