Portugal's 2026 Budget Proposal: Property Transfer Tax (IMT) Brackets to Increase by 2%
The Portuguese government has outlined its fiscal plans for 2026, submitting a preliminary draft of the State Budget Law to Parliament on October 9 that includes noteworthy adjustments to property taxation. The proposal details a 2% increase across the board for the Municipal Property Transfer Tax (IMT) brackets, a measure that will affect all acquisitions of urban properties designated for housing. This legislative update is a key component of the government's broader economic strategy and will have direct consequences for the real estate market nationwide. The changes aim to align the tax framework with evolving property valuations, a topic of continuous discussion among economists and market analysts. For those following market dynamics, our real estate market insights blog offers in-depth analysis.
According to the official proposal, the value for which a property purchase is fully exempt from IMT will be raised. The current exemption, which applies to properties valued up to €104,261, is set to increase to €106,346. This adjustment represents an increase of €2,085.22 in the exemption threshold, providing a slight financial relief for buyers at the entry level of the market. On the other end of the spectrum, the highest tax bracket will also be adjusted. The top rate of 7.5% is currently levied on property transactions exceeding €1,128,287. Under the 2026 budget, this rate will apply to property values starting from €1,150,853. This change, while seemingly minor, reflects the ongoing appreciation in Portugal's property market, particularly in high-demand areas.
The budget also proposes an update to the 'IMT Jovem' program, a tax incentive implemented on August 1, 2024, to support young homebuyers. This scheme grants a full IMT exemption to individuals aged 35 or younger who are purchasing their first primary and permanent residence and are not listed as dependents for IRS purposes. The maximum property value eligible for this full exemption is slated to rise from €324,058 to €330,539. This change is intended to keep the incentive relevant in the face of rising house prices. Understanding the full scope of such legal changes is critical, and our section on regulatory and legal frameworks provides essential context.
For properties acquired under the 'IMT Jovem' scheme with a value between the new threshold of €330,539 and €660,982, the government will maintain a partial exemption. Buyers in this range will receive an exemption on the value up to the €330,539 limit and will pay a marginal tax rate of 8% on the amount that exceeds it. For properties valued above €660,982, no exemption will be granted. The government has maintained the existing restrictions, which exclude young people who already own residential property or have held such ownership in the three years prior to the new acquisition. These details are crucial for anyone planning a purchase, and specialized professionals like property acquisition lawyers can offer tailored advice.
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The legislation also specifies the conditions under which the 'IMT Jovem' benefit can be revoked. The exemption is lost if the property is not designated as the owner's primary and permanent residence within six months of the purchase date. Similarly, if the property's use is changed from its original purpose within a six-year period, the benefit is nullified. However, the law provides exceptions for certain circumstances, such as the sale of the property, a change in the household's composition, or a mandatory job relocation to a location more than 100 kilometers away, provided the property continues to be used for housing. The benefit is also lost if the owner is declared a tax dependent at any point during the six-year term.
In a related measure, the proposal extends a similar benefit to the Stamp Duty (Imposto do Selo, IS). Young buyers eligible for the IMT exemption will also receive a deduction from the 0.8% Stamp Duty rate, capped at the same property value of €330,539. For any value exceeding this amount, the standard Stamp Duty will be applied. The final version of the State Budget Law for 2026 is expected to be debated and voted on in the coming weeks, with the real estate sector closely watching for the final outcome of these proposed fiscal adjustments.
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