The programme Construir Portugal introduced tax incentives designed to encourage the construction, rehabilitation, sale and letting of residential property, including changes to Portuguese Personal Income Tax, Corporate Income Tax, VAT and Property Transfer Tax.
1. What qualifies as a moderate rent or sale price?
For 2026, monthly rent is considered moderate where it does not exceed €2,300. The maximum moderate sale price for residential property is €660,982.
The relevant value may also include equipment, fixtures and other items permanently attached to the property, as well as certain services that contribute to its value.
2. Can the proceeds from the sale of a property be reinvested in a rental property?
Yes. Capital gains arising from the sale of a main residence or another residential property may qualify for tax relief where the sale proceeds are reinvested in residential property located in Portugal and made available for letting at a moderate rent.
Among other conditions, the property must be let for at least 36 months during the first five years, the applicable rent limit must be respected and the property cannot be sold during that period. The regime applies to disposals taking place between 1 January 2026 and 31 December 2029.
3. What Personal Income Tax rate applies to moderate rental income?
Rental income arising from residential lease agreements with a moderate rent is subject to a reduced autonomous tax rate of 10%, unless a more favourable rate applies. The measure covers qualifying income earned up to 31 December 2029.
Where withholding tax is required, the applicable withholding rate is also reduced to 10%.
4. Has the tax deduction for rent increased?
Yes. The maximum Personal Income Tax deduction for rental expenses has increased to:
€900 for 2026;
€1,000 from 2027 onwards.
The effective deduction remains subject to the general conditions and limits established under Portuguese tax law.
5. What has changed for non-residents purchasing property?
Non-residents purchasing property intended exclusively for residential use are, in principle, subject to a 7.5% Property Transfer Tax rate, without the usual exemptions or reductions.
Exceptions may apply where the purchaser becomes a Portuguese tax resident within two years or places the property on the residential rental market at a moderate rent, provided that all relevant conditions and deadlines are met.
The deadline for paying Property Transfer Tax has also been extended to 30 days following assessment, under the rules applicable from 25 May 2026.
6. When may the reduced VAT rate apply to construction works?
The reduced VAT rate may apply to certain construction or rehabilitation contracts relating to properties intended for sale as the purchaser’s main residence or for residential letting, provided that the applicable sale-price or rent limits and all other requirements are met.
The measure covers planning procedures initiated between 25 September 2025 and 31 December 2029, where VAT becomes chargeable between 1 January 2026 and 31 December 2032.
7. Can individuals building their own home claim a partial VAT refund?
Subject to specific conditions, individuals may claim a partial refund of the VAT incurred under construction contracts for their main residence.
The refund corresponds to the difference between the standard and reduced VAT rates. Materials purchased separately by the individual do not qualify.
The property must be designated as the individual’s main residence within six months and must retain that use for at least 12 months. Claims relating to 2026 may be submitted from 1 October 2026.
In summary:
The Construir Portugal programme provides significant tax incentives for property owners, landlords, companies, investors and individuals constructing their own homes. However, access to these measures depends on strict compliance with the applicable limits, deadlines, property-use requirements and documentary obligations.
This information was prepared on the basis of Decree-Law no. 97/2026 of 20 May, adopted under the legislative authorisation granted by Law no. 9-A/2026 of 6 March, and is provided for general information purposes only. It does not replace an individual assessment of your circumstances or the scheduling of a tax advisory meeting.