From January 2026, Portugal is expected to introduce significant tax reforms affecting landlords, property buyers and real-estate developers. These updates form part of a wider housing affordability policy agenda aimed at boosting mid-income housing and moderating price and rent pressures.
While some measures are confirmed, several remain in legislative approval phase, meaning final details could still change. Staying informed now will help you plan ahead, structure investments strategically and avoid last-minute surprises.
Key Changes Proposed for 2026 – Portugal Property & Tax Policy
1. Landlord Income Tax Reduction (IRS)
Landlords offering long-term leases (12+ months) at monthly rents up to €2,300 are expected to benefit from a reduced autonomous tax rate of 10%, down from the current 25%.
This initiative aims to increase affordable residential rentals and encourage landlords to maintain rents within moderate brackets.
2. IMT Increase for Non-Resident Property Buyers
In 2026, non-resident buyers of Portuguese property are expected to face a higher IMT rate, estimated to rise from 6.5% to around 9%.
This measure is designed to reduce competitive pressure from foreign investment and increase local accessibility to residential purchases. Details of exemptions and implementation timing are still pending.
3. VAT Reduction for Developers Building Moderately-Priced Housing
Construction of properties intended for sale below €648,000, or for rental within the moderate-rent bracket, may qualify for a reduced VAT rate of 6%, down from 23%.
This is expected to lower development costs significantly, improving feasibility and return potential for mid-market residential projects.
What These Changes Mean for Investors
| Beneficiary | Benefit Opportunity |
| Landlords | Higher net rental yield under reduced IRS rate |
| Developers | Lower build cost → Higher ROI on moderate-priced units |
| Local buyers/first-time buyers | Increased access to stock below €648k |
| Foreign / non-resident buyers | Must factor in higher IMT acquisition cost |
These reforms reward investors focused on long-term rentals, affordability-aligned pricing and development in the mid-market range, while placing higher cost barriers on external capital entering the market.
Risks, Limitations & Unknowns You Should Consider
- Measures are not fully legislated yet – keep monitoring
- Benefits only apply within price/rent thresholds – exceeding them means losing tax relief
- IMT increases could reduce liquidity for foreign-buyer resale markets
- Changes could shift competition toward mid-market properties, affecting pricing
- VAT eligibility may be subject to compliance rules on use, pricing and sale timing
What Next for Property Investors?
- Run cash-flow & tax simulations based on 10% IRS vs 25% IRS rental taxation
- If you are a foreign buyer, evaluate whether buying pre-2026 or post-2026 is advantageous
- Developers should reassess feasibility under 6% VAT to determine project margin uplift
- Track legislation closely for final thresholds and qualifying criteria
- Speak with a tax or property strategy consultant before acquisition or build commitment
FAQs — Portugal Property Tax Changes 2026
1. Do these rules apply across all of Portugal?
Yes, the framework is national, though implementation may differ based on property type and classification.
2. Will short-term rentals (AL) qualify for the 10% landlord tax rate?
No, the reduction targets long-term housing leases of 12+ months.
3. If rent rises above €2,300 later, do tax benefits end?
Based on draft direction, eligibility depends on rent staying within the cap.
4. Does VAT reduction apply to luxury developments?
No, only projects under €648,000 or within moderate-rent values appear eligible.
5. Should non-resident investors buy before 2026?
If IMT rises to 9%, pre-2026 acquisition may be economically favourable but case-by-case planning matters.
