On September 25, 2025, the Portuguese Government announced a package of measures to boost the housing market. These initiatives aim to support both property owners and tenants while addressing affordability and supply challenges.
The measures are not yet final. They will be debated in Parliament during the 2026 State Budget discussions. Still, the proposals give a clear idea of how the Government plans to reshape housing taxation.
1. Tax Benefits for the Rental Market
The rental sector is a key target of these reforms. Both landlords and tenants could see meaningful advantages.
Lower IRS Rate for Landlords
Income from rental contracts of up to €2,300 per month may be taxed at a rate of only 10%, down from 25%.
Capital Gains Relief
Landlords who sell a property and reinvest in rentals at moderate rents may be able to avoid paying the IRS on capital gains.
AIMI Exemption
Properties rented for less than €2,300 a month may be exempt from Additional Municipal Property Tax (AIMI), even if the property value exceeds €600,000.
Higher Deductions for Tenants
Tenants could deduct more rent expenses on their IRS returns: €900 in 2026 and €1,000 in 2027. The limit stays at 15% of annual costs.
2. Incentives for Construction
To encourage new housing, the Government plans a reduced VAT rate for some projects:
- 6% VAT instead of 23% on: Homes built for sale, priced up to €648,000.
Homes built for rental, with rents capped at €2,300 per month. This tax cut will remain in effect until 2029. However, the construction of primary residences for personal use appears to be excluded. Many question why self-use housing should not benefit from the same reduced VAT.
3. Measures to Limit Demand
Besides supporting supply, the package also seeks to control housing demand:
- Higher IMT for Non-Residents: The Property Transfer Tax (IMT) may increase for foreign buyers of Portuguese properties. Emigrants would not face this increase.
Legal experts have already warned of potential conflicts with EU non-discrimination rules and the Portuguese Constitution’s principle of equality.
Final Thoughts
The proposed Portugal Housing Tax Benefits combine rental incentives, support for construction, and tighter rules for foreign demand. If approved in the 2026 State Budget, they could bring real change to Portugal’s property market.
Property owners, investors, and tenants should closely follow the legislative debate. Acting early may help them prepare for the new tax environment.
The information provided in this article is intended for general informational purposes only, on the matter of Portugal Housing Tax Benefits, and does not constitute legal or tax advice. The measures described are likely to be part of the Portuguese Government’s proposed State Budget for FY2026. Therefore, they are subject to parliamentary discussion and approval. Readers should consult qualified legal or tax professionals for advice tailored to their specific circumstances.
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