Government Confirms Reduction Of VAT To 6% For Construction Up To €648,000
The Portuguese government approved on Thursday a package of fiscal and rental measures aimed at tackling the housing crisis. A central step is the reduction of value-added tax to 6% for construction projects up to €648,000. The lower tax will also apply to rental housing with monthly values up to €2,300. Prime Minister Luís Montenegro said this limit was set for “areas of greater pressure,” where rents are often above that level. The measure will be in place until 2029 and reviewed by future governments.
Income Tax Cuts For Landlords Offering Rentals At “Moderate Prices”
Landlords who set rents at what the government calls “moderate prices” will pay a reduced income tax (IRS) on those earnings. Tenants in the same category may also benefit from higher deductions on rent in their annual tax returns. The maximum deduction will increase to €900 in 2026 and €1,000 in 2027.
IMT Increases For Non-Resident Property Buyers, With Emigrants Excluded
Another measure targets international property demand. The Municipal Transfer Tax (IMT) on housing purchases will rise for buyers who are not residents in Portugal. The rule excludes emigrants, who will not face the higher tax burden. Officials argued that this step is meant to address growing external pressure on urban real estate markets, particularly in coastal cities.
Among the measures now presented, a new tax incentive for construction stands out, long requested by the sector: a reduction of VAT to 6% for construction up to €648,000. The 6% VAT rate will also apply to rentals up to €2,300. In other words, to construction intended for renting at this value.
End Of “Affordable Rent” Category Replaced By New Legal Definition In 2025
Prime Minister Montenegro described the overall strategy as a “shock policy,” saying: “We want to shake the construction and rental market.” The new rules form part of a wider attempt to reshape housing access in Portugal, following months of public protests over rising costs.
Do you believe these measures will help improve living conditions for Madeirans and other island residents, while also easing the housing crisis?
Source: Euronews
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