“Construir Portugal” Program: Tax Measures for Housing

Decree-Law No. 97/2026 of 20 May was published under the “Construir Portugal” Program (“Decree”), introducing tax incentives for institutional and private investors, tenants and first-time homebuyers, with the aim of boosting the housing and rental market in Portugal.

The Decree introduces amendments to the Value Added Tax Code (“VAT”), the Personal Income Tax Code (“PIT”), the Tax Benefits Statute (“EBF”) and the Real Estate Transfer Tax (“RETT”), also creating three autonomous regimes: the Investment Contracts for Residential Leasing (“CIA”), the partial VAT refund regime for Primary and Permanent Residence (“HPP”) construction and the Simplified Accessible Rental Regime (“RSAA”).

Property owners, investors with residential construction or urban rehabilitation projects, first-time homebuyers and tenants should reassess their tax situation in light of the new Decree.

VAT: Reduced rate and partial refund

• Reduced rate of 6% on construction and rehabilitation works for properties for sale as HPP, rental at moderate rents (€2,300/month), or under CIA.

• Conditions:

1. The sale for HPP or rental must occur within a maximum of 24 months after the start of use;
2. In the case of rental, the property must remain rented for at least 36 months in the first five years;
3. In the case of sale, the non-allocation of the property to HPP by the acquirer does not trigger VAT regularization but implies a 10% increase in the RETT applicable to the acquirer.

• Partial VAT refund (for effective application of the 6% rate) to individuals in the construction of their HPP, provided that the property value plus construction costs does not exceed the moderate sale price (€660,982).

• Conditions: The application must be submitted within 12 months after the issuance of the documentation for the start of use, and the refund by the Tax and Customs Authority must occur within 150 days.

• Temporal application: Both measures take effect from the quarter following the entry into force of the Decree (i.e., third quarter of 2026) but cover operations whose procedural initiative occurs between 25.09.2025 and 31.12.2029, whose VAT liability arises from 01.01.2026 and, in the case of the refund, until 31.12.2032.

PIT: Tax deductions and capital gains reinvestment

• The progressive increase in tax deductions for property-related expenses to €900 in 2026 and €1,000 from 2027.
• Tax exclusion of capital gains obtained from the transfer of residential properties in case of reinvestment of the sale proceeds in the acquisition of properties intended for residential rental at moderate rents (€2,300/month).

• Conditions: (i) reinvestment between 24 months before and 36 months after the transfer; (ii) execution of a lease agreement within 6 months; (iii) maintenance in rental for 36 months in the first 5 years; (iv) prohibition of sale within 5 years.

• Temporal application: Measure applicable to transfers carried out between 1 January 2026 and 31 December 2029.

Investment Contracts for Rental (“CIA”)

• New investment contract regime to be entered into with the Institute for Housing and Urban Rehabilitation (IHRU), I.P., with a 25-year term, to promote the construction, rehabilitation or acquisition of properties for rental at moderate rents.
• Scope: projects with at least 70% of the construction area intended for residential rental at moderate rent (€2,300/month).
• Tax benefits:

1. Exemption from RETT and Stamp Duty on acquisition;
2. Exemption from IMI for the first 8 years and 50% reduction thereafter;
3. Exemption from AIMI during the project;
4. Reduced rate (6%) of VAT on construction work;
5. Refund of 50% of VAT on architecture, engineering and project services;
6. 50% reduction of the Stamp Duty rate on Alternative Investment Undertakings (“OIA”).

• Conditions:
  • The application of RETT and IMI exemptions and IMI reduction depends on a resolution by the municipal assembly;
  • Termination of the CIA entails the loss of tax benefits and payment of 100%, 50% or 30% of the corresponding amounts, depending on whether non-compliance occurs in the first 10 years, between 10 years and the last 5 years, or in the last 5 years of the term, respectively.
• Temporal Application: Measures applicable from 1 September 2026.

Tax Benefits Statute (“EBF”)

• Reduction of autonomous taxation on rental property income at moderate rents to 10%, until 31.12.2029.
• Exclusion of 50% of rental property income at moderate rents (€2,300/month) obtained by CIT taxpayers or PIT taxpayers with organized accounting under Category B, until 31.12.2029.
• Temporal Application: Measures applicable retroactively from 1 January 2026.
• Exemption from RETT and Stamp Duty on the acquisition of a first Primary and Permanent Residence of controlled-cost housing, when the acquisition value does not exceed the limit of the 1st bracket of subparagraph b) of paragraph 1 of Article 17 of the RETT Code (€330,539).

• Conditions:
  • Holders of ownership rights over residential property at the date of transfer or in the previous 3 years are not eligible;
  • The application of the exemption depends on a resolution by the municipal assembly.

Alternative Investment Undertakings (“OIA”) / Tax Benefits Statute (“EBF”):

• 5% rate on income distributed to participants relating to results from the immediately preceding tax period, by OIA in the part corresponding to lease agreements under the RSAA.
• Exclusion of up to 30% of remaining income of participants in OIA (other distributions, redemption or liquidation), when at least 50% of assets are allocated to properties leased under the RSAA.
• 25% reduction of the Stamp Duty rate applicable to OIA under Entry 29.2 of the General Stamp Duty Table, when at least 25% of assets are allocated to properties leased under the RSAA.

• Conditions: OIA incorporated or with constitutional documents amended by 2 December 2029, to provide that assets consist of 5% or more of properties leased under the RSAA, and effective leasing under the RSAA of the proportion of the percentage defined in the OIA constitutional documents.

• Temporal Application: Measures applicable retroactively from 1 January 2026.

Simplified Accessible Rental Regime (“RSAA”)

• In accessible rental agreements, the monthly rent must be equal to or less than 80% of the municipality median, published by the INE.
• Exemption from PIT and CIT on rental property income under the RSAA.

• Conditions: submission of a copy of the contract and proof of communication on the Tax Portal to the IHRU by 15 January of the year following the execution.

• Minimum contractual terms: 3 years for permanent residence rental; 3 months for temporary residence.
• Municipal accessible rental programs benefit from the same tax regime, provided they comply with the rent limits and minimum terms.
• Temporal Application: Measures applicable from 1 September 2026.

Real Estate Transfer Tax (“RETT”)

• Increased RETT rate of 7.5% for non-residents on the acquisition of housing, without the possibility of exemption or reduction — except when: (i) the acquirer has been considered a tax resident in Portugal; (ii) becomes a resident within 2 years after acquisition; or (iii) the property is intended for rental at moderate rents within 6 months and is rented for 36 months in the first 5 years.