Published in the Official Gazette on 20 May 2026, Decree-Law no. 97/2026 reorganises a large part of housing taxation in Portugal. It touches VAT, IRS, IRC, IMT and stamp duty and creates new rental support regimes aimed at increasing the supply of moderately priced housing.
For families, landlords, developers and investors, this brings new tax benefits but also new obligations, value caps and holding periods. Here is a point-by-point summary of what changes in practice.
Overview of the main changes
- Construction and rehabilitation: VAT may drop to 6% on eligible works.
- Landlords: moderate rents taxed at 10% IRS.
- Tenants: rent deduction rises to EUR 900 (2026) and EUR 1,000 (2027).
- Affordable rental: new simplified regime linked to median rents.
- Investors: investment contracts with benefits up to 25 years.
- Non-residents: 7.5% IMT on housing purchases.
- Controlled-cost housing: possible IMT exemption and stamp duty deduction.
Reduced 6% VAT on construction and rehabilitation
The headline measure is the application of the reduced VAT rate of 6% to construction and rehabilitation works for own permanent housing or for housing rental. Value caps apply: monthly rent up to EUR 2,300 and sale price up to EUR 660,982.
Deadlines also apply: properties for sale must be sold within 24 months of the use licence, and rented properties must remain in housing rental for at least 36 months within the first five years.
Self-builders can recover part of the VAT
Those building their own permanent home outside a business activity may request partial VAT refunds on works. The taxable patrimonial value (or land plus construction cost ex-VAT) must not exceed EUR 660,982, and the property must be used as own permanent housing within 6 months and kept that way for at least 12 months.
Landlords with moderate rents: 10% IRS
Rental income from housing contracts within the moderate rent caps is taxed at an autonomous 10% rate until 31 December 2029, applicable to both new and existing contracts.
Tenants can deduct more rent
- 2026: limit rises to EUR 900.
- 2027 onwards: EUR 1,000.
New Simplified Affordable Rental Regime
Rent caps will be set at 80% of the median rent per square metre published by INE for each municipality. Minimum contract term is 3 years for permanent residence and 3 months for temporary residence.
Investment contracts: benefits up to 25 years
Investors who build, rehabilitate or acquire properties for the rental market can access a 25-year benefit package: IMT and stamp duty exemption, IMI exemption for 8 years (then 50% reduction), 6% VAT on works, AIMI exemption and 50% VAT refund on architecture, engineering and project services.
Capital gains exempt when reinvested in rental property
A new IRS exclusion applies to capital gains reinvested in Portuguese property for housing rental. Reinvestment window: 24 months before to 36 months after the sale. The new property must be rented within 6 months and kept rented for at least 36 months in the first 5 years.
7.5% IMT surcharge for non-residents
The purchase of urban housing properties by non-residents is now subject to a flat 7.5% IMT rate, with no exemptions or reductions. Exceptions apply for those who already are or become Portuguese tax residents within 2 years, and for those who place the property in housing rental within the regime caps.
Controlled-cost housing: IMT and stamp duty benefits
First acquisitions of controlled-cost housing for own permanent residence may benefit from IMT exemption up to EUR 106,346 (2026 first-bracket limit) and stamp duty deduction up to the same threshold. Application depends on a municipal assembly resolution.
Key takeaways
Decree-Law 97/2026 is a broad reorganisation of housing taxation. Most benefits depend on value caps, strict deadlines (6, 12, 24, 36 months) and minimum holding periods as own permanent housing or rental. Small decisions on contract type, property allocation and works schedule can make the difference between 6% and 23% VAT, 10% and progressive IRS, or 7.5% and reduced IMT.
At Grupo Your we support families, landlords, developers and investors in correctly applying these measures and maximising the available tax benefits.
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