The topic of the tax shock in the real estate sector has raised many questions, particularly as it includes measures impacting construction, rehabilitation, self-construction, and rental.
Below is a comprehensive summary with limits, deadlines, and conditions as set out in the received report, including general references to public sources.
Note: The legislation is currently under detailed parliamentary review and may still be amended.
1) VAT: Construction, Rehabilitation, and Self-Construction
The report points to a measure reducing VAT from 23% to 6% on construction and rehabilitation works intended for housing.
The measure is referenced for two scenarios:
Sale: Applicable if the property is sold as a primary and permanent residence, with a sale price of up to €648,000.
• The sale must take place within 24 months after the use permit/license is issued, according to technical proposals.
• Rental: Also applicable to residential rental agreements with a monthly rent of up to €2,300.
In rental cases, there is an obligation to place the property on the market and maintain the lease for a minimum period, for example 36 months.
• In rental cases, there is an obligation to place the property on the market and maintain the lease for a minimum period, for example 36 months.
For self-build projects, a partial VAT refund is available, corresponding to the difference between 23% and 6%, with applications to be submitted within 12 months of the licence being granted.
2) Personal Income Tax (IRS): Landlords and Tenants
The report includes IRS measures impacting rents and rental schemes:
A reduced autonomous tax rate of 10% on moderate rents, in force temporarily until 2029.
• An IRS exemption under the Affordable Rental Simplified Regime (RSAA), for rents up to 80% of the municipal median.
• Increased rent deduction for tenants in IRS: a ceiling of €900 in 2026 and €1,000 from 2027 onwards.
• Capital gains tax exemption when gains are reinvested in properties intended for moderate rental.
3) Corporate Income Tax (IRC): Companies and Rental Income
For IRC purposes, the report indicates:
• Only 50% of rental income up to €2,300 per month is considered for corporate tax purposes.
• IRC exemption for income generated under the RSAA framework.
4) IMT, IMI, AIMI and Stamp Duty
The report foresees the creation of Investment Contracts for Rental (CIA), with a duration of up to 25 years, subject to the following requirement:
• At least 70% of the property’s area must be allocated to moderate rental.
Within the CIA framework, the following measures are referenced:
• Exemption from IMT and Stamp Duty on the acquisition of land or property for construction or rehabilitation.
• IMI exemption for up to 8 years, and up to a 50% reduction for the remaining period.
• AIMI exemption throughout the entire duration of the CIA.
• A special IMT rate of 7.5% for acquisitions by non-residents, with exceptions such as affordable rental or tax residency in Portugal.
5) Funds and Investment Vehicles
The report includes measures for investment funds and vehicles:
A more favorable tax regime for funds allocating a minimum portion of assets to affordable rental.
A proportional reduction of the taxable base on distributed income.
6) General References (Public Sources)
The report indicates the following general references:
• Government Portal: housing tax package approved in Parliament.
• Technical notes and analyses: PwC, CNMF, Jornal Económico.
• Legislation currently under detailed review, and therefore subject to potential amendments.
These tax shock measures in the real estate sector cover VAT, IRS, IRC, and property-related taxes, focusing on encouraging construction and rehabilitation for housing at moderate price levels, promoting moderate rents and affordable rental schemes (RSAA), defining price and rent limits, deadlines for sale or market placement, and minimum rental periods. They also include a partial VAT refund mechanism for self-construction.
In addition, incentives are introduced through Investment Contracts for Rental, with exemptions and reductions in IMT, IMI, AIMI, and Stamp Duty, as well as adjustments for investment funds linked to affordable rental.
As noted, the legislation is currently under detailed parliamentary review and may still be amended.
