Government Announces Housing Tax Measures Will Only Take Effect in 2027
The Minister of State and Finance, Joaquim Miranda Sarmento, announced during the presentation of the State Budget for 2026 (OE2026) proposal that the fiscal measures concerning personal income tax (IRS) for housing will only have a tangible impact in 2027. The government's announcement clarifies the timeline for a set of policies aimed at influencing the rental market, confirming that both landlords and tenants will have to wait to feel the financial effects.
The new legislation includes a significant reduction in the tax rate for landlords who offer properties under the 'moderate rent' scheme, for monthly rents up to 2,300 euros. The tax rate on this income will drop from 25% to 10%. Although this new rate will be applicable for the entirety of the 2026 fiscal year, the actual taxation and resulting financial benefit will only be processed during the annual tax declaration period, which begins in April 2027. This procedural detail is critical for property owners' financial planning. For detailed guidance on such matters, consulting with English-speaking accountants is recommended.
The implementation timeline is set by the structure of the Portuguese tax system, where income earned in one year is declared and taxed in the following year. The effective date for the application of the new tax rate is January 1, 2026, but the financial settlement occurs more than a year later.
The new legislation also affects tenants. A measure allowing for a deduction from the tax base for rents paid, up to an annual limit of 900 euros, will follow the same timeline. Tenants will only be able to claim this deduction on their 2026 income when they file their tax returns in 2027. This means the relief for tenants will not be immediate.
To be eligible for these measures, landlords and tenants must ensure their rental contracts are properly registered with the Tax Authority (Autoridade Tributária e Aduaneira) and that all declared values are accurate. The 'moderate rent' values will be defined by the government and are expected to vary based on location and property type. Compliance with these legal issues is mandatory to benefit from the new rules.
There are no penalties for non-compliance with opting into the scheme, but landlords who do not adhere to the 'moderate rent' criteria will simply continue to be taxed at the standard, higher rates on their rental income. For tenants, failure to declare rental payments correctly may result in the inability to claim the deduction.
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Industry reaction has been cautiously optimistic. The Association of Lisbon Landlords (Associação Lisbonense de Proprietários) stated that while the tax reduction is welcome, the delay in its impact may slow down its intended effect of bringing more properties into the rental market at controlled prices. They also called for more clarity on the specific rent values for different municipalities.
Legal professionals specializing in real estate have noted that the success of the measures will depend on their clear and efficient implementation by the tax authorities. A lawyer from a prominent Lisbon firm commented, "The policy's intent is correct, but the administrative execution will be key. Investors will be watching closely to ensure the process in 2027 is seamless."
The government's stated rationale for these changes is to combat the housing affordability crisis by providing a dual incentive: encouraging landlords to moderate prices while offering some financial relief to tenants. Minister Sarmento stated that the measures are currently in the "final legislative process," suggesting they will soon be enacted into law.
This legislative package is part of a series of housing-related policies expected to be detailed further in the coming months. The government has indicated that it is also exploring measures to increase housing supply and simplify construction licensing, which may be announced as related legislation.
Official information and resources for understanding compliance with the new tax laws will be made available through the Portal das Finanças once the legislation is officially published in the Diário da República, the official government gazette.
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