Investment in Residential Property: New Tax Rules for Owners and Investors in 2026
Portugal introduced a new package of tax measures in 2026 aimed at increasing the supply of residential property and encouraging investment in the long-term rental market.
This insight outlines the main changes affecting property owners and investors, including the reduced taxation of rental income, the new affordable rental regime, the acquisition of residential property by non-residents and the reinvestment of property sale proceeds.
What changed in 2026?
Decree-Law no. 97/2026, of 20 May, introduced a broad set of tax measures applicable to the construction, rehabilitation, acquisition, rental and sale of residential property in Portugal.
The different measures do not all apply from the same date. Some produce effects from 1 January 2026, while the new Simplified Affordable Rental Regime became effective on 1 September 2026.
Is there a reduced tax rate for residential rental income?
Yes.
Rental income earned by individuals from Portuguese residential property is generally subject to Personal Income Tax (IRS) at a flat rate of 25%, although reduced rates may apply depending on the duration of the lease.
Under the new rules, rental income derived from residential leases is subject to a 10% tax rate where the monthly rent does not exceed the statutory moderate-rent threshold.
For 2026, that threshold is EUR 2,300 per month, corresponding to 2.5 times the Portuguese monthly minimum wage.
The reduced rate:
applies to rental income obtained between 1 January 2026 and 31 December 2029;
may apply to existing as well as new residential leases;
is available to both Portuguese resident and non-resident individual landlords; and
applies unless the landlord already benefits from a more favourable tax rate.
Where qualifying rental income is earned by a company, or by an individual under organised accounting within the scope of a business activity, only 50% of that income is taken into account for tax purposes.
What is the new Simplified Affordable Rental Regime?
The Simplified Affordable Rental Regime (Regime Simplificado de Arrendamento Acessível or RSAA) replaced the previous Affordable Rental Programme from 1 September 2026.
Under this regime, the maximum rent is determined according to the type and location of the property, based on 80% of the median rental value per square metre published for the relevant municipality.
Other characteristics, including the property’s energy efficiency and the availability of private parking, may also be taken into consideration when determining the applicable rent ceiling.
Qualifying leases must generally have a minimum duration of:
three years, where the property is used as the tenant’s permanent residence; or
three months, in certain cases involving temporary residence.
Is rental income under the RSAA exempt from tax?
Yes.
Rental income arising from contracts that meet the RSAA requirements is exempt from both Personal Income Tax and Corporate Income Tax.
The landlord must, however, submit a copy of the lease and evidence that it has been registered with the Portuguese Tax Authority through the electronic platform made available by the Institute for Housing and Urban Rehabilitation (IHRU).
The ordinary moderate-rent regime and the RSAA should therefore not be confused. A residential rent of up to EUR 2,300 may qualify for the reduced 10% tax rate, whereas the full exemption under the RSAA is subject to lower, location-specific rent limits and additional contractual and reporting requirements.
Are the new rental incentives available to non-resident owners?
Yes.
Non-resident individuals earning rental income from Portuguese property may benefit from the 10% rate where the property is rented for residential purposes and the monthly rent does not exceed the applicable EUR 2,300 threshold.
They may also benefit from the full exemption available under the RSAA, provided all the relevant conditions and formalities are met.
The landlord’s non-resident status does not, in itself, prevent access to these incentives.
Has the taxation of property acquisitions by non-residents changed?
Yes.
The acquisition of residential property by a non-resident is now generally subject to Property Transfer Tax (IMT) at a flat rate of 7.5%, without the exemptions or progressive rate reductions that may otherwise apply.
However, this treatment does not apply, or may subsequently be reversed, where the purchaser:
is already resident in Portugal for tax purposes;
becomes Portuguese tax resident within two years following the acquisition; or
places the property on the residential rental market within six months, at a rent not exceeding the moderate-rent threshold, and keeps it rented for at least 36 months during the first five years following the acquisition.
Where the relevant conditions are subsequently met, the purchaser may request the reimbursement of the difference between the IMT initially paid and the amount that would have been payable under the ordinary rates.
The purchaser’s intended use of the property should therefore be considered before completion, as it may materially affect the overall acquisition cost.
Can a property capital gain be exempt if the proceeds are reinvested in rental property?
Potentially, yes.
The new rules allow the exclusion from Personal Income Tax of certain capital gains arising from the sale of residential property where the sale proceeds, after repayment of any acquisition loan, are reinvested in the acquisition of another property located in Portugal and intended for residential rental.
The exclusion is subject to detailed conditions, including:
the period within which the proceeds must be reinvested;
the maximum rent applicable to the new property;
the deadline for placing the property on the rental market;
a minimum rental period; and
restrictions on the subsequent disposal of the replacement property.
The availability of this relief should be assessed before the sale or reinvestment is completed, particularly where the seller intends to use only part of the proceeds or where the property may not remain on the rental market for the required period.
Are there incentives for construction and rehabilitation?
The new package also includes a reduced VAT rate of 6% for certain qualifying construction and rehabilitation works involving residential property.
Its application depends on several conditions, including the intended use of the property, the applicable sale price or rental value and compliance with specific procedural requirements.
A separate regime of Investment Contracts for Residential Rental also provides incentives for qualifying long-term investment projects. Depending on the circumstances, these may include exemptions or reductions concerning IMT, Stamp Duty, Municipal Property Tax and Additional Municipal Property Tax.
Why this matters
The 2026 housing tax package creates relevant opportunities for property owners and investors, but the available incentives are subject to different thresholds, time limits and compliance requirements.
In particular, owners of residential rental property should assess whether existing leases already qualify for the reduced 10% tax rate and whether entering the RSAA would be advantageous in light of the lower permitted rent and the full tax exemption.
Non-resident investors should also consider the new 7.5% IMT rate before acquiring residential property in Portugal. The intended use of the property — including a future move to Portugal or its placement on the long-term rental market — may significantly affect the final tax cost.
Early review is particularly important where a property acquisition, sale, rehabilitation project or new lease is planned, as some benefits depend on steps taken at or shortly after the transaction.
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This insight is provided for general information purposes only and does not constitute legal or tax advice. It is not intended to be an exhaustive statement of the law and should not be relied upon as a substitute for advice tailored to individual circumstances.
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