Practical guide: Tax relief measures for housing

In December 2025, we published a Legal Flash analyzing the main tax measures set out in Law Proposal 47/XVII/1, which authorized the government to adopt tax relief measures aimed at promoting housing supply.

Also, in March 2026, we reported on the publication of Law 9-A/2026 (the legislative authorization law), and highlighted the 10 key measures that the authorized decree-law was expected to implement. For further information, see our post, Reduced VAT and tax benefits for housing.

We can now confirm that Decree-Law 97/2026 of May 20 has been published in the Official Gazette of the Republic of Portugal. It implements those tax relief measures under the legislative authorization granted by Law 9-A/2026 of March 6.

Overall, the decree-law seeks to address barriers to permanent home ownership through a broad tax incentive regime designed to mobilize the public, cooperative and private sectors.

The main measures fall under five pillars:

1. The temporary application of the reduced 6% value-added tax (“VAT”) rate to construction and rehabilitation contracts for residential properties.
2. The reduction of tax on income from residential rental contracts and the exclusion from taxation of real estate capital gains reinvested in rental properties.
3. The creation of rental investment contracts (“RIC”) and the Simplified Affordable Rental Regime (“SARR”).
4. The progressive increase in the tax deduction for rent paid by tenants, together with tax benefits for the purchase of controlled-cost housing and higher property transfer tax (“IMT”) for nonresident purchasers.
5. The reduction of tax for participants or shareholders in real estate funds whose assets include real estate intended for residential rental or sub-letting.

Contents

Background

Broad concepts

I. CONSTRUCTION AND REHABILITATION

1. Temporary application of the reduced 6% VAT rate—Item 2.42.1 of List I of the VAT Code

2. Partial VAT refund for individuals (Annex II)

II. RESIDENTIAL RENTALS

3. Property income—Reduction of personal income tax (“PIT”) and corporate income tax (article 45-C of the Tax Benefits Statute)

4. Capital gains exemption on reinvestment in residential rentals

5. RIC (Annex I)

6. Rent deduction for tenants (PIT)

III. AFFORDABLE HOUSING

7. SARR (Annex III)

IV. IMT

8. Deadline for IMT payment

9. Higher IMT for nonresidents

V. ACQUISITION OF CONTROLLED-COST HOUSING

10. Tax benefits for the purchase of controlled-cost housing (Article 45-B of the Tax Benefits Statute)

VI. ALTERNATIVE INVESTMENT UNDERTAKINGS (“AIUs”)

11. Benefits for AIUs

VII. FINAL SUMMARY: KEY DATES

Final notes

Monitoring subsequent regulations

We will continue to monitor the supplementary regulations, particularly the ordinances governing RIC procedures and the SARR. Those ordinances must be published within 30 days after publication of the decree-law. We will also track any significant developments in the implementation of these measures.

For further information, please contact our Cuatrecasas experts in the Knowledge and Innovation Group.