Housing Tax Package: From 6% VAT to Reduced IRS, What Parliament Approved

18 February 2026

3 min read

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Housing Tax Package: From 6% VAT to Reduced IRS

The Portuguese Parliament approved a comprehensive set of tax measures aimed at stimulating the housing market. The package, expected to cost the State over €300 million, covers everything from VAT reduction on construction to IRS benefits for landlords and tenants, as well as the creation of new investment contracts for rental housing.

VAT Reduced to 6%: A Boost for Construction

One of the most impactful measures is the VAT rate reduction from 23% to 6% on construction or rehabilitation works for housing. The benefit applies to properties intended for:

Permanent own housing

Rental with rents up to €2,300/month (2.5× the national minimum wage for 2026)

The measure has a defined timeframe: it covers works started between 25 September 2025 and 31 December 2029, with VAT payable until 2032. Notably, those already building do not benefit from this reduction.

To prevent abuse, the buyer must live in the property for at least 12 months. Failure to do so results in a 10 percentage point surcharge on IMT. Exceptions exist for situations such as marriage, dissolution of civil partnership, or increase in dependents.

Lighter IRS for Landlords and Tenants

Key IRS changes include:

Autonomous tax rate on rental income drops from 25% to 10%, provided rents do not exceed €2,300/month

Companies and self-employed with organised accounting pay tax on only 50% of rental income

Tax deduction for tenants on rent expenses rises to €900 in 2026 and €1,000 from 2027

Capital gains exempt from IRS if reinvested in another property for rental

Housing Rental Investment Contracts (CIA)

The package creates a new legal instrument: Housing Rental Investment Contracts (CIA), lasting up to 25 years. At least 70% of the built area must be allocated to moderate rents.

Promoters subscribing to a CIA benefit from:

IMT and Stamp Duty exemption on land or building acquisition

IMI exemption for up to 8 years, followed by 50% reduction

Additional IMI exemption during the contract

Reduced VAT rate on construction works

50% VAT refund on architecture and project services

50% Stamp Duty reduction proportional to fund assets allocated to rental

Other Measures: First Home and Investment Funds

IMT and Stamp Duty exemption for first homes at controlled costs, for permanent own housing only

Real estate investment funds allocating at least 5% of assets to affordable rental are taxed on only 5% of corresponding income

The Cost to the State: Over €300 Million

The approved measures represent a direct cost to the State exceeding €300 million. In the broader housing policy context, total support in the sector is estimated at around €1 billion in less than two years.

Whether these measures will achieve the desired effect on housing access remains to be seen. But given their scope and the multiple tax instruments involved, this package represents one of the most ambitious housing initiatives in Portugal in recent years.

👉 See our full State Budget 2026 analysis for all tax measures affecting your company.

👉 Talk to our tax consulting team to understand how these changes impact your specific case.

Source: 24noticias.sapo.pt | Article based on information published on 18 February 2026