These measures, designed to encourage development, rental markets and home purchases, were formally approved on 12 May.
Tax relief measures
According to a statement published by the Presidency, the legislation implements tax relief measures authorised under Law No. Law No. 9-A/2026 from 6 March, focusing on stimulating housing supply through reduced taxation.
Reducing VAT on construction
One of the most significant changes is the reduction of VAT on residential construction projects from 23 per cent to 6 per cent, while the lower rate will apply to homes intended either for sale or long-term rental as permanent residences, provided they fall within the government’s “moderate pricing” thresholds.
For rental properties, the cap is set at monthly rents of up to €23,000, and the ceiling is €660,982 for homes intended for sale.
The construction sector has repeatedly argued that delays in publishing the legislation contributed to a decline in new housing developments. Data from the Portuguese Association of Civil Construction and Public Works Industries showed that licenses for housing construction and rehabilitation projects decreased by 16 percent in the first two months of 2026 compared with the same period last year.
Income and property taxation
This package also introduces several changes to income and property taxation intended to encourage landlords to place more homes on the rental market.
Under the new rules, the IRS rate applied to rental income from moderately priced housing will fall from 25 percent to 10 percent.
In addition, capital gains tax on the sale of residential property will be waived when the proceeds are reinvested in new housing destined for the rental market.
The government will also raise the maximum value of rent deductions allowed under IRS calculations to €1,000 per month.
Non-resident buyers
Meanwhile, non-resident buyers purchasing residential property in Portugal will face a 7.5 percent Property Transfer Tax (IMT).
This approval comes eight months after proposals for the housing tax package were first announced in September, which were led by the Prime Minister.
The government submitted the request for legislative authorisation to parliament in December. It was approved in February with support from the Partido Social Democrata (PSD), CDS-PP and Iniciativa Liberal (IL), while Chega abstained.
Final approval
Although the authorisation law was promulgated earlier this year by former President Marcelo Rebelo de Sousa, the decree-law required the final approval of the newly elected President, António José Seguro, before entering into force.
In Belém, additional housing reforms remain under consideration at the presidential palace, including a separate decree-law aimed at simplifying planning procedures for new housing developments, which would allow construction work to begin just eight days after prior notification is submitted.
The government has also sent new legislation to parliament that would enable a single heir to initiate judicial proceedings to sell inherited urban or rural properties that have remained undivided for more than two years due to disputes among heirs.