The government has implemented a new tax package for housing, including a reduction in the value-added tax (Imposto sobre o Valor Acrescentado or IVA) on construction from 23% to 6% and a decrease in the personal income tax (Imposto sobre o Rendimento das Pessoas Singulares or IRS) on rental income to 10%. These measures, which aim to increase housing supply and support tenants, apply retroactively to the beginning of the year. Additionally, the annual deduction limit for rent paid under the IRS has increased from 700 to 900 euros.
New housing tax measures take effect retroactively
Thursday, 21 May 2026AI summary
Context & Explainers
VAT is Value Added Tax (Imposto sobre o Valor Acrescentado), a consumption tax charged at each stage of production and sale; the standard mainland rate in Portugal is 23%. Parliamentary proposals to cut VAT on bottled gas from 23% to 6% would directly reduce consumer prices if approved.
The IRS withholding tables (tabelas de retenção na fonte) are government-published schedules that determine how much personal income tax (Imposto sobre o Rendimento das Pessoas Singulares — IRS) employers must deduct from each paycheck. They take into account gross pay, marital status, number of dependents, and disability status.
The tables are updated annually (and sometimes mid-year when budgets change), directly affecting monthly take-home pay. When tables are revised downward, workers see more in their pay packet; when raised, less. Any difference between amounts withheld and the actual tax owed is settled when the annual IRS return (Modelo 3) is filed, typically between April and June.
Employees and pensioners should check the current tables — published by the Autoridade Tributária e Aduaneira (AT) — whenever they change, as the impact on net income can be significant.
3 sources
- 6% VAT rate moves forward and developers promise it will bear fruitobservador.pt ·
- There are new measures for Housing: here is what you need to know about the 10% IRS, 6% VAT and capital gainscnnportugal.iol.pt ·
- 10% income tax on rents and 6% VAT on construction work apply since Januarycmjornal.pt ·
