Income taxation may be about to change significantly, especially for short-term contracts that, until now, have not benefited from reduced rates. The Government wants to apply a single 10% IRS rate to rental contracts with values considered moderate, covering not only permanent residences but also temporary contracts for professional, academic or tourist reasons. According to Jornal de Negócios, this change represents one of the central measures of the new tax package for housing.
The idea is simple: create a transversal tax incentive to increase the supply of homes on the rental market, regardless of the duration of the contract, as long as there is an income limit within the moderate values defined by law. According to the same publication, this change aims to correct the exclusion that had been affecting short-term contracts, which continued to be subject to the autonomous rate of 25%.
Short contracts now have access to the reduced rate
The Ministry of Infrastructure and Housing clarified that the requirement for minimum three-year contracts continues to apply only to the simplified affordable rental regime, which guarantees total exemption from IRS and IRC when rents are 20% below the market. In other cases, the minimum period set out in the Civil Code applies, that is, one year.
Only non-permanent or temporary housing contracts for special purposes can have a shorter duration, which includes displaced students, temporarily seconded professionals or families undergoing prolonged medical treatment.
According to Jornal de Negócios, the Government intends for this 10% rate to be applied to rents received until the end of 2029, when an assessment of the impact on the market will be made. The measure covers rents up to 2.5 times the minimum wage, which currently corresponds to around 2,300 euros per month.
Until now, landlords were only able to benefit from reduced rates when entering into long contracts. The 15% rate applied between five and ten years and the 10% between ten and twenty. Short contracts, even when motivated by legitimate transitional needs, were left out and paid 25%.
According to the same source, this change does not call into question the initial objective of promoting housing stability, as the strongest incentives continue to be reserved for long-term contracts within the affordable regime.
The Executive argues that the market needs more supply and that the priority is to ensure that more owners put houses up for rent. The new rate aims to make this step more appealing, reducing the fiscal burden and allowing temporary contracts to have a similar framework to permanent rents.
Reduced VAT and new rules for construction and rehabilitation
The fiscal package also includes parallel measures aimed at stimulating the construction of new houses and urban rehabilitation. According to the publication, works intended for permanent housing or rental can benefit from VAT reduced to 6%, as long as price and income limits are respected.
Families who opt for self-construction will also be able to request a partial refund of VAT after the work is completed, as long as the house is registered as a tax residence.
Most of these measures have limited application in time, with an evaluation scheduled for 2029. Even so, the Government believes that the impact will be immediate, especially in increasing supply and stabilizing prices. According to , the objective is to encourage both owners and tenants in a market where pressure remains high.
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