On January 9, Draft Law No. 47/XVII/1st Session, of 28 November 2025, was approved in general terms, providing for a set of measures to encourage housing and residential leasing to promote the creation of a housing stock tailored to the needs of the population in the national territory and to facilitate the construction, rehabilitation, purchase, and lease of properties at moderate prices.
The proposal will be subject to discussion, and the measures in question may still be subject to change. It includes amendments to the Value Added Tax (VAT) Code, Personal Income Tax (IRS), Tax Benefits Statute (EBF), and Real Estate Transfer Tax (IMT), among other individual measures, namely:
VAT: Reduced rate and partial refund
- Temporary application of a reduced VAT rate of 6% on construction and rehabilitation contracts relating to properties intended for sale as permanent residences (HPP) or for residential leasing with moderate rents[1] or covered by the Investment Contracts for Residential Letting Regime (see below).
- Partial VAT refund regime, upon request (for the application of the 6% reduced VAT rate), applicable to individuals not engaged in a business or professional activity when purchasing construction services for properties intended for HPP, where the purchase price of the property (or the taxable value, if higher) plus construction costs does not exceed the moderate sale price[2].
- Both VAT measures only cover urban development operations whose procedural initiative occurs between 25 September 2025 and 31 December 2029, and whose VAT liability occurs between 1 January 2026 and 31 December 2032.
IRS: Tax credit deductions and capital gains reinvestment
- Progressive increase in deductions of housing-related expenses from tax due to € 900 in 2026 and € 1,000 in 2027.
- Exclusion from taxation of capital gains obtained on the transfer of residential property in the event of reinvestment of the proceeds in the acquisition of property intended for residential leasing at moderate rents.
Investment Contracts for Residential Leasing (CIA)
- A regime of investment contracts for residential leasing is introduced, to be entered into between investors who meet specific requirements and the IHRU, I.P., with a term of 25 years, to strengthen investment in the construction, rehabilitation, or acquisition of properties for residential leasing at moderate rents.
- The regime applies to projects where at least 70% of the construction area is allocated to residential leasing at moderate rents.
- The regime grants several tax benefits, namely exemptions from IMT and Stamp Duty on the acquisition of properties intended for residential leasing, IMI exemption for the first eight years and a 50% IMI reduction for the remaining years of the project, AIMI exemption during the project term, application of the reduced VAT rate to construction works, among others, enhancing the attractiveness of the model for large‑scale projects.
Tax Benefits
- Exemption from IRS (PIT) and IRC (CIT) on rental income earned under the Simplified Regime for Affordable Agreement (RSAA), applicable to residential lease agreements where the monthly rent is less than 80% of the median rent in the relevant municipality (as published by INE).
- Reduction of the autonomous taxation rate applicable to property income from residential lease agreements with moderate rents from 25% to 10%, until December 31, 2029.
- Exclusion from IRC (CIT) of 50% of property income arising from residential lease agreements with moderate rents, until 31 December 2029.
- IMT and Stamp Duty exemption on the acquisition of a first controlled‑cost principal permanent residence, where the acquisition value does not exceed the limit of the first bracket of the IMT rate applicable to the purchase of permanent housing by taxpayers aged 35 or under (€330.539), subject to a decision by the municipal assembly.
- Application of a 5% tax rate to income distributed to participants or shareholders arising from Collective Investment Undertakings, insofar as it corresponds to income resulting from rental contracts entered under the RSAA.
- Exclusion from taxation of up to 30% of the income earned by participants or shareholders arising from Collective Investment Undertakings through distribution or liquidation or redemption, when at least 50% of their assets correspond to real estate subject to lease agreements entered under the RSAA.
Other relevant measures
- Application of the increased IMT rate of 7.5% to non-residents, without the possibility of exemption or reduction, on the purchase of urban buildings or autonomous fractions intended for housing, with some exceptions (in particular, when the property is intended for residential leasing with moderate rents).
[1] According to the Draft Law, moderate rents correspond to 2.5 times the minimum monthly wage for 2026, i.e., €2.300.
[2] According to the Draft Law, a moderate sale price corresponds to the upper limit of the second bracket referred to in Article 17(1)(b) of the IMT Code (applicable to purchases of a first HPP by taxpayers aged 35 or under). Now that the amendments to the IMT Code introduced by the State Budget for 2026 are in force, this limit was increased to €660.982.
