Decree-Law no. 97/2026, of 20 May, has been published, approving a set of tax measures aimed at increasing the supply of housing, with particular focus on the construction, rehabilitation, acquisition and leasing of residential properties.

The statute does not merely change rates or create an isolated benefit. Its logic is broader: to reduce the tax burden when the property enters, or remains, in the housing market at values considered moderate. Hence the measures impact very different profiles: individuals, landlords, developers, contractors, investment vehicles, institutional investors and non-resident purchasers.

This note follows that practical logic: instead of presenting the amendments tax by tax, it identifies the main effects of the statute by type of stakeholder.

Key idea In 2026, many benefits depend on two reference thresholds: a monthly rent of up to €2,300 and a sale price of up to €660,982. These amounts do not dispense with a case-by-case verification of the remaining requirements, but they are the first filter for applying the regime.

1. The two thresholds that structure the statute

A large part of the new measures is based on the concept of moderate value. In 2026, the reference values are as follows:

Criterion	Reference value in 2026
Moderate monthly rent	up to €2,300/month
Moderate sale price	up to €660,982

The moderate monthly rent corresponds to 2.5 times the guaranteed minimum monthly wage provided for 2026, set at €920. The moderate sale price corresponds to the upper limit of the 2nd IMT band applicable to the acquisition of primary and permanent residence in 2026.

These thresholds may be updated by ministerial order. Furthermore, for the purposes of assessing them, what matters is not only the price or rent formally stated in the contract. Movable assets, equipment, accessory parts and services that contribute to the valuation of the property must also be taken into account, even if contracted separately.

This rule is relevant in practice: contractual structures that artificially separate the price of the property from other associated payments should not, by this means, avoid the legal thresholds.

2. Individuals: building one’s own home may now give entitlement to partial VAT refund

For individuals who build their primary and permanent residence, the statute creates a regime for partial refund of the VAT borne on construction works contracts.

The regime applies where the works contract is entered into outside the scope of a business or professional activity and the property is intended to be the beneficiary’s primary and permanent residence. The taxable value of the property, or, if higher, the acquisition value of the land plus the construction costs, excluding VAT, may not exceed €660,982.

There are also time requirements. The property must be allocated to primary and permanent residence within six months of the issuance of the documentation related to the start of use, and this allocation must be evidenced by the taxpayer’s tax domicile. The allocation must be maintained for at least 12 months.

The refund does not cover any and all expenses related to the works. Only VAT borne on construction works contracts subject to the standard rate is relevant, as set out in invoices issued in accordance with legal requirements and reported to the Tax Authority. The mere purchase of materials, considered in isolation, falls outside the regime.

The application must be submitted electronically within 12 months of the issuance of the documentation relating to the start of use. The Tax Authority has 150 days to process the refund, provided that the application is duly documented. The regime covers construction works whose VAT becomes chargeable up to 31 December 2032.

To remember This is not an automatic benefit at the time of the works. It requires appropriate invoices, a works contract, an occupancy permit, proof of the value of the land and effective allocation of the property to primary and permanent residence.

3. Individuals who sell property: reinvesting in rental may eliminate capital gains taxation

The statute introduces a new exemption from IRS taxation for real estate capital gains. The measure allows the sale proceeds, net of the repayment of any loan contracted for the acquisition of the property, to be reinvested in the acquisition of another property, located in Portugal, intended for residential leasing with moderate rent.

The reinvestment must take place between 24 months before and 36 months after the sale. The intention to reinvest must be indicated in the IRS return for the year of disposal.

The tax advantage then depends on the effective use of the acquired property. A residential lease contract, with rent up to €2,300/month, must be entered into within six months. The property must remain leased for at least 36 months, consecutive or non-consecutive, within the first five years. During this period, the rent may not exceed the legal thresholds and the property may not be transferred, whether for consideration or free of charge.

The measure applies to disposals carried out between 1 January 2026 and 31 December 2029.

In practice, this regime may be of interest to owners wishing to reorganize real estate assets without withdrawing capital from the housing sector. The benefit, however, has a clear counterpart: the acquired property must be placed and kept on the residential rental market.

4. Buyers and tenants: indirect benefits and higher rent deductions

Buyers of primary and permanent residences may indirectly benefit from the reduction of the VAT rate applicable to certain construction or rehabilitation works. Where the property is intended for sale as a primary and permanent residence and the price does not exceed €660,982, the works may benefit from the reduced VAT rate, provided that the remaining requirements are met.

There is, however, a relevant caveat for the buyer. If the application of the reduced rate was based on the property being intended as a primary and permanent residence, failure to effectively allocate it to that purpose may result in an IMT surcharge corresponding to 10% of the taxable value. The risk, in this respect, lies with the purchaser.

For tenants, the most direct change is the increase in the annual limit of the IRS credit for rent paid under residential lease contracts: €900 in 2026 and €1,000 from 2027 onwards.

The measure reinforces the importance of formalizing contracts and reporting them to the Tax Authority, without which the tax benefit will have no practical effect for the tenant.

5. Landlords and property owners: moderate rents now have a more favorable tax framework

For owners who place properties on the residential rental market, the statute introduces a separate 10% tax rate on rental income arising from contracts with a monthly rent of up to €2,300, received up to 31 December 2029, unless a more favorable regime applies.

Where this income is received by corporate income taxpayers, or by personal income taxpayers with organized accounting under category B, only 50% of the respective amount is taken into account. The effect is a reduction of the taxable base applicable to that income.

The measure may be attractive to individual landlords, real estate companies and owners with residential property held for yield. The benefit, however, is not based solely on entering into a lease contract: it depends on compliance with rent limits and with the applicable reporting and documentation obligations.

6. Construction and real estate development sector: reduced VAT rate on eligible works contracts

One of the measures with the greatest practical impact for the construction sector is the application of the reduced VAT rate, currently 6% on the mainland and 4% in the Autonomous Regions, to certain construction or rehabilitation works for residential purposes.

The reduced rate may apply, in particular, to works on properties intended for sale as primary and permanent residences, where the sale price does not exceed €660,982, or on properties intended exclusively for residential leasing, where the monthly rent does not, as a rule, exceed €2,300. It may also apply to properties covered by Investment Contracts for Residential Rental.

For properties intended for sale, the transfer must take place within a maximum of 24 months from the issuance of the documentation relating to the start of use, and the acquisition deed must expressly mention the application of item 2.42.1 of List I annexed to the VAT Code.

For properties intended for leasing, the first lease contract must enter into force within a maximum of 24 months from the issuance of the documentation relating to the start of use. In addition, the property must be leased for at least 36 months, consecutive or non-consecutive, within the first five years.

From the promoter’s or project owner’s perspective, the reduced rate may significantly change the project’s economic structure. But it requires planning from the outset: definition of the product, control of sale price or rent, planning documentation, preliminary sale agreements, deeds and marketing or leasing timelines must be aligned with the intended tax benefit.

From the contractor’s or construction company’s perspective, the key point is documentation. The reduced rate should not be applied based solely on an informal indication from the project owner. Works contracts and invoicing must identify the grounds for applying the reduced rate, and the supporting elements for the transaction’s tax treatment must be retained.

Incorrect application of the reduced rate may lead to adjustment of the tax due, plus interest and, where applicable, penalties. Therefore, the fiscal opportunity comes with heightened requirements for coordination between promoter, project owner, contractor and tax advisers.

7. Institutional investors and investment vehicles: strengthening the rental support regime

The statute strengthens the tax regime set out in article 24-A of the Tax Benefits Statute, applicable to investment vehicles with exposure to affordable residential leasing.

This regime is not entirely new. It was created in 2024 and already allowed for partial exemptions from taxation where part of the vehicle’s assets consisted of properties allocated to residential lease or sublease contracts at affordable prices.

Decree-Law no. 97/2026, however, broadens and makes this framework more favorable. First, the deadline for incorporating the vehicles or adapting their constitutional documents is extended to 31 December 2029. Furthermore, the regime is now articulated with the new RSAA, or with other similar regimes for residential lease or sublease at affordable prices.

To benefit from the regime, the vehicle’s constitutional documents must provide that at least 5% of its assets consist of rights over properties subject to contracts covered by the RSAA or similar regimes. This allocation must be verified in the proportion defined in the constitutional documents, by reference to the balance sheet value on the last day of the tax period immediately preceding that in which the income is obtained.

The main novelty concerns the tax treatment of income received by unit-holders or shareholders. Distributed income corresponding to results arising from eligible residential lease or sublease contracts will now be taxed at a rate of 5%, in the corresponding proportion.

As regards other distributed, redeemed or liquidated income, a logic of partial exemption from taxation is maintained, depending on the percentage of eligible assets, but with more favorable bands than under the previous regime:

Eligible assets	Exemption from taxation
More than 5% up to 10%	2,5%
More than 10% up to 15%	5%
More than 15% up to 25%	7,5%
More than 25% up to 50%	15%
More than 50%	30%

Investment vehicles falling within the two highest bands also benefit from a 25% reduction of the rate provided for in item 29.2 of the General Table of Stamp Duty.

The regime may be relevant for real estate investment funds, real estate investment companies and other vehicles seeking to structure portfolios with an affordable housing component. The investment decision should, however, be accompanied by a review of the constitutional documents and periodic verification of the composition of eligible assets.

8. Large-scale projects: Investment Contracts for Residential Rental

Investment Contracts for Residential Rental (“CIA”, Portuguese acronym for Contratos de Investimento para Arrendamento) are one of the most relevant components of the statute for medium- and long-term housing projects. They are entered into between the investor and IHRU, acting on behalf of the State, and may be in force for up to 25 years.

Their purpose is to support investments in the construction, rehabilitation or acquisition of properties intended for residential leasing or leasing for residential subleasing.

Investments are eligible where at least 700/1000 of the gross floor area is intended for residential leasing, with the remaining area potentially allocated to uses that are complementary to or compatible with housing. Rents under the covered contracts may not exceed the applicable limits.

CIAs may provide a wide range of tax benefits, including exemption from IMT and Stamp Duty on the acquisition or transfer of eligible properties, IMI exemption for a period of up to eight years, a 50% reduction in the IMI rate for the remaining period, application of the reduced VAT rate on covered works, exemption from AIMI during the term of the contract and refund of 50% of the VAT borne on architectural, engineering, design and study services.

These contracts may be attractive for investors capable of developing rental projects at scale. In return, they involve obligations to allocate properties to leasing, reporting duties and the risk of losing benefits if the contract conditions are not met.

Relevant date   The CIA regime takes effect from 1 September 2026. Its implementation still depends on additional secondary legislation.

9. Non-resident purchasers: increased IMT, with exceptions

The statute introduces an increased IMT rate for residential acquisitions by non-residents. The acquisition of an urban property or autonomous unit intended exclusively for housing is now subject to a rate of 7.5%, without any exemption or reduction.

The increase does not apply where the purchaser is already a tax resident in Portugal, becomes a tax resident in Portugal within two years of the acquisition, or allocates the property to residential leasing with moderate rent within six months and keeps it leased for at least 36 months within the first five years.

In the exempted situations, the Tax Authority may, at the request of the interested party, annul the difference between the tax paid and the tax that would result from applying the general rates. The request must be submitted within six months of the date on which the person becomes a resident or of the date on which the lease contract is entered into, as applicable.

The measure should be taken into account in acquisitions by foreign investors, international buyers, non-resident emigrants and entities without tax residence in Portugal.

10. Municipalities and controlled-cost housing

The statute also provides for tax benefits for the first acquisition of controlled-cost housing intended exclusively as primary and permanent residences.

These acquisitions may benefit from IMT exemption where the acquisition value does not exceed the maximum limit of the first band of the table applicable to primary and permanent residence. Where the value exceeds that limit, the rates applicable to primary and permanent residence may apply. A credit against Stamp Duty is also provided for, under the terms and limits set out in the statute.

Excluded are purchasers who hold an ownership right, or a partial right in rem derived from that right, over an urban residential property on the date of transfer or at any time in the three previous years.

Application of the IMT benefits depends on a resolution of the municipal assembly, upon proposal by the municipal council. Therefore, practical implementation may vary from municipality to municipality.

11. RSAA: affordable rental with its own logic

The Simplified Affordable Rental Regime (“RSAA”, Portuguese acronym for Regime Simplificado de Arrendamento Acessível) is the new regime under which a lease contract may be classified as an affordable rental contract.

In simple terms, it works as follows: the landlord agrees to charge a capped rent, defined according to public criteria, and, in return, may benefit from a more favorable tax regime, namely exemption from IRS or IRC on rental income obtained under that contract.

The RSAA applies to residential lease contracts, lease contracts for residential subleasing and residential sublease contracts. It may also cover municipal affordable rental programs. Contracts may be intended for permanent residence and, in certain cases, for temporary residence.

The main difference compared to the general moderate rent threshold set out in other parts of the statute lies in how the rent is calculated. For several tax measures in the package, the relevant limit is, as a rule, €2,300/month. Under the RSAA, however, the maximum rent is not a fixed national amount: it will be defined by type and municipality, with reference to 80% of the median rent values published by the National Statistics Institute (INE) for the municipality where the property is located. The implementing order may also take into account characteristics of the property, such as energy efficiency or private parking.

For contracts intended as permanent residences, the minimum term is three years. For contracts intended as temporary residences, the minimum term is three months.

To access the tax benefit, the landlord must upload, on the IHRU electronic platform, by 15 January of the year following the year in which the contract is signed, a copy of the contract and proof that it was reported via the Tax Portal. Thereafter, IHRU will notify the Tax Authority of the contract by the end of February, and the tax regime will apply with effect from the date of execution of the contract.

Thus, the RSAA is not merely “affordable rent” in a generic sense. It is a formal contract classification regime: if the contract complies with rent caps, minimum terms and reporting obligations, it may benefit from tax exemption; if it ceases to meet these requirements, the benefits may be lost, with adjustment of the tax due.

The RSAA takes effect from 1 September 2026, and its full implementation still depends on additional secondary legislation.

12. Dates to remember

Measure	Effective date / relevant period
Amendments to the IRS Code and to the Tax Benefits Statute	since 1 January 2026
Exemption of real estate capital gains from IRS	disposals between 1 January 2026 and 31 December 2029
Reduced taxation of rental income	income received up to 31 December 2029
CIA	1 September 2026
RSAA	1 September 2026
Partial VAT refund for construction of primary and permanent residence	VAT chargeable up to 31 December 2032
Reduced VAT rate on certain works contracts	specific transitional rules; in particular, planning operations initiated between 25 September 2025 and 31 December 2029, with VAT chargeable from 1 January 2026

The practical application of some measures still depends on the publication of additional secondary legislation, particularly with regard to CIAs and the RSAA.

13. Conclusion

Decree-Law no. 97/2026 is a significant tax intervention in the housing sector. The statute seeks to act at various stages of the chain: construction, rehabilitation, acquisition, leasing, institutional investment and affordable rental.

The opportunity is clear, but the benefits are not automatic. In almost all regimes there are price or rent caps, allocation periods, reporting and documentation obligations, and tax consequences in case of non-compliance.

Therefore, the practical usefulness of the statute will depend less on the mere existence of benefits and more on how transactions are structured from the outset. Developers, contractors, investors, landlords and individuals should verify, before undertaking contractual or tax commitments, whether the project satisfies the legal conditions of the benefit they intend to apply.

This note is for information purposes only and does not constitute legal or tax advice. Application of the regimes described must be assessed in light of the specific circumstances of each transaction.