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Portugal's new housing tax package introduces several incentives designed to increase housing supply, encourage construction and renovation, and support the residential rental market.
The measures, approved under Decree-Law No. 97/2026 of 20 May, cover areas such as VAT on construction, taxation of rental income, personal income tax deductions and the reinvestment of property capital gains.
6% VAT on construction and renovation
One of the main changes is the temporary application of the reduced 6% VAT rate to certain construction and renovation works involving properties intended for permanent primary residences or residential rental.
The tax benefit applies to homes sold for up to approximately €648,000 and to rental properties with monthly rents of up to €2,300, provided that all legal requirements and deadlines are met.
One of the main changes is the temporary application of the reduced 6% VAT rate to certain construction and renovation works involving properties intended for permanent primary residences or residential rental.
The tax benefit applies to homes sold for up to approximately €648,000 and to rental properties with monthly rents of up to €2,300, provided that all legal requirements and deadlines are met.
Tax benefits for landlords
Property owners who make homes available for residential rental within the established rent limits may benefit from reduced taxation on rental income.
For individual landlords, the autonomous personal income tax rate applicable to certain rental income may be reduced to 10%. Companies may also benefit from more favourable corporate income tax treatment.
Increased rental deduction for personal income tax
The new housing package also strengthens the tax benefit available to tenants.
The maximum personal income tax deduction for permanent residence rents increases to €900 in 2026 and €1,000 from 2027 onwards. The effective benefit will depend on household income, the amount of rent paid and the remaining deductions included in the annual tax return.
Incentives for reinvestment in rental properties
Capital gains obtained from the sale of property may, under certain conditions, be excluded from taxation when the proceeds are reinvested in the acquisition of properties intended for residential rental.
To benefit from this measure, owners must comply with the applicable reinvestment deadlines, rental limits and the minimum period during which the property must remain available on the rental market.
What changes for property owners and investors?
Portugal's new housing tax package may create opportunities for property owners, developers, construction companies and investors. However, the benefits are not automatic and depend on compliance with several legal and tax requirements.
Before constructing, renovating, selling or placing a property on the rental market, it is important to assess the tax framework applicable to each transaction.
Aldeia Fiscal supports individuals and companies in assessing the new housing measures, identifying the available tax benefits and ensuring compliance with the applicable legal and tax obligations.
