Portugal’s Parliament has approved new housing legislation that significantly reduces the tax burden on rental income.
The measure is not yet in force, as it still requires promulgation by the President of the Republic and publication in the Official Gazette.
Once effective, the reform will reduce the autonomous IRS rate on rental income from 25% to 10% for landlords charging rents up to €2,300 per month. The reduction applies to both new and existing contracts, for income earned until 31 December 2029.
Who can benefit?
The 10% rate applies to residential leases that fall within the definition of “moderate rent”, a concept aimed at covering mainstream housing for middle-income families.
Under the proposal, moderate rent corresponds to a monthly value not exceeding 2.5 times the national minimum wage projected for 2026, currently around €2,300.
Example: a landlord receiving €1,500/month would pay around €1,800/year in IRS, instead of €4,500, representing a 60% reduction.
Both existing and new leases may benefit, provided they meet the eligibility thresholds.
0% tax for affordable housing contracts
Landlords offering rents 20% below the municipal median may access a full IRS exemption under the new Simplified Affordable Rental Regime, which replaces the former rental support programme.
Key requirements include:
- Minimum 3-year contracts for permanent residence;
- Compliance with rent caps at 80% of the local median price.
Impact on companies
Corporate taxpayers (IRC) also benefit: eligible rental income will be taxed on only 50% of its value, reducing the effective rate.
A fiscal incentive to expand housing supply
The measure aims to promote more accessible rental options by reducing risk for landlords and increasing net profitability. Whether this will widen supply in a constrained housing market remains to be seen.
Tax Department
João Valadas Coriel | Sofia Quental | Inês Grácio | Catarina Amaral
