What Has Changed, And Why It Matters for Buyers, Owners and Long-Term Investors
Portugal entered a new phase of housing policy in 2026 with the implementation of a comprehensive fiscal and regulatory package approved in late 2025. Rather than relying on price controls, the reform focuses on stimulating supply, encouraging long-term rental stability, and improving the financial feasibility of construction, renovation and rental investment.
For buyers, owners, developers and investors, these measures do not simply adjust tax rates: they reshape decision-making, timelines and long-term strategies within the Portuguese real estate market.
Reduced VAT on Residential Construction and Renovation
One of the most significant measures is the reduction of VAT from 23% to 6% on qualifying residential construction and rehabilitation projects.
This reduced rate applies only under specific conditions, notably when:
• The property is sold below defined price thresholds as a primary residence, or
• The property is placed on the rental market under the “moderate rent” framework, with the first lease starting within 24 months of completion and maintained for a minimum period (currently three years).
The measure is expected to remain in force until at least 2029. In certain qualifying cases, private individuals renovating or building their own residence may also benefit from partial VAT reimbursement mechanisms.
Why it matters
By lowering development and rehabilitation costs at source, this incentive improves the financial viability of mid-market residential projects, a segment historically constrained by high construction costs and limited margins.
Rental Income Tax Incentives for Moderate Rents
To encourage long-term rental supply, Portugal has strengthened incentives for properties rented under the “moderate rent” regime (currently capped at approximately €2,300/month, depending on location and typology).
Key measures include:
• A reduced IRS rate on qualifying rental income, lowered from 25% to 10%, applicable to both new and existing contracts that meet the criteria;
• For corporate landlords, taxation applied to only 50% of qualifying rental income under corporate tax rules;
• Potential exemption from AIMI (Additional Municipal Property Tax) for eligible properties.
In specific cases, particularly when rents are significantly below local reference values, additional tax relief may apply, subject to compliance with programme requirements.
Why it matters
These measures aim to rebalance the risk-return equation for long-term rentals, making them more attractive for owners while supporting more predictable pricing for tenants. In urban markets such as Lisbon, Cascais and Porto, a large proportion of rental stock already falls within these thresholds, increasing the reform’s potential impact.
Tenant-Side Tax Relief
From 2026, tenants also benefit from increased tax deductions:
• Rent deductions against personal income tax increase to €900 in 2026, rising to €1,000 in 2027, provided the lease qualifies under the moderate rent framework.
Why it matters
While not transformative on its own, this measure supports long-term tenancy and contributes to greater stability in the rental market. An important factor for owners and investors seeking consistent occupancy.
Long-Term Rental Investment Frameworks
A new category of long-term rental investment contracts (often referred to as CIA – Contratos de Investimento para Arrendamento) has been introduced, with durations of up to 25 years and significant fiscal advantages.
Depending on project structure and compliance, benefits may include:
• Exemptions from IMT and stamp duty on acquisition;
• Temporary IMI exemptions;
• Continued eligibility for the 6% VAT rate on construction and rehabilitation;
• Potential partial VAT refunds on architectural, technical and feasibility studies.
To qualify, developments must typically allocate a substantial proportion of residential units (often around 70%) to long-term rentals under moderate rent conditions.
Why it matters
This framework is designed to attract long-term, institutional and semi-institutional capital , encouraging professionally managed rental projects that contribute to sustained housing supply rather than short-term speculation.
Additional Measures Affecting Buyers and Investors
The 2026 package also includes:
• Targeted relief for first-time buyers, particularly in controlled-cost housing segments;
• Incentives for investment vehicles and funds focused on affordable and long-term rental housing.
Why it matters
By lowering transaction costs and improving long-term yield visibility, the reform broadens participation, from private buyers to developers and professional investors.
The Broader Context
Portugal’s housing reform represents a structural shift: encouraging production, renovation and long-term use rather than relying on restrictive market interventions.
Its effectiveness will depend on execution, including planning approvals, construction capacity and market uptake, but the tools now in place materially alter how projects can be structured and optimised.
For market participants, these changes affect:
• Project feasibility
• Net yields
• Holding strategies
• Portfolio restructuring decisions
A Market That Rewards Strategy
These reforms are not automatic advantages: eligibility depends on compliance, valuation thresholds, licensing and documentation. Strategic planning is therefore essential.
At Bonte Filipidis, we support clients beyond transactions, helping them:
• Assess whether assets qualify for specific fiscal frameworks
• Identify properties aligned with long-term rental or development strategies
• Coordinate with legal and tax advisors to ensure compliance
• Structure real estate decisions that align investment logic with lifestyle objectives
In Portugal today, housing policy is evolving, and with it, the opportunities.
But as always, the difference lies not in the law itself, but in how it is applied.
