The New Housing Tax Package: Incentives, Limits and Implementation Challenges
The recent Portuguese legislative proposal introducing the so-called “Housing Tax Package” represents the most ambitious set of tax measures adopted in recent years in the field of access to housing in Portugal. Its central objective is to establish tax incentives for the construction, rehabilitation, sale and lease of residential property, through a coordinated set of measures designed to stimulate supply, promote private investment and foster affordable rental housing.
Among the principal incentives, in the context of personal income taxation (“IRS”, in the Portuguese acronym), is the exemption from taxation of capital gains arising from the transfer of residential property, where the proceeds are reinvested in the acquisition of property intended for residential leasing, applicable until 31 December 2029. In parallel, the maximum limit for the deduction of rental expenses borne by tenants is increased to EUR 1.000,00 per year, alongside the application of a reduced autonomous tax rate of 10% to rental income derived from residential lease agreements, likewise applicable until the end of 2029.
In the sphere of property taxation, the proposal provides for an exemption from the Municipal Real Estate Transfer Tax (“IMT”, in the Portuguese acronym) and a deduction from the tax due corresponding to item 1.1 of the Stamp Duty Tax (“IS”, in the Portuguese acronym) General Table upon the first acquisition of residential property intended exclusively for owner-occupation and classified as cost-controlled housing. Furthermore, a reduced VAT (“IVA”, in the Portuguese acronym) rate is to apply to construction and rehabilitation works concerning property intended for permanent owner-occupation or residential leasing. In addition, a regime for the partial refund of VAT incurred by private individuals is introduced, applicable to construction and rehabilitation works initiated between 25 September 2025 and 31 December 2029, provided that the tax becomes chargeable by 31 December 2032, subject to the effective allocation of the property to permanent owner-occupation for a minimum period of twelve months, unless non-compliance results from exceptional circumstances expressly provided for by law.
It should be emphasised that the granting of these tax benefits is subject to maximum thresholds for both rental values and sale prices. Accordingly, the maximum moderate monthly rent may not exceed 2.5 times the statutory minimum monthly wage applicable for 2026, amounting to EUR 2.300,00, while the maximum moderate sale price is capped at EUR 660.982,00.
Significant reservations have been expressed by several entities regarding the introduction of these new concepts and the corresponding thresholds, which are widely regarded as misaligned with the socio-economic reality of the Portuguese population, particularly when assessed against the national average gross salary. Moreover, the absence of territorial differentiation mechanisms is likely to produce adverse effects, including increased real estate speculation, artificial standardisation of rental values, and a generalised rise in housing prices across large parts of the country. Such concerns underscore the tension between the objectives pursued by the proposed measures and the principle of balance and prevention of speculation enshrined in Article 29 of the Basic Housing Law (“Lei de Bases da Habitação”).
Additionally, as part of a public policy strategy aimed at regulating demand and curbing external pressure on the Portuguese housing market, the proposal introduces an increased IMT rate of 7.5% on the acquisition of residential property by non-residents.
In this context, the success of this tax package—while not immune to criticism and notwithstanding the commendable political initiative and effort it embodies—will ultimately depend on its coherent and effective implementation, regulatory stability, and the capacity to reconcile tax incentives with genuine economic feasibility and affordability, failing which its underlying social objectives may be jeopardised.
Following parliamentary scrutiny, which resulted in several significant amendments to the initial governmental proposal, the statute was approved in final global vote by the Parliament on 20 February 2026 and submitted to the President for promulgation.
[This article was written on 26 February 2026; accordingly, at the date of its publication and/or reading, promulgation may already have occurred.]
Sara Campelo de Carvalho, Associate Lawyer | Cerejeira Namora, Marinho Falcão from Portugal
