Portugal slashes landlords' income tax to spur rental housing

The Portuguese government has approved a new housing‑tax package that lowers the personal income tax (IRS) on rental income from 25% to 10% for leases up to €2,300 per month. The measure, promulgated by President António José Seguro, is expected to be published in the official gazette by the end of May and will take effect shortly thereafter, with retroactive application to 1 January. By cutting the tax rate, a landlord receiving €1,000 in rent could see net income rise from about €750 to €900, and rentals above €2,300 would face a much higher tax burden, creating an incentive to keep rents at or below the threshold.

The package also includes other housing‑related tax changes: exemption of capital‑gains tax when proceeds from a home sale are reinvested in rental properties, an increase in the deductible rent limit to €1,000 per month, and a 7.5% IMT rate for non‑resident buyers. A planned reduction of VAT on new construction from 23% to 6% aims to revive stalled building licences. The legislation passed with support from PSD, CDS and IL, while Chega abstained, and follows a multi‑month legislative process that began last September.