On 12 May 2026, the President of the Republic, António José Seguro, promulgated the Government decree adopted under the legislative authorisation granted by Lei n.º 9-A/2026, of 6 March. The decree carries the bulk of the housing tax package and takes effect once published in the Diário da República, expected within days of promulgation. The package was first announced by Government in September 2025, deposited in Parliament in December 2025 as a request for legislative authorisation, and approved in February 2026 with the abstention of Chega.
The package introduces four operational changes that bear directly on MCS prospects. First, the standard VAT rate on construction and rehabilitation works for residential property intended for sale or rental at a “moderate price” falls from 23% to 6%. Second, the IRS rate on rental income falls from 25% (the autonomous rate for property income) to 10%, where the lease is at a moderate-rent threshold, has a minimum duration of three years, and runs until 2029. Third, capital gains on the sale of residential property may be excluded from taxation where the proceeds are reinvested in new rental property under the moderate-rent envelope. Fourth, the IMT rate on the acquisition of residential property by non-residents is set at 7.5%, with carve-outs for emigrants. Adjacent measures expand the IMI exemption for moderate-rent projects and raise the IRS rental-deduction ceiling for tenants to EUR 1,000 per month.
This note sets out the four core measures, the “moderate price” thresholds that govern access to them, the IMT position for non-residents, the timing of entry into force, and the points on which MCS can assist.
The “moderate price” thresholds
Access to the bulk of the package’s reliefs is conditioned on the property qualifying as a “moderate price” property. The thresholds set in the legislative authorisation are EUR 660,982 for a sale price and EUR 2,300 per month for a residential lease. The sale threshold is anchored to the IMT-bracket structure and is intended to be updated annually in line with the IMT bracket revision. The rent threshold operates as a hard ceiling: a lease above EUR 2,300 per month is outside the regime, regardless of the property’s other characteristics.
The thresholds operate at the level of the individual property and the individual lease, not at the level of the owner’s overall portfolio. A landlord with several units can qualify each unit independently, provided each lease sits within the rent ceiling and meets the three-year minimum duration. A developer building several units for sale can qualify those whose sale price is at or below the EUR 660,982 mark while keeping higher-value units outside the relief.
VAT at 6% on construction and rehabilitation
Construction and rehabilitation works on residential property intended for sale or rental at moderate-price thresholds are subject to the reduced VAT rate of 6%, rather than the standard 23% rate. The relief applies to the works themselves, not to the underlying acquisition of the land or building.
For developers and refurbishment operators, the rate change materially alters project economics. The VAT differential of 17 percentage points on the works component of a development budget is a substantial cost saving where the end product qualifies under the moderate-price threshold. The structural choice for a developer working close to the threshold is now whether to price the units at or below EUR 660,982 to secure the VAT relief on the works, or to price above and forfeit it. The same logic applies to a build-to-rent operator targeting the moderate-rent ceiling.
IRS at 10% on qualifying rental income
The standard autonomous IRS rate on Category F (property) income is 25%. Under the package, the rate falls to 10% where the lease is residential, the rent is at or below EUR 2,300 per month, the contract has a minimum duration of three years, and the contract runs until at least 2029.
The relief is structured as a substitute autonomous rate rather than as a deduction; it operates by replacing the 25% rate with the 10% rate, where the qualifying conditions are met for the relevant year of assessment. The IRS Category F regime continues to permit aggregation as an option, but the 10% autonomous rate is the default for qualifying income. The conditions are assessed at the level of the individual lease; a landlord operating one moderate-rent lease and one above-threshold lease applies the 10% rate to the first and the 25% rate to the second.
Capital gains exclusion on reinvestment in rental property
Capital gains arising on the sale of residential property may be excluded from IRS where the proceeds are reinvested in new residential property allocated to a moderate-rent lease meeting the conditions described above. The relief operates by analogy with the existing reinvestment relief on the sale of own and permanent residence, but with the destination of the proceeds being a rental property rather than a new own residence.
The relief opens an exit route for landlords holding legacy stock outside the moderate-rent regime, whose disposal would otherwise trigger a Category G gain at 50% inclusion subject to the progressive scale (or, where applicable, the autonomous flat rate for non-residents). Where the proceeds are redeployed into qualifying moderate-rent stock, the gain is excluded. The reinvestment conditions, time window, and tracing requirements are technical and require attention at the planning stage; they are not automatic and a non-compliant reinvestment loses the relief.
IMT at 7.5% on non-resident purchasers
The IMT rate on the acquisition of residential property by individuals who are not resident in Portugal is set at 7.5%. The measure does not apply a sliding-scale bracket structure of the kind that governs purchases by residents; it operates as a flat-rate IMT on the relevant acquisition. The principal carve-out is for emigrants, Portuguese nationals or holders of equivalent status who are resident abroad and who acquire property in Portugal under the conditions specified for the emigrant category.
The change is the single most directly relevant measure in the package for the MCS expat-prospect audience. A foreign national without prior Portuguese tax residence acquiring a residential property in Madeira or on the Portuguese mainland now faces a flat 7.5% IMT, on top of the standard IMI and AIMI exposure that attaches to residential property in the holding phase. The position interacts with the residency path: a purchaser planning to take Portuguese fiscal residence before completion may, depending on the timing of NIF allocation, fiscal address registration, and the closing of the acquisition, fall on either side of the resident/non-resident line. The sequencing of these steps is now materially more consequential than it was before the package.
Adjacent measures: IMI exemption and IRS tenant deduction
Two adjacent measures complete the picture. The IMI exemption that previously applied to investment properties allocated to long-term rental is extended to up to eight years for projects linked to moderate-rent leases. And the tenant-side IRS deduction for residential rent paid is raised, with the monthly ceiling moving to EUR 1,000.
The tenant deduction operates symmetrically with the landlord’s 10% autonomous rate: the regime aligns the relief on both sides of the lease, on the assumption that lower landlord taxation and higher tenant deduction will combine to push rents in qualifying stock towards the moderate-rent ceiling and away from short-let or above-ceiling lettings.
Timing of entry into force
The decree was promulgated on 12 May 2026. The measures take effect once the decree is published in the Diário da República, which is expected within days of promulgation. Once in force, the measures apply to lease contracts entered into and to acquisitions completed on or after the entry-into-force date, with the precise transitional rules to be confirmed against the published text. Existing leases and pre-package acquisitions remain on the prior regime in the absence of an express transitional provision to the contrary.
The 2029 sunset on the qualifying-lease condition for the 10% IRS rate is a hard date: leases that do not run until at least 2029 are not eligible. For landlords entering into a new qualifying lease in 2026, the minimum duration condition is satisfied; for shorter leases starting in 2027 or later, the timing margin narrows.
Assistance concerning the housing tax package
MCS advises on the full residential real-estate transaction cycle, including pre-acquisition tax planning for non-resident purchasers, structuring the acquisition vehicle, sequencing the residency path against the closing timetable, qualifying a property under the moderate-price thresholds where the buyer intends to develop or rehabilitate, structuring a lease to fall within the 10% IRS regime, and planning the disposal of legacy stock against the new reinvestment relief. For developers and build-to-rent operators, we advise on the VAT-rate qualification of the works component, the IMI exemption for moderate-rent projects, and the consequential corporate-structuring questions where the operator is a non-Portuguese entity.
The procedural next step for any prospective non-resident purchaser is a scoping review covering the IMT position, the timing of any planned residency change, and the AIMI exposure across the post-acquisition holding phase. Engagements are quoted on the basis of that review.
Contact MCS for a scoping discussion at the addresses on www.mcs.pt.
This article is provided for general information purposes only and does not constitute legal, tax, financial, or migration advice. The content reflects the legal and regulatory framework of the housing tax package in force at the date of publication; subsequent amendments to the relevant statutes, regulations, administrative orientations, or jurisprudence may render parts of the content inapplicable.
The references to procedural arrangements are illustrative of the position as understood at the date of publication and are subject to change at the discretion of the issuing authorities. At the date of preparation of this article, the Government decree promulgated on 12 May 2026 had not yet been published in the Diário da República; the description of the measures set out above reflects the legislative authorisation contained in Lei n.º 9-A/2026 of 6 March and the publicly available accounts of the decree as approved and promulgated.
The specific transitional rules, statutory definitions, conditions of application, and any reservations expressed in the act of promulgation should be verified against the published text of the decree once available, and parts of this article may require updating to reflect the final text. No professional or client relationship is created by the reading of this article, and readers should not act, or refrain from acting, in reliance on the content without obtaining advice tailored to the specific facts of their situation. Madeira Corporate Services accepts no liability for any decision taken on the basis of this article in the absence of a formal engagement.
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
