Housing Tax Package 2026: Everything Changing in VAT, IRS, IRC and IMT
Portugal has a new housing tax package. The Housing Tax Package proposed by the Government to the Assembly of the Republic was approved on January 9, 2026, comprising tax relief measures to increase housing supply and amend urban licensing, urbanisation, building and urban rehabilitation regimes.
The legislation - Law No. 9-A/2026, of March 6 - is an enabling act, meaning the Government now has until September 2, 2026 to publish the decree-law that will implement all the measures. Until then, none of them are yet in force in their final form. But it's already possible to understand what will change - and prepare.
The set of measures is expected to represent a cost to the State exceeding €300 million, with total housing sector support estimated at around €1 billion in less than two years.
1. VAT Reduced from 23% to 6% on Construction and Rehabilitation
The most emblematic measure of this package is the reduction of VAT applicable to construction or rehabilitation works on residential properties.
Who does it apply to?
The reduced 6% VAT rate applies to construction or rehabilitation works on properties intended for residential rental with rents up to €2,300, or for own permanent housing up to a maximum value of €660,982.
When is it in effect?
The reduced rate applies to urban operations started between September 23, 2025 and December 31, 2029, ceasing on December 31, 2032.
Mandatory conditions
Works intended for sale for the purchaser's own permanent housing may benefit from the reduced rate, provided the sale occurs within 24 months of the start-of-use documentation. The property must remain rented for at least 36 consecutive or intermittent months in the first five years.
What happens if you don't comply?
Anyone who benefits from the reduced 6% VAT and sells or stops inhabiting the property in less than one year risks penalties in IMT. Specifically, a 10 percentage point increase in IMT is applied.
2. Partial VAT Refund for Those Building Their Own Home
Those who build their own home also have access to a special benefit.
Individuals who pay VAT on construction services for properties intended for own permanent housing may benefit from a partial VAT refund, corresponding to the difference between the standard 23% rate and the reduced 6% rate. The refund request must be submitted to the Tax Authority within 12 months of the usage licence being issued, with the refund due within 150 days of receiving the request.
3. Reduced IRS for Landlords - From 25% to 10%
This is one of the measures with the greatest direct impact for property owners who rent out properties.
The housing tax package includes a significant tax relief for rental: the autonomous IRS rate on property income drops from 25% to 10% for rents up to €2,300, in effect until 2029.
This reduction applies to both new and existing contracts, provided the rent is within the defined limits.
Additionally, withholding tax is reduced to 10% on Category F income when paid by entities with organised accounting required to withhold tax.
4. Full IRS and IRC Exemption Under RSAA
For those charging even lower rents, the benefit is even greater.
The former Rental Support Programme (PAA) gives way to the Simplified Accessible Rental Regime (RSAA), designed to simplify bureaucracy and promote affordable housing supply. Rents are limited to 80% of the median rent per square metre published by INE for the property's municipality. Income from contracts under this regime is exempt from IRS and IRC, provided contracts have minimum terms of three years for permanent residence or three months for temporary residence.
5. Capital Gains Exemption for Reinvestment in Rental
Those who sell a property and reinvest the money in rental housing may be exempt from capital gains taxation.
A capital gains tax exemption is provided for those who reinvest in housing at moderate values within five years. The reinvestment can occur between 24 months before and 36 months after the sale.
6. Higher IRS Deductions for Tenants
Tenants also benefit from increased tax deductions.
The deduction limit for tenants on rent expenses rises to €900 in 2026 and €1,000 from 2027. The deduction limit remains at 15% of rents paid.
7. IRC: Companies Pay Tax on Only 50% of Rents
Companies investing in the residential rental market also benefit from significant tax relief.
Property income from contracts exclusively for residential rental will be considered at only 50% for IRC purposes, representing a significant reduction in the tax burden on corporate entities investing in the rental market.
8. Investment Contracts for Rental (CIA) - Integrated Benefits Package
For large investors with bigger projects, the package creates an especially attractive regime.
The package includes the creation of housing rental investment contracts (CIA) lasting up to 25 years, where at least 70% of the built area must be allocated to moderate rents.
CIAs include an integrated benefits package:
- IMT and Stamp Duty exemption on acquisition
- IMI exemption for up to 8 years and 50% reduction for the remaining period
- Additional IMI exemption
- Reduced VAT rate on works
- Partial VAT refund on architecture, engineering, project and study services
9. 7.5% IMT for Non-Residents
To curb foreign demand pressure on the national real estate market, the package introduces a specific tax penalty.
Property acquisitions by non-residents become subject to a flat IMT rate of 7.5%, regardless of the property's value.
There are exceptions: the rate does not apply if the buyer becomes a Portuguese resident or allocates the property to residential rental at moderate rent.
10. Benefits for Controlled-Cost Housing (HCC)
Buyers of controlled-cost housing also benefit from specific measures.
IMT exemption is provided for the first acquisition of urban property for own permanent housing, provided it is controlled-cost housing not exceeding €324,058, along with Stamp Duty deduction.
When Do These Measures Take Effect?
This is a fundamental point to clarify.
Law No. 9-A/2026 is an enabling act - Parliament authorised the Government to legislate, but the measures will only effectively come into force when the Government publishes the respective regulatory decree-law, which must happen by September 2, 2026.
| Measure | Validity Period |
|---|---|
| 6% VAT on construction | Works started between Sep. 2025 and Dec. 2029 |
| VAT enforceability | Until December 31, 2032 |
| 10% IRS for landlords | Until 2029 |
| IRC 50% of property income | Until December 31, 2029 |
| CIA - Investment Contracts | Up to 25 years |
| Government regulation | By September 2, 2026 |
Summary: What Changes For Each Profile
| Profile | Main Benefits |
|---|---|
| Builder / Developer | 6% VAT on works (instead of 23%) |
| Landlord | 10% IRS on rents (instead of 25%) |
| Landlord with very low rents | Full IRS and IRC exemption (RSAA) |
| Tenant | Deduction up to €900 (2026) and €1,000 (2027) |
| Company / Investor | IRC on only 50% of rents received |
| Seller who reinvests | Capital gains exemption if reinvested in rental |
| HCC Buyer | IMT exemption (up to €324,058) |
| Non-resident buyer | IMT increased to 7.5% |
Criticism and Debate
The package is not without controversy. Approval occurred despite critical opinions from economists and researchers who warned that tax relief could mainly result in increased investor margins, without significant impact on final prices.
The Budget Technical Support Unit (UTAO) also warns that setting a rent of up to €2,300 as "moderate" - a value above the market median - may, instead of containing prices, contribute to their increase, allowing the tax benefit to be absorbed by the landlord.
On the tenants' side, the Tenants' Association considers the values out of step with the reality of average incomes in Portugal.
Note: This article is for informational purposes and is based on official and specialised sources on Law No. 9-A/2026. The measures described here are dependent on Government regulation (by September 2, 2026) to come into force. For specific situations, consulting a certified accountant or specialised lawyer is recommended.
Legislation and Official Resources
📄 Law No. 9-A/2026, of March 6 - Full text published in the Diário da República.
Related Articles
- 📖 Corporate Tax 2026: Complete Guide
- 📖 IRS 2025: Tax Deductions Page Is Now Online
- 🧮 IRC Simulator 2026 - Calculate your company's tax
- 🧮 IRS Simulator 2025 - Estimate your refund
Get the latest tax news
Subscribe to our newsletter and receive articles, tax alerts and tips directly in your inbox.
Related articles
Beverage Packaging Deposit System: How It Works in Portugal
From April 10, 2025, Portugal launches a deposit system for beverage packaging. Learn how to recover €0.10 per returned container.
Fixed-Term vs Permanent Employment Contracts: Differences, Rights and When to Use Each (2026)
Hiring and unsure which contract to use? We explain the differences between fixed-term, uncertain-term and permanent contracts — with comparison tables, deadlines and practical examples for 2026.
Can a Managing Partner Not Receive a Salary? Everything You Need to Know in 2026
Are you a partner or manager wondering if you can choose not to receive a salary? We explain the tax implications, Social Security and alternatives.
