On 25 September 2025, the Council of Ministers approved a set of tax measures – in particular concerning Personal Income Tax (“PIT”), Value Added Tax (“VAT”), and Property Transfer Tax (“IMT”) – with the aim of promoting the supply of and access to housing in Portugal, through tax reductions for developers, landlords, and tenants.
Although the Draft Law to be submitted by the Government to Parliament is not yet known, the Council of Ministers’ Statement of 25 September 2025 foresees the following measures:
- PIT
– Incentives for leasing and selling residential properties within a “moderate value” range, primarily aimed at the middle class across the national territory:
For tenants | Increase of the tax deduction related to rental expenses to € 900 in 2026 and € 1,000 in 2027. Currently, this limit is set at € 800.
For landlords | A reduction is foreseen in the autonomous PIT rate from 25% to 10% on moderate rents, defined as rents up to € 2,300.
Sale of residential properties | An exclusion from PIT on capital gains resulting from the sale is foreseen, provided the sale proceeds are reinvested in properties for lease at a moderate value.
- VAT
– Boosting the rental market and the construction of residential properties at a moderate price.
The reduced VAT rate of 6% will apply to the construction of residential properties for sale at a moderate price. In parallel, the reduced VAT rate will apply to leases at moderate rents.
There is also a reference to tax incentives for investments in the construction, rehabilitation, or acquisition of properties for lease at moderate rents.
- IMT
– Although not included in the aforementioned Council of Ministers’ Statement, the Government announced at a press conference an increase in the IMT rate applicable to the acquisition of properties by non-resident taxpayers in Portugal.
This measure aims to discourage the acquisition of properties in Portuguese territory by non-resident taxpayers with greater purchasing power than the Portuguese population.
However, according to information released by the Government, this measure will not apply to Portuguese citizens.
Additionally, other measures were approved focusing on urban planning and the licensing of housing construction works, as well as the temporary accommodation of workers in the civil construction sector.
It should be stressed that only the general outlines of the tax measures approved by the Council of Ministers have been disclosed, and it will be necessary to wait for the Draft Law for a more detailed analysis of the new regime.
In particular, the drafting of the respective transitional provisions for each of the tax changes will be of special importance, given the need to safeguard rights and legal expectations, as well as the principles of legal certainty and security.
The Tax Law practice of Antas da Cunha ECIJA anticipates, as of now, a set of issues arising from the potential approval of the tax measures as presented, namely:
– Increase of IMT on property acquisitions by non-resident taxpayers | This may constitute a provision in breach of European Union Law, by introducing unequal treatment between residents and non-residents in Portugal, hindering the free movement of people and capital. The Court of Justice of the European Union has already ruled on this matter in the past concerning other discriminatory tax measures – for example, PIT taxation of capital gains on real estate realized by non-residents.
– Reduction of VAT to 6% | It is important to clarify whether this reduction applies from the outset – at the start of construction and/or lease – or, alternatively, will be a regularization to be made by the taxpayer when the relevant conditions are met.
Should the first situation be adopted – more favorable to developers and lessors – it will be necessary, for example, to establish the consequences of the sale not taking place and/or the lease not being concluded at the fixed moderate value, as well as the deadlines for its regularization and respective sanctions.
Since this is a proposal for the years 2025–2029, the transitional law must also be clear on the application of this regime, namely whether it is sufficient to sign a promissory contract of purchase and sale by 2029 or whether, instead, sales must occur by the end of that year. Regarding leases, it must also be clarified what the impact will be on the lessor if, despite all attempts, the property cannot be rented (even within the moderate value).
Antas da Cunha Ecija Tax team is available to provide tailored assistance and support, either through a specific analysis of the tax implications for the participants involved, or in respect of any regularizations with the Tax Authority.
