What is Decree-Law 97/2026: The Housing Package in Detail

Published in the Official Gazette on 20 May 2026, Decree-Law 97/2026 implements the so-called Housing Package — a comprehensive set of tax relief measures and incentives aimed at increasing housing supply, lowering construction and rehabilitation costs, and boosting affordable rentals in Portugal. The diploma introduces significant changes to various tax codes, namely the Value Added Tax Code (CIVA), the Personal Income Tax Code (CIRS), the Corporate Income Tax Code (CIRC), and the Municipal Property Transfer Tax Code (IMT).

This Decree-Law 97/2026 executes the legislative authorisation granted by Law No. 9-A/2026, of 6 March, which established the guidelines for the housing sector reform. Expanding on initial measures (which had already reduced VAT on construction to 6% in specific contexts), this diploma notably creates the new Simplified Affordable Rental Scheme (RSAA), a robust mechanism to attract landlords to the controlled rental market, and introduces a new and relevant IMT rate for the acquisition of housing by non-residents. The Order of Certified Accountants (OCC) has published an official summary of the measures, which serves as a complementary guide to this analysis. For a more in-depth understanding of the VAT component, we recommend consulting our detailed guide on 6% VAT on civil construction.

The primary objective of these measures is twofold: on the one hand, to stimulate private investment in the construction and rehabilitation of residential properties, making these activities more profitable and, consequently, increasing supply; on the other hand, to mitigate pressure on rental prices, encouraging the placement of properties on the market at more affordable values, and supporting families in paying their rents.

6% VAT on Housing Construction and Rehabilitation: Investment Stimulus

The application of the reduced VAT rate of 6% (instead of the standard rate of 23%) to construction and rehabilitation contracts for properties intended for housing is, without a doubt, the measure with the greatest immediate impact on the construction sector. This measure, enshrined in Article 2 of Decree-Law No. 97/2026, aims to significantly reduce investment costs, making projects more viable and encouraging their development. However, its application is subject to specific limits and the purpose of the property.

Conditions for Applying 6% VAT

The reduced VAT rate applies to construction and rehabilitation contracts for properties that fall into the following categories and comply with the established limits:

• Sale for Permanent Own Residence (HPP): The taxable asset value (VPT) or the sale price of the property cannot exceed €660,982. This limit corresponds to the value of the 2nd IMT bracket for HPP in 2026, as established in paragraph 1 of Article 2 of Decree-Law No. 97/2026. The objective is to focus the benefit on mid-range housing, excluding the luxury segment.
• Residential Rental: For properties intended for rental, the monthly rent cannot exceed €2,300. This value is determined as 2.5 times the national minimum wage of 2026, as per paragraph 2 of Article 2 of Decree-Law No. 97/2026. This condition aims to ensure that the tax benefit contributes to increasing the supply of affordable rentals.

The application window for this tax benefit is crucial: projects must be initiated between 25 September 2025 and 31 December 2029. This temporal delimitation offers a five-year period for developers and builders to plan and execute their projects, maximising the use of tax savings, which can amount to 17 percentage points of VAT on the total cost of the work.

Practical Example of Savings

Let's consider a construction project for a residential apartment building, with a construction cost of €1,500,000 (excluding VAT). All apartments fall within the price or rent limits for the application of 6% VAT.

• With 23% VAT: Total cost = €1,500,000 + (23% of €1,500,000) = €1,500,000 + €345,000 = €1,845,000
• With 6% VAT: Total cost = €1,500,000 + (6% of €1,500,000) = €1,500,000 + €90,000 = €1,590,000

The direct VAT saving on this project amounts to €255,000 (€345,000 - €90,000). This cost reduction can be decisive for the financial viability of many projects, allowing for more competitive sale prices or rents.

For contractors and developers, the correct application of the rate requires maintaining robust documentation proving the residential purpose of the property and compliance with legal limits, in accordance with the requirements of the Tax and Customs Authority. Rigorous accounting and tax management is recommended, for which HVR Business Consulting offers specialised support in accounting for civil construction.

CIA — Investment Contracts for Rental: Incentive for Large Projects

The CIA (Investment Contracts for Rental) represents a tax and financial incentive scheme aimed at investors who propose to build or rehabilitate properties with the objective of allocating them to controlled-price rentals. This scheme, detailed in Articles 3 to 7 of Decree-Law No. 97/2026, is particularly attractive to institutional investors and medium/large developers, given its structure and the required counterparts.

Characteristics and Benefits of CIA

• Contractual Agreements: Contracts are entered into between the investor and the IHRU (Institute for Housing and Urban Rehabilitation), the managing entity of this scheme. The duration of these contracts can extend up to 25 years, providing stability and predictability to the investment.
• Comprehensive Tax Exemptions: The CIA offers a package of very significant tax exemptions, namely:
  • IMT: Total exemption from Municipal Property Transfer Tax on the acquisition of properties for the projects covered.
  • Stamp Duty: Exemption from Stamp Duty on acts and contracts related to the project.
  • IMI: Exemption from Municipal Property Tax during the term of the contract with the IHRU, as per Article 6 of Decree-Law No. 97/2026.
  • Reduced VAT Rate: Application of the reduced VAT rate on construction/rehabilitation, under the terms already mentioned.
• Residential Purpose: At least 70% of the construction area covered by the project must be for housing. This condition ensures that the investment directly benefits the country's housing stock.
• Counterpart: Controlled Prices: The main counterpart for these tax benefits is the commitment that the rents charged will be subject to controlled price limits throughout the term of the contract with the IHRU. These limits are defined by the IHRU based on accessibility criteria.

The CIA is an instrument designed to encourage large-scale projects that significantly contribute to the supply of affordable rentals. The exemption from IMT, Stamp Duty, and IMI, combined with 6% VAT, represents a strong tax relief that can boost the profitability of long-term investments. The scheme takes effect on 1 September 2026.

RSAA — Simplified Affordable Rental Scheme: Total IRS/IRC Exemption

The Simplified Affordable Rental Scheme (RSAA), established in Articles 8 to 12 of Decree-Law No. 97/2026, represents one of the most innovative measures with the greatest potential to boost the rental market. This scheme replaces and simplifies the previous affordable rental scheme, making it significantly more attractive to landlords, whether individuals or corporations.

Key Points of RSAA

• Total IRS and IRC Exemption: The main added value of the RSAA is the total exemption from IRS and IRC on rental income derived from affordable rental contracts entered into under this scheme. This exemption is a strong incentive and is provided for in paragraph 1 of Article 9 of Decree-Law No. 97/2026.
• Maximum Rent Limit: For a contract to be eligible for the RSAA, the maximum rent limit is set at 80% of the median rents per square metre published by the National Statistics Institute (INE) for each municipality. This limit ensures that properties are effectively placed on the market at prices below the market average, promoting accessibility.
• Effective Date: The scheme comes into force on 1 September 2026.

Practical Example of Tax Benefit for Landlord (Individual)

Let's consider a landlord (individual) who owns a property in Lisbon and who, if they rented the property on the open market, would obtain a monthly rent of €1,000. However, they decide to join the RSAA, which implies a maximum rent of €800 (80% of the market rent, for simplification of the example).

Scenario 1: Open Market Rental

• Gross Annual Rent: €1,000 x 12 = €12,000
• Deductible expenses (e.g., IMI, condominium fees, works, etc.): €2,000
• Taxable Income: €10,000
• IRS Rate (considering an autonomous rate of 28% for rental income, without aggregation): €10,000 x 28% = €2,800 in tax
• Net Income After Tax: €12,000 - €2,000 - €2,800 = €7,200

Scenario 2: RSAA Rental

• Gross Annual Rent: €800 x 12 = €9,600
• Total IRS Exemption (as per Article 9 of DL 97/2026): €0 in tax
• Net Income After Tax: €9,600

In this example, despite the landlord receiving a lower gross annual rent under the RSAA (€9,600 vs €12,000), their net income after tax is significantly higher (€9,600 vs €7,200). The total IRS exemption largely compensates for the difference in gross rent, making the RSAA a financially more advantageous option for many landlords, provided that the differential between market rent and affordable rent is not excessive.

For landlords, the total IRS exemption on rents is the biggest incentive ever given to long-term rentals in Portugal. The decision to join should, however, meticulously compare the tax savings with the lost market rent. HVR Business Consulting offers a case-by-case simulation service to help landlords make the most informed decision.

IRS — Increased Rental Deduction: Support for Tenants

For tenants, the Housing Package brings a tax relief measure directly felt in their household budget: the increase in the limit for rental deductions from IRS tax liability. This measure aims to mitigate the impact of housing costs on families, making renting more sustainable.

Changes to Deduction Limits

The changes to the IRS Code, provided for in Article 13 of Decree-Law No. 97/2026, introduce the following limits:

• For the year 2026: The maximum limit for rental deductions from IRS tax liability rises to €900.
• From the year 2027 onwards: The maximum deduction limit is further increased, reaching €1,000.

It is important to note that these changes to the IRS Code take effect from 1 January 2026, which constitutes a transitional rule preceding the general entry into force of the diploma, allowing taxpayers to benefit from this support earlier.

Deduction Mechanism

The rental deduction corresponds to a percentage of the rents paid (currently 15%), with a maximum limit. With the increase in the limit, more families will be able to benefit from a greater reduction in their tax payable. For the deduction to be effective, it is essential that the rents paid are duly communicated to the Tax and Customs Authority, either through e-fatura (in the case of electronic rent receipts) or through the annual IRS declaration.

Practical Example of Benefit for Tenant

Let's consider a tenant who pays a monthly rent of €600, totalling €7,200 annually.

• Scenario 1: Before Changes (limit of €600)
  • 15% deduction on €7,200 = €1,080
  • Applicable maximum deduction limit = €600
• Scenario 2: Year 2026 (limit of €900)
  • 15% deduction on €7,200 = €1,080
  • Applicable maximum deduction limit = €900

In this example, the tenant would benefit from an increase of €300 in their IRS deduction for the year 2026. This saving, although it may seem modest, represents an important financial relief for many families, contributing to greater disposable income.

For tenants, the most important action is to ensure that paid rents are correctly communicated in e-Fatura, ensuring they fully benefit from the increased deduction.

IMT — New 7.5% Rate for Non-Residents: Disincentive to Speculation

One of the most relevant and impactful measures, especially for foreign investors and for the housing market in areas of greater real estate pressure, is the introduction of a 7.5% IMT rate. This rate applies to the acquisition, by non-residents, of urban property (or autonomous fraction) exclusively intended for housing. This measure, enshrined in Article 14 of Decree-Law No. 97/2026, aims to discourage the acquisition of properties for purely speculative purposes by non-residents who do not intend to establish residence in Portugal, contributing to the moderation of housing market prices.

Exceptions to the Application of the 7.5% Rate

The new increased rate of 7.5% does not apply in specific situations, safeguarding the interests of those who genuinely intend to reside in the country or have already had a tax connection to Portugal:

• The acquirer has already been considered a tax resident in national territory. This exception aims to protect former residents or those who, for some reason, had a period of tax residence in Portugal.
• The acquirer becomes a tax resident within 2 years from the date of acquisition of the property. This exception is crucial for those who buy a property with the intention of moving to Portugal, giving them a two-year period to formalise their tax residence. If tax residence is not established within this period, the tax will be settled at the 7.5% rate, with the respective compensatory interest.

In practice, this measure penalises the purchase of housing by non-residents who do not intend to establish residence in Portugal, maintaining tax neutrality or existing schemes for those who move to the country. Foreign investors should, therefore, re-evaluate their acquisition structure, considering the implications of buying as an individual versus a company, and as a resident versus a non-resident. HVR Business Consulting offers specialised support in real estate accounting and the framework of the IFICI regime, which may be relevant for these investment decisions.

Practical Example of IMT Impact

Let's consider the acquisition of a residential property worth €500,000.

• Scenario 1: Tax Resident Acquirer in Portugal
  • IMT rate for HPP (bracket example): ~5% (considering the applicable bracket, may vary)
  • IMT payable: €500,000 x 5% = €25,000
• Scenario 2: Non-Resident Acquirer Not Meeting Exceptions
  • IMT rate: 7.5% (as per Article 14 of DL 97/2026)
  • IMT payable: €500,000 x 7.5% = €37,500

In this example, a non-resident who does not fall within the exceptions would pay an additional €12,500 in IMT. This significant increase in transaction costs may lead many investors to rethink their strategy, opting to become tax residents or to direct their investment to other purposes than housing, or even to other markets.

Entry into Force and Transition Schedule

The implementation of the measures of Decree-Law No. 97/2026 is not uniform, with different effective dates for the various provisions. It is crucial to be aware of this schedule for correct application and planning.

The disparity in effective dates requires increased attention, especially regarding ongoing or planned projects, to ensure that tax benefits are correctly applied and that obligations are met within the established deadlines.

Common Mistakes to Avoid in Applying the Housing Package

The complexity of the new tax rules and the interrelation between different codes can lead to errors in their application. It is essential that taxpayers, businesses, and professionals are vigilant to avoid omissions or incorrect interpretations that could result in fines or loss of benefits.

1. Failure to Comply with Limits for 6% VAT: A frequent error is the application of the reduced VAT rate without rigorous verification of the sale value/VPT or monthly rent limits. For example, a rehabilitation project that slightly exceeds the €660,982 limit for HPP will not be eligible, and the incorrect application of the rate could result in additional VAT assessments and interest.
2. Lack of Supporting Documentation: For 6% VAT and for the CIA/RSAA schemes, it is imperative to have robust documentation proving the residential purpose of the property and compliance with the requirements. The absence of affordable rental contracts or purpose declarations in deeds can prevent the application of benefits.
3. Misinterpretation of Tax Residence for IMT: Foreign investors may make the mistake of assuming they will be automatically exempt from the 7.5% IMT rate, without understanding the nuances of tax residence in Portugal. Failure to formalise tax residence within 2 years of acquisition can lead to additional tax assessments and interest.
4. Failure to Communicate Rents in e-Fatura: Tenants who do not ensure that their rents are duly communicated by landlords in e-Fatura may lose the right to the IRS deduction, even with the increased limits.
5. Failure to Compare RSAA with the Open Market: Landlords may join the RSAA without conducting a detailed financial simulation comparing the net income after tax with the market rent, evaluating the real net impact. Although the IRS/IRC exemption is a strong attraction, in some cases, the rent differential may be so large that the open market is still more advantageous, especially for higher-value properties.
6. Unawareness of Deadlines and Application Windows: Ignoring the effective date schedule and application windows (such as for 6% VAT) can lead to missed opportunities or improper application of schemes.
7. Failure to Seek Specialised Advice: The complexity of the Housing Package and its implications in various tax areas make the advice of a accounting or tax professional essential. Attempting to apply the rules without proper knowledge can result in costly errors.

What to do now — by profile: Recommendations and Conclusion

Decree-Law No. 97/2026 represents a significant turning point in housing policy in Portugal, with profound implications for a wide range of stakeholders. Its complexity and the diversity of measures require careful analysis and strategic planning by all involved. Success in applying these measures will depend on each profile's ability to adapt and optimise their tax and operational situation.

Specific Recommendations by Profile

• Developers and Builders: It is imperative to validate the eligibility of ongoing and future works for 6% VAT. This includes a thorough review of projects, ensuring that sale value or rent limits are respected. The preparation and maintenance of documentation proving the residential purpose is crucial to avoid tax contingencies. Additionally, the potential of the CIA scheme for larger rental projects should be evaluated, considering the long-term tax benefits in exchange for controlled rents.
• Landlords and Real Estate Investors: The RSAA is a very advantageous tax scheme. A detailed simulation is recommended to compare joining the RSAA (with its total IRS/IRC exemption) versus obtaining market rent, evaluating the real net impact. For investors, especially non-residents, it is fundamental to re-evaluate the property holding structure in light of the new 7.5% IMT rate. Anticipated tax planning can generate significant savings.
• Tenants: The main action for tenants is to ensure that paid rents are correctly communicated in e-Fatura. It is the landlord's responsibility to issue the respective electronic rent receipts. Tenants should periodically check their e-Fatura portal to confirm that all amounts have been registered, in order to fully benefit from the increased IRS deduction.

HVR Business Consulting is prepared to support developers, real estate investors, and landlords throughout the Housing Package framework. Our team of tax and accounting specialists can help navigate these new rules, optimise your tax position, and ensure compliance with all obligations. Do not let the complexity of new laws prevent you from taking advantage of benefits or expose you to risks.

Call to Action: Request a free diagnostic with HVR Business Consulting to analyse the impact of Decree-Law No. 97/2026 on your particular situation and discover how you can optimise your investments and tax obligations.

Sources and Legal References

• Decree-Law No. 97/2026, of 20 May: Approves the package of tax measures to foster housing supply. (Diário da República, 1st series – No. 97 – 20 May 2026).
• Law No. 9-A/2026, of 6 March: Legislative authorisation law establishing the basis for the Housing Package. (Diário da República, 1st series – No. 9-A – 6 March 2026).
• Value Added Tax Code (CIVA): Relevant articles for the application of the reduced VAT rate on construction and rehabilitation works. (Changes introduced by Article 2 of DL 97/2026).
• Personal Income Tax Code (CIRS): Relevant articles for rental deductions and exemptions in the RSAA. (Changes introduced by Articles 9 and 13 of DL 97/2026).
• Corporate Income Tax Code (CIRC): Relevant articles for exemptions in the RSAA for legal entities. (Changes introduced by Article 9 of DL 97/2026).
• Municipal Property Transfer Tax Code (IMT): Relevant articles for the new 7.5% rate for non-residents and exemptions in the CIA. (Changes introduced by Articles 6 and 14 of DL 97/2026).
• Order of Certified Accountants (OCC): Summary of the measures of Decree-Law No. 97/2026.