Portugal’s reduced 6% VAT rate for housing construction is no longer a regime “still to come”. With the publication of Decreto-Lei n.º 97/2026 (May 20), the implementing decree that operationalises Lei n.º 9-A/2026 (March 6) is now in force, with the different components producing effects on staggered dates (notably from 1 January 2026 and 1 September 2026, as set out in Article 18 of the decree-law). Together, the two diplomas set out the complete framework for the reduced VAT rate on construction contracts targeting moderate-price/moderate-rent housing, the partial VAT refund scheme for self-builders, the new CIA and RSAA support regimes, the IMT surcharge for non-residents, and the increase to the IRS rent deduction for tenants.
This article replaces our earlier piece on the same topic, which was written before the implementing decree was published. Wherever previously we wrote “to be defined by the implementing decree”, we now point to the specific article or annex of Decreto-Lei n.º 97/2026.
1. The two-diploma architecture
The reform now sits in two pieces of legislation that must be read together:
- Lei n.º 9-A/2026, de 6 de março — the legislative authorisation law that sets out the limits and framework conditions for the Government to act.
- Decreto-Lei n.º 97/2026, de 20 de maio — the implementing decree that concretises that authorisation, including:
- the addition of verba 2.42 to List I of the CIVA (subdivisions 2.42.1 and 2.42.2);
- the regime applicable to verba 2.42.1 (Articles 10 and 11);
- the regime for partial VAT refund on self-construction (Annex II);
- the CIA (Construção para Arrendamento Acessível) and RSAA (Renda Social Acessível) support regimes (Annexes I and III).
Any reference in earlier commentary to “expectations pending the implementing decree” should now be read against the actual provisions of Decreto-Lei n.º 97/2026.
2. The reduced VAT rate: what it applies to
Verba 2.42.1 of List I of the CIVA, as introduced by Decreto-Lei n.º 97/2026, subjects to the reduced VAT rate (6% on the mainland) construction contracts for new residential property, or rehabilitation works that result in residential property, provided that the dwelling is intended:
- as own and permanent housing (HPP) of the acquirer; or
- for letting under a residential lease (arrendamento habitacional) at a moderate rent.
The reduced rate applies to the contractor’s invoice. It does not, by itself, change the position of a self-builder buying materials and engaging sub-contractors outside a formal empreitada; that situation is dealt with through the partial-refund mechanism (see section 7 below).
3. Eligibility window: procedural initiative and VAT chargeability
The eligibility window is anchored in two dates:
- Procedural initiative between 25 September 2025 and 31 December 2029, meaning the urban-planning step (typically the licensing application or comunicação prévia under the RJUE) must fall in this interval; and
- VAT chargeable until 31 December 2032, meaning the actual chargeable event for VAT on the relevant supply must occur by that date.
This window is set out in Article 2(l) and (m) of Lei n.º 9-A/2026 and reiterated in Article 18(5)–(6) of Decreto-Lei n.º 97/2026.
4. Price and rent caps
To qualify, the dwelling must respect two caps:
- Moderate monthly rent: not exceeding 2.5 × the Minimum Monthly Wage (RMM) for 2026.
- Moderate sale price: not exceeding the upper limit of the second bracket of paragraph (b) of Article 17(1) of the CIMT.
These caps result from Article 2(b)(i) and (ii) of Lei n.º 9-A/2026 and are restated in Article 2(2) of Decreto-Lei n.º 97/2026. The specific euro figures depend on the RMM and CIMT brackets in force in 2026; any euro figure circulated in commentary should be treated as illustrative for that year.
5. The 24-month placement-on-market window
The most important practical change brought by Decreto-Lei n.º 97/2026, and the one most often misstated in older commentary, is the 24-month placement-on-market window for developers. It is set out in Article 10(1):
- Sale as HPP: the sale must occur within 24 months of the issuance of the documentação de início de utilização under the RJUE (in practice, the título de utilização or equivalent), and the relevant title must expressly reference verba 2.42.1.
- Letting: the first residential lease must take effect within 24 months of that same documentation, and the dwelling must remain let for at least 36 months (continuous or interpolated) within the first 5 years.
This converts what was earlier described as an expectation into hard, binding law. Developers cannot rely on the reduced rate without a credible 24-month placement plan and, in the letting case, without satisfying the 36-month occupancy threshold.
6. The 12-month HPP condition and the IMT surcharge
The acquirer’s behaviour after purchase is also disciplined.
Lei n.º 9-A/2026 directed the Government to provide that the partial-refund regime ceases to apply if the dwelling is not affected to HPP, or if the acquirer does not remain there for at least 12 months, save for “exceptional circumstances”.
Decreto-Lei n.º 97/2026 concretises this in two places:
- Annex II, Article 2(5): the dwelling must be affected to HPP within 6 months of the issuance of the documentação de início de utilização under the RJUE and maintained as HPP for at least 12 months, with cross-reference to Article 10 of the CIRS for the catalogue of exceptional circumstances.
- Article 10(5): if HPP is not achieved or not maintained for 12 months (save for exceptional circumstances), the IMT owed by the acquirer is increased by 10 percentage points.
A practical implication that deserves emphasis: for empreitadas taxed at the reduced rate under verba 2.42.1, failure to affect the property to HPP does not trigger a regularisation of the reduced VAT rate already invoiced. Instead, the consequence falls on the acquirer through the IMT surcharge described above. This allocation of risk is explicit in the preamble of Decreto-Lei n.º 97/2026 and in Article 10(5).
7. Partial VAT refund for self-construction (Annex II)
For individuals who build their own home outside the scope of a single empreitada — typically engaging multiple contractors and trades separately, with VAT charged at the standard rate on those construction services, Annex II of Decreto-Lei n.º 97/2026 establishes a partial VAT refund scheme. The mere acquisition of construction materials, on its own, does not qualify for the refund (Annex II, Article 2(2)). The rules are no longer speculative; they are in force:
- Beneficiaries and scope: individuals acting outside the scope of a business or professional activity, where VAT is chargeable up to 31 December 2032, where the property is affected to HPP, and where the price/rent caps in section 4 are respected.
- Application deadline: the refund application must be filed within 12 months of the issuance of the documentação de início de utilização under the RJUE.
- Documentation: identification of the property and any co-owners, contracting agreements, the use title, the value of the land, and invoices for construction costs.
- Refund amount: the difference between VAT invoiced at the standard rate and the VAT that would have resulted from application of the reduced rate.
- Clawback: if the qualifying conditions cease to be met, an additional liquidation (clawback) is issued by the Tax Authority.
This is the heart of the self-builder route. It is administered by the AT and rests on documentary proof at the moment of completion of works.
8. Tenant-side IRS rent deduction
Decreto-Lei n.º 97/2026 amends Article 78-E of the CIRS to raise the annual IRS deduction limit for residential rent paid:
- From 2027 onwards: annual limit of €1,000.
- Transitional rule for 2026: annual limit of €900.
The previous formulation in some commentary suggested “€1,000 per month”, which is incorrect. The €1,000 figure is the annual ceiling, and only takes effect in 2027; in 2026 the ceiling is €900.
9. IMT 7.5% rate for non-residents
Lei n.º 9-A/2026 instructed the Government to introduce a 7.5% IMT rate on the acquisition of residential property by non-residents. Decreto-Lei n.º 97/2026 concretises this through a new paragraph 10 of Article 17 of the CIMT, with three carve-outs:
The 7.5% rate applies save where:
- The acquirer is already resident in Portugal;
- the acquirer becomes resident within the following 2 years; or
- The property is let at moderate rent for at least 36 months within the first 5 years following acquisition.
The “emigrant carve-out” terminology used in earlier commentary is acceptable shorthand for the second category, but the proper technical framing is the three-pronged exception in Article 17(10) of the CIMT.
10. Madeira and the regional rate differential
In the Autonomous Region of Madeira, the relevant rates produce, in arithmetic terms, the same 17 percentage-point differential between the standard and reduced rates (subject to confirmation that the regional schedule remains at 5% reduced / 22% standard as at the date of any given transaction). What earlier commentary described as “pending the implementing decree” is no longer accurate as to the existence of the framework itself; what does remain to be monitored are any regional adjustments or joint ordinances specific to the Autonomous Regions.
11. CIA and RSAA support regimes
Decreto-Lei n.º 97/2026 introduces two additional regimes in its annexes:
- CIA — Contratos de Investimento para Arrendamento (Annex I): a contractual framework for investment in affordable rental housing;
- RSAA — Regime Simplificado de Arrendamento Acessível (Annex III): a simplified affordable-letting regime.
These regimes sit alongside the reduced VAT rate and the partial-refund scheme and provide additional levers for developers building for the moderate-rent market. They produce effects from 1 September 2026 (Article 18 of the decree-law). A separate detailed note will follow on the CIA and RSAA mechanics.
12. FAQ
Is there a 24-month placement-on-market window for developers?
Yes. Article 10(1) of Decreto-Lei n.º 97/2026 fixes a 24-month deadline measured from the issuance of the documentação de início de utilização under the RJUE, for the sale (in the HPP-sale case) or for the start of the first residential lease (in the letting case). In the letting case, the property must additionally be let for at least 36 months (continuous or interpolated) within the first 5 years.
Is there a 12-month deadline for the self-build partial-refund application?
Yes. Annex II, Article 4(1) of Decreto-Lei n.º 97/2026 fixes a 12-month deadline, running from the issuance of the documentação de início de utilização under the RJUE.
Does the IRS tenant rent deduction limit jump to €1,000 immediately?
No. The €1,000 figure is the annual ceiling and applies from 2027 onwards. For 2026, the transitional ceiling is €900.
If the dwelling is not affected to HPP, does the VAT charged at the reduced rate need to be corrected?
No, not on the contractor side. Under Article 10(5) of Decreto-Lei n.º 97/2026, the consequence falls on the acquirer through a 10 percentage-point increase in IMT, save for exceptional circumstances under Article 10 of the CIRS.
Are non-resident buyers always taxed at IMT 7.5%?
No. Article 17(10) of the CIMT provides three carve-outs: (i) acquirer already resident; (ii) acquirer becomes resident within 2 years; or (iii) the property is let at moderate rent for at least 36 months within the first 5 years.
Is the eligibility window the same as before?
Yes. Procedural initiative between 25 September 2025 and 31 December 2029, with VAT chargeable up to 31 December 2032. This is anchored in Article 2(l) and (m) of Lei n.º 9-A/2026 and reiterated in Article 18(5)–(6) of Decreto-Lei n.º 97/2026.
13. Practical implications
For developers, the regime is now actionable. The placement-on-market timetable (24 months) and the letting threshold (36 months out of the first 5 years) are not soft expectations but operative conditions; they must be modelled into project plans, sale contracts, and lease templates.
For individual self-builders, the partial-refund route via Annex II is also operational, with a clear 12-month filing window and a defined documentation set. The Tax Authority retains a clawback power if conditions cease to be met.
For non-resident purchasers, the 7.5% IMT rate is now law, with carve-outs that reward integration (residency) or contribution to the moderate-rent stock (36 months of qualifying letting).
For tenants, the increase to the IRS deduction is a modest annual ceiling adjustment, €900 in 2026, €1,000 from 2027, and not a per-month figure.
14. Conclusion
The publication of Decreto-Lei n.º 97/2026 closes the gap that Lei n.º 9-A/2026 had left open and replaces a long list of “to be defined” items with concrete rules. The framework now functions as a coherent package: a reduced VAT rate channelled through verba 2.42.1 for qualifying construction contracts, a partial-refund mechanism for self-builders, a disciplined 24-month placement-on-market window and 36-month letting threshold for developers, an IMT surcharge to ensure acquirers actually use dwellings as HPP, a calibrated 7.5% IMT for non-residents with three carve-outs, and a modest tenant-side IRS deduction increase.
What remains to be monitored is, on the regional side, any specific portarias for Madeira and the Azores, and, on the administrative side, AT guidance and refund processing once the first applications under Annex II are filed.
This article is provided for general informational purposes only and does not constitute legal, tax, accounting, financial, or professional advice. The information contained herein is based on MCS’s interpretation of Lei n.º 9-A/2026, of 6 March, and other publicly available legal materials as understood at the date of publication.
The legislative and regulatory framework discussed in this article may be subject to amendment, clarification, administrative guidance, or implementing regulations. In particular, certain operational aspects of the reduced VAT regime for construction and rehabilitation works, including application procedures, documentation requirements, deadlines, and refund mechanisms, may depend on implementing legislation or administrative guidance that may not yet have been published or may change after publication of this article.
Any figures, thresholds, tax rates, ceilings, or examples referred to in this article are illustrative and should be professionaly verified before being relied upon, as they may be affected by annual updates, regional variations, legislative amendments, or official interpretations by the Portuguese Tax and Customs Authority or other competent authorities.
No reader should act or refrain from acting on the basis of this article without first obtaining specific legal and tax advice tailored to their individual circumstances, project structure, residence status, property use, contractual arrangements, and applicable regional rules. The application of Portuguese VAT, IMT, IMI, IRS, IRC, and related housing-package measures may vary depending on the facts of each case.
MCS accepts no liability for any loss, damage, cost, or expense arising from reliance on this article or from any action taken or not taken on the basis of its contents, except where such exclusion is not permitted by applicable law. Engagement with MCS is subject to a separate written agreement defining the scope of services, professional responsibilities, fees, and applicable terms.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
