The new housing law provides that investors will be compensated if the law is changed and they lose tax benefits.
The new regime of Housing Lease Investment Contracts (CIA), integrated into the recent package of tax incentives for housing, provides for protection against legislative or regulatory changes that may affect the profitability of projects, ensuring investors the right to compensation if future changes compromise the economic-financial balance of the contracts.
The provision aims to provide predictability to real estate developers and institutional investors who invest in the model known as “build to rent”, in which properties are built or rehabilitated specifically for placement on the rental market. Contracts may valid for periods of up to 25 yearsduring which the tax benefits initially granted are, in principle, safeguarded, explains the .
The Government considers that this stability is essential to increase supply of housing for rent in Portugal. In recent years, several legislative changes and changes in tax interpretation have created uncertainty in the sector.
Under the new regime, investors will be able to benefit from exemptions from IMT and Stamp Tax in the acquisition of land and properties, exemption from IMI during the first eight years and a 50% reduction in the remaining period of the contract, exemption from AIMI and application of the reduced VAT rate of 6% in construction or rehabilitation works. It is also planned to partial VAT refund supported in certain technical services, such as architectural and engineering projects.
On the other hand, at least 70% of the built area will have to be used for housing rental at incomes considered moderate. Currently, the maximum limit has been set at 2300 euros monthlya value that may be updated in the future in accordance with the legal mechanisms for updating rents.
The legislation also establishes penalties for non-compliance. If promoters abandon the conditions agreed before the end of the contract, they will have to return part or all tax benefits received. The refund will be full if the non-compliance occurs in the first ten years, reducing to 50% in the intermediate phase of the contract and to 30% in the last five years, plus compensatory interest.
