Housing tax package approved: what changes for homeowners, investors and buyers.

Housing tax package approved: what changes for homeowners, investors and buyers?

On 18 February 2026, the Portuguese Parliament approved the new housing tax package at the committee stage, introducing significant changes with a direct impact on the property sector, construction, and the rental market.

One of the headline measures is the reduction of VAT to 6% on the construction of homes intended for an owner’s own permanent residence, although the rules have been adjusted compared with the Government’s initial proposal.

VAT at 6% on construction: what are the new rules?

The measure was approved with votes against from the PS, abstentions from Chega and Livre, and votes in favour from PSD, Iniciativa Liberal and CDS-PP.

However, following technical criticism, including concerns raised by the President of the Order of Certified Accountants (OCC), Paula Franco, about practical implementation difficulties, changes were introduced to the regime.

Under the revised rules, the reduced VAT rate:

• applies only to properties intended as the buyer’s own permanent home;

• no longer applies if the buyer:

  • does not use the property as their own permanent home; or

  • does not remain living in the property for a minimum period of 12 months.

If these conditions are not met, there may be:

• an increase in IMT of 10 percentage points, except in exceptional situations set out in the Personal Income Tax Code (IRS Code), Article 10, no. 23.

This change aims to prevent speculative use of the measure and ensure the tax benefit is directed towards genuine permanent housing.

Other measures included in the housing tax package

Alongside the VAT reduction, the package includes several measures that could materially affect the market:

1. Capital gains when reinvesting into rental property
   Capital gains tax may be excluded on the sale of residential property where the proceeds are reinvested in the purchase of properties intended for residential letting. This could encourage owners to channel investment into the long-term rental market.

2. Higher IRS deduction for rents
   The IRS deduction limit for rents paid by tenants increases to €1,000, strengthening tax support for households renting.

3. Reduced IRS rate on rental income
   A 10% autonomous IRS rate will apply to rental income from residential tenancy agreements, a significant reduction that may make renting more attractive as an investment.

4. Exemption from IMT and Stamp Duty
   The package also provides for exemptions from IMT and Stamp Duty on the purchase of properties intended for:

• residential letting;

• letting for subletting as residential accommodation;

• residential subletting.

What impact could this have on the market?

This housing tax package seeks to:

• encourage construction for owner-occupation;

• promote long-term renting;

• increase the supply of rental homes;

• support families under pressure from high housing costs.

However, the real-world impact will depend on practical regulation, tax administration, and how the market responds — particularly regarding the reduced VAT rules and their conditions.

At Cerro Novo Properties, we will continue to follow legislative developments and the market effects of these measures, supporting homeowners, investors and buyers in making informed decisions.

Source: Lusa / Idealista, “Pacote fiscal da habitação aprovado na especialidade no Parlamento”, 18 February 2026.