Andreia Bento Simões and Marta Cortez analyse new legislative changes in Portugal's rental market

Andreia Bento Simões and Marta Cortez analyse the new regulatory framework shaping Portugal's rental market and the opportunities it creates for domestic and international investors.

Portugal's real estate sector has stood as a benchmark for growth, stability and resilience in Southern Europe over the past decade. In recent years, however, mounting pressure on housing supply has prompted a wave of legislative reforms aimed at promoting affordability and encouraging long-term rental investment. The Portuguese Government has introduced a comprehensive set of measures combining tax incentives, streamlined urban planning procedures and enhanced legal certainty, seeking to balance social needs with market attractiveness for domestic and international capital.

Tax Package for Housing

Among the most significant developments is the Tax Package for Housing, which introduces a reduced VAT rate of 6% applicable to the construction or rehabilitation of residential properties intended for long-term rental. Landlords offering properties at Moderate Rents, defined as up to 2.5 times the Portuguese monthly minimum wage (currently corresponding to a maximum of €2,300), benefit from a personal income tax rate of 10%, provided that contracts have a minimum duration of three years. For corporate investors, only 50% of rental income derived from contracts with Moderate Rents is subject to corporate taxation, significantly improving net yields.

Contracts for Investment in Rental Housing and Alternative Investment Undertakings

The new framework also introduces Contracts for Investment in Rental Housing, executed with the IHRU, offering IMT and stamp duty exemptions upon acquisition, IMI exemption for the first eight years and a 50% reduction for the remaining duration, with contracts of up to 25 years. Alternative Investment Undertakings with real estate assets dedicated to housing at Moderate Rents benefit from a reduced tax rate of 5% on income distributed to unitholders or shareholders. Additionally, investors may benefit from partial tax exemptions of up to 30%, provided that at least 50% of the fund's assets are allocated to affordable residential rental projects, increasing progressively in proportion to the share of eligible housing assets in the portfolio.

Streamlining Urban Planning and Licensing

The revision of the Legal Regime of Urbanisation and Building (RJUE) aims to simplify licensing procedures, with more agile approval mechanisms, expanded use of prior communication procedures and clearer timelines for administrative decisions, reducing bureaucratic delays and mitigating development risks.

For corporate and institutional investors seeking stable returns within the European Union, Portugal is positioning itself as a jurisdiction where legal certainty, tax efficiency and market resilience converge. In an increasingly professionalised market, investors who anticipate and capitalise on the latest legislative developments will be best placed to succeed.

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