By the time you're reading this, you've probably already been through half a dozen newsletters packed with great content. Ours, we'll admit, is slightly delayed — but it comes with a distinct advantage: it's short enough to read between a caipirinha and a fresh dive at the beach, and by the end of it you'll actually know what Decree-Law 97/2026 means for your property and your wallet.
Published on 20 May, it brings a genuinely impressive package of tax incentives for anyone buying, renting out, or investing in Portuguese property. Here's what you need to know, with jargon kept to a minimum.
Before diving into the benefits, it's worth knowing who qualifies. Most of these incentives apply to properties with "moderate" prices or rents. This concept has not been exempt from criticism, particularly given the typical wealth level of a Portuguese national, but it's now set in stone. Here's how the law defines that:
If your property falls within these numbers, read on. Also, we divided the article into several sections so you can quickly jump to the one that better fits your profile.
Below is a summary of the measures for those planning to buy a property, with specific details for non-residents and first-time buyers.
Non-residents buying residential property in Portugal are subject to a flat municipal property transfer tax (IMT) rate of 7.5%, rather than the progressive rates applicable to residents.
To escape this aggravated rate, there are only a few options/cases:
Whether this rule will survive legal scrutiny is another matter. A flat penalty rate applied exclusively to non-residents raises legitimate questions under EU free movement of capital rules — and we wouldn't be surprised if this one ends up before the Court of Justice of the EU before too long. But that's a conversation for another day.
Construction or renovation work on properties intended for the owner’s own primary residence or long-term residential rental qualifies for a reduced VAT rate of 6% (in Mainland Portugal) or 4% (in Madeira or the Azores), down from the standard 23% and 22% respectively.
In cases where the full rate is paid, you may claim a refund of the difference — that's 17 to 18% of the tax paid — as long as the VAT became chargeable before 31 December 2032.
Bear in mind that the property must be designated as your primary residence within 6 months of completion and remain so for at least 12 months, and you have 12 months to file the claim with AT.
If you're buying your first home for permanent owner-occupation and it qualifies as "cost-controlled housing" (purchase price up to €330,539), you're exempt from IMT (Municipal Property Transfer Tax) and can benefit from a reduction of Stamp Duty — as long as you haven't held rights over any residential property in the past three years.
For landlords, we would like to highlight the following measures:
Landlords renting at moderate rates get a meaningful reward from the taxman:
In plain terms, renting affordably becomes a lot more tax-efficient.
Sold a property and planning to reinvest in the rental market? You could be exempt from Portuguese personal income tax, provided:
Regarding the property you buy with the reinvestment:
A few conditions, yes, but the tax saving can be substantial.
Alternative Investment Funds (AIFs): even more attractive now
If you invest through Alternative Investment Funds focused on affordable housing, the new rules are worth paying close attention to:
To qualify, the fund must have at least 5% of its assets in properties under the Simplified Affordable Rental Regime (SARR) or an equivalent scheme, and must be set up by 31 December 2029.
Investors in the property sector will also be able to benefit from measures under Decree-Law 97/2026.
Alternative Investment Funds (AIFs): even more attractive now
If you invest through Alternative Investment Funds focused on affordable housing, the new rules are worth paying close attention to:
To qualify, the fund must have at least 5% of its assets in properties under the Simplified Affordable Rental Regime (SARR) or an equivalent scheme, and must be set up by 31 December 2029.
From 1 September 2026, the ICR regime comes into force. This is a direct agreement between the private investor and IHRU (the Portuguese Institute for Housing and Urban Rehabilitation), on behalf of the State, offering tax benefits for up to 25 years on properties built, renovated, or acquired for residential rental. The package includes:
Also launching in September 2026, the SARR replaces the previous Rental Support Programme. Lease agreements must comply with a minimum term (3 years for permanent residence and 3 months for temporary residence) and the rent must not exceed 80% of the median rent per sqm in the relevant municipality (to be set by ministerial order).
The headline benefit: full PIT and CIT exemption on rental income earned under this regime.
Good news for tenants.
Renters aren't left out. The annual rent deduction limit under PIT is going up:
Needless to say, to benefit from this deduction, the contract needs to be duly registered with the Portuguese tax authorities.
The message is clear: the Government wants more properties in the rental market and more construction, new or not, and overall, there are some ambitious tax cuts.
Ultimately, there is an intention to align the profitability of rentals with other activities, such as short-term holiday rentals, and also foster private investment. Additional measures (not from a tax standpoint) are expected over the next few months as part of a wider program.
If you own property, are thinking of buying, or invest in real estate, now is a good time to revisit your strategy.
