Government Announces Tax Exemption Package for Build-to-Rent Projects
The Portuguese Government has presented a new legislative package aimed at increasing the housing supply through significant tax incentives for the Build-to-Rent (BTR) sector. The measures, announced in a recent Council of Ministers meeting, introduce a “fiscal shock” designed to stimulate the construction of properties for the rental market, particularly in high-demand areas such as the Lisbon and Porto metropolitan regions.
Under the proposal, investment contracts for BTR projects will be eligible for a reduced VAT rate of 6% on construction costs. These developments will also benefit from a complete exemption from the Municipal Property Transfer Tax (IMT) and the annual Municipal Property Tax (IMI) for an initial period of eight years. This is a substantial extension from the standard three-year IMI exemption. From the ninth year onward, the IMI will be reduced by 50%, and projects will also be fully exempt from the Additional to IMI (AIMI).
A central condition for accessing these fiscal benefits is the adherence to a “moderate” rent cap, which has been set at a maximum of €2,300 per month. This requirement ensures that the incentives are directed towards expanding the supply of affordable and mid-market rental housing. Additionally, income distributions from Collective Investment Organisms (OIC) involved in these projects will be taxed at a reduced rate of 5%.
The government's plan also extends to general housing construction, where any project with a final sale price under €648,022 will also qualify for the 6% VAT rate on construction. Furthermore, capital gains from property sales will be tax-exempt if the proceeds are reinvested into another housing property valued up to the same limit within a five-year timeframe. For detailed guidance on the financial aspects, our financial concerns guide is a valuable resource.
Need Expert Guidance?
Get personalized insights from verified real estate professionals, lawyers, architects, and more.
For landlords, the new rules offer a reduced Personal Income Tax (IRS) rate of 10% and a 50% exclusion from Corporate Income Tax (IRC) for rental contracts of at least three years, provided the rent does not exceed the €2,300 ceiling. A full exemption from both taxes is granted if the rent is priced 20% below the median for the respective municipality. This initiative is of particular interest to property constructors and developers.
The government has also signaled its intent to introduce further reforms by December, which will address the urban rental regime, eviction procedures, and rent support programs. Regulations for the real estate mediation sector, condominiums, and the Housing Emergency Fund are also forthcoming. Public guarantees will be established to support Public-Private Partnerships and BTR contracts.
The primary goal of these measures is to increase the housing stock available for rent, thereby easing the affordability crisis and aligning Portugal’s housing effort rate with the 40% maximum recommended by the OECD and the European Commission. The legislative proposals are now pending approval by the Assembly of the Republic. For ongoing analysis of such changes, our Regulatory and Legal Frameworks blog provides in-depth information.
Navigate Portuguese property regulations with expert guidance at realestate-lisbon.com.