Expert Proposes Sweeping Tax Reforms to Solve Portugal's Rental Crisis
In a detailed analysis of Portugal's housing crisis, José Jorge Paraíso, Managing Director of Kalam Portugal, has outlined a comprehensive new plan to stimulate the long-term rental market. The proposal, published in Diário Imobiliário, argues that after three years of failed policies under the "+Habitação" program, a new approach is urgently needed to prevent further social and economic turmoil. The plan suggests a series of significant tax incentives for landlords, aiming to increase the supply of rental properties and lower costs for tenants, which could reduce rents by up to 32.5%.
The proposal is built on the principle of using the Valor Patrimonial Tributário (VPT), or the official tax value of a property, as the basis for the incentive structure. For properties with a VPT below €650,000, landlords who agree to a rental yield of less than 3.5% would see their rental income tax drop from the current 25% to just 8%. For properties valued between €650,000 and €1,150,000, the yield cap would be 3.2% to qualify for the same tax reduction. This measure requires a minimum rental contract of five years, providing stability for both tenants and owners. These potential changes are a key topic for anyone exploring investment and strategy guides for the Portuguese market.
In addition to the income tax reduction, the plan calls for a complete exemption from the annual IMI (Imposto Municipal sobre Imóveis) property tax for the duration of the qualifying rental contract. To further incentivize long-term commitment, property owners who keep their properties in the program for at least 13 of the 15 years prior to a sale would benefit from a 50% discount on capital gains tax. This addresses one of the major investment risks associated with real estate: tax erosion on profits.
Paraíso's article also criticizes the government's lack of accurate data, stating that it is impossible to form a coherent strategy without knowing the true scale of housing needs parish by parish. He argues that the current crisis stems from "vast incapacity or indifference in housing management." His plan also addresses new construction, proposing that the VAT on new build-to-rent projects be reduced from 23% to 6% if the units are committed to the proposed long-term rental program. This could significantly lower upfront costs for developers and stimulate the creation of new housing stock.
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Another critical component of the proposal is a reform of eviction laws. Landlords in the program would have access to an expedited 30-day eviction process for non-payment or breach of contract, creating a "green lane" that mitigates a significant risk for property owners. This measure is designed to build confidence in the rental market. For a deeper understanding of the current legal landscape, investors can review information on property acquisition legal services.
The plan also tackles the controversial Alojamento Local (AL) or short-term rental market. It suggests increasing taxes on AL and restricting licenses to buildings that are certified as seismically resistant. This would push many owners of older, non-retrofitted properties in city centers towards the more stable income stream offered by the proposed long-term rental program. The author believes these measures, taken together, would not require direct government expenditure but rather a strategic foregoing of tax revenue, which would be offset by the legalization of undeclared contracts, reduced housing subsidy needs, and overall economic activity.
The proposal concludes with a call for a 15-year political pact between Portugal's major parties to ensure the stability of the program. This long-term guarantee is presented as essential for giving owners and investors the confidence to commit to the long-term rental market. Without such stability, Paraíso warns, any new measures are unlikely to succeed.
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