Photo: Adobe Stock Author: Redaction New rule only covers sales from 2026 Anyone who sold their main residence in 2025 is excluded from the new IRS exemption regime for capital gains , even if they reinvest part of the proceeds in a rental property in 2026. The Tax Authority (AT) clarified, in a binding ruling, that the new regime only applies to transfers carried out between 1 January 2026 and 31 December 2029. Therefore, the date of the sale is decisive in determining whether the capital gains can benefit from the tax exemption. Reinvestment has specific requirements The new regime allows certain gains to be excluded from taxation when the proceeds from the sale of a home are reinvested in the purchase of a property intended for residential letting, within the rental limits established by law. The reinvestment can take place between 24 months before and 36 months after the sale. The intention to reinvest must also be declared in the IRS return for the year in which the transfer took place. To retain the tax benefit, a residential tenancy agreement must be signed within the legally established rental limits and within the applicable deadline. The property acquired through the reinvestment must also remain on the rental market for at least 36 months, consecutively or intermittently, during the first five years. Sale date determines eligibility In the case analysed by the AT, the taxpayer sold their main residence in 2025 and intended to use part of the proceeds received in 2026 to purchase an apartment for residential letting. Although the reinvestment would take place while the new rule was already in force, the AT considers that the capital gains arose from the transfer carried out in 2025. Therefore, the relevant date for determining whether the regime applies is the date of the sale, not the date on which the reinvestment is made. Capital gains from 2025 are excluded Decree-Law No. 97/2026 establishes that the new rules take effect from 1 January 2026 and cover transfers carried out until 31 December 2029. As a result, a home sold in 2025 cannot benefit from this tax exemption through a subsequent reinvestment. The AT concluded that, in this case, the capital gains do not meet the timing requirements established under the new regime. Where the reinvestment is only partial, the tax exemption may also be proportional to the amount actually reinvested, provided that the other conditions set out in the IRS Code are met.
Photo: Adobe Stock Author: Redaction 10% rate applies to residential leases A new tax rule allows landlords to benefit from a 10% autonomous income tax rate on certain rental income from residential lease agreements. The measure is set out in Article 45-C of the Tax Benefits Statute and applies to income received until 31 December 2029. The scheme covers agreements intended exclusively for residential use where the monthly rent complies with the limits set out in Decree-Law no. 97/2026. The measure aims to encourage the availability of properties for residential rental at values considered moderate. One of the issues clarified by the Tax and Customs Authority concerns cases where the agreement is signed with a company, but the property is specifically intended for an individual. Company can sign a residential lease The fact that the company is the formal tenant does not, in itself, prevent the landlord from accessing the tax benefit. For the property to retain its residential classification, it must be established who will occupy the home. In the case examined by the Tax and Customs Authority, the company intends to rent the property for use as the permanent residence of its managing partner. In this type of situation, the agreement must specifically identify the individual who will live in the property and establish that its use will be exclusively residential. The property cannot be used for commercial, industrial or service activities. Restrictions on subletting or transferring the contractual position must also be included to ensure compliance with the conditions of the scheme. Rent must comply with the legal limit In addition to exclusive residential use, the amount of rent is one of the conditions for applying the 10% rate. Decree-Law no. 97/2026 considers a monthly rent to be moderate when it does not exceed 2.5 times the minimum monthly wage set for 2026. Considering the €920 minimum monthly wage set for 2026, the limit corresponds to €2,300 per month. The conditions must continue to be met throughout the term of the agreement. If the property is subsequently used for a purpose other than residential, its tax treatment may be affected. Therefore, landlords who rent a home to a company can access the 10% rate when the agreement complies with the conditions established for residential leases, including identifying the person who will occupy the property, exclusive residential use and the applicable rent limit.
Photo: Adobe Stock Author: Redaction Less income tax withheld from salaries The income tax reduction approved for this year will begin to affect income received from November onwards. With the update to withholding tax tables, eligible workers are expected to have less tax deducted each month. In practice, this change may result in an increase in net salary, as a smaller share of income will be paid to the State through withholding tax. The additional amount available will, however, depend on each taxpayers income and tax situation. The measure applies to income tax brackets up to the sixth bracket and represents an estimated tax relief of around €400 million. Christmas bonus will also be affected The impact of the income tax reduction will not be limited to monthly salaries. The Christmas bonus received this year should also benefit from the new withholding rules. For households, this change may mean more disposable income in the final months of the year, a period when expenses tend to increase. The additional money may be used to increase savings, cover expenses or balance the household budget. However, an increase in net income does not necessarily mean that the annual tax due will be lower by the same proportion. Withholding tax works as an advance payment of the tax that will be assessed later. Lower withholding may reduce the refund Lower monthly withholding means that taxpayers pay less income tax throughout the year. As a result, the amount received as a refund when filing the annual tax return may also be lower than in previous years. Depending on each taxpayers income, expenses and deductions, there may even be additional tax to pay when the final tax assessment is made. The income tax reduction therefore allows part of the income to be received throughout the year, rather than only through a potential tax refund. For households, it is important to take this change into account when managing their budget and not automatically interpret the increase in net salary as a definitive tax gain.
Source: Adobe Stock Author: Redaction Youth IMT allows you to buy a home without tax One of the main situations for IMT exemption in 2026 applies to young people aged 35 or under who purchase their first permanent residence. The benefit covers the purchase of a property or unit intended exclusively for this purpose. In mainland Portugal, full IMT exemption applies to properties worth no more than €330,539. Between this amount and €660,982, there is a partial benefit, with the rate applicable to that bracket being charged. Above €660,982, the specific Youth IMT benefit no longer applies. To qualify for the exemption, the other requirements established by law must be met, namely not being considered a dependent for IRS purposes in the year of acquisition. There are also rules concerning ownership of residential properties during the three years preceding the purchase. Other situations may qualify for exemption IMT exemption is not limited to the scheme intended for young people. The purchase of a permanent residence may also qualify for exemption when the value used as the basis for assessment does not exceed the limit of the first bracket applicable to this type of property. In 2026, this limit is €106,346 in mainland Portugal. There are also other specific schemes provided for in the IMT Code. These include the acquisition of properties for resale by taxpayers who carry out this activity and meet the legal requirements. The declaration of activity as a purchaser of properties for resale must be submitted before the acquisition. There are also exemptions associated with certain acquisitions made by credit institutions and transactions covered by specific urban rehabilitation schemes, provided that the requirements established by law are met. When can the benefit be lost? Obtaining an IMT exemption requires certain conditions to be met, both at the time of acquisition and afterwards: The property must actually be used as a permanent residence when this is the purpose of the exemption. Under the Youth IMT scheme, the requirements established to benefit from the IMT and Stamp Duty exemption must be met. The Tax Authority provides the necessary procedures on the Portal das Finanças to declare the acquisition and apply the codes corresponding to the tax benefits. Therefore, before buying a home, it is important to check the propertys value, the purpose of the purchase, the buyers age and whether they own other properties. Exemption rules can represent significant savings, but the application of the benefit always depends on compliance with the conditions established in the IMT Code.
Source: Adobe Stock Author: Redaction Invoices and IRS are due by the end of the month August is not a month without tax obligations for those who work for themselves. One of the main deadlines is the reporting of invoices issued in July, which can be done by 31 August. The obligation applies to those who use certified software to issue invoices and also includes cases where there was no invoicing during the previous month. Even without issued invoices, the absence of invoicing must be reported. The end of August is also important for IRS. Anyone who submitted the Model 3 tax return with self-employment income and received the tax assessment by 31 July must pay the tax due, where applicable, by 31 August. Social Security contributions Another deadline to bear in mind for any self-employed person is the payment of Social Security contributions relating to July. Although the usual deadline is the 20th of the following month, there is an exception in August: payment can be made by 31 August, without interest or fines, even if the last day of the month is not a working day. Anyone who pays by direct debit does not need to make a manual payment. However, they must ensure that there are sufficient funds in the account for the payment to be collected. What happens with VAT? Not all obligations fall in August. In the case of VAT, deadlines that would normally coincide with this month are postponed until September. Therefore, those on the quarterly regime only need to submit the return for the second quarter, covering April, May and June, in September. The return must be submitted by 21 September and the tax paid by 25 September. What should you mark on your calendar? For a self-employed person, the main August deadline is 31 August for reporting July invoices, paying the IRS tax due and paying Social Security contributions for the previous month. VAT is not included in this calendar and is postponed until September. Keeping these deadlines in mind can help avoid missed payments and any interest or fines associated with failing to meet these obligations.
Source: Adobe Stock Author: Redaction What happens if you file your tax return late? If you did not submit your tax return within the legal deadline, you can still file it through the Finance Portal. However, filing after the deadline constitutes a tax offence and may have several consequences. In 2026, the tax return relating to 2025 income must be submitted between 1 April and 30 June. After that date, the Tax Authority (AT) will still accept the return but may impose penalties. The main consequences include a fine, default interest if tax is owed, delays in processing your refund, the loss of certain tax benefits and, in some cases, the initiation of administrative offence proceedings. The sooner you regularise your situation, the lower the financial impact is likely to be. What is the fine for filing your tax return late? The fine for filing your tax return late can range from €150 to €3,750, as provided for under current legislation. However, the final amount depends on several factors, such as the length of the delay, whether you have been notified by the AT and whether you regularised the situation on your own initiative. If you submit your return voluntarily before receiving any notification and regularise your situation within 30 days of the legal deadline, you may benefit from a significant reduction in the fine. In these cases, the penalty may be reduced to the minimum amount, usually set at €25. If a fine is imposed, you must pay it within the deadline set by the Tax Authority. Failure to do so may result in enforced collection, with additional interest and charges. Are you still entitled to a refund? Filing your tax return late does not automatically mean losing your right to a refund. If the tax assessment shows that you paid more tax than required during the year, the Tax Authority remains obliged to refund that amount. However, processing no longer follows the faster route used for returns submitted on time. In practice, your refund may take longer, as these returns are often subject to additional checks. Furthermore, if a fine is imposed, the financial benefit may be reduced. For example, if you are entitled to a refund but receive a fine, the net amount you receive will be lower. Can you lose tax benefits? Late submission of your tax return may have consequences beyond fines. In certain situations, you may lose access to tax benefits or face difficulties obtaining support and services that require an up-to-date tax assessment notice. Possible impacts include the loss of joint taxation for some households, difficulties accessing student grants, housing support or municipal benefits, as well as delays in credit applications with financial institutions. If the tax return is not submitted, the Tax Authority may issue an estimated assessment based solely on the information it holds. This calculation may not take into account all the deductions and tax benefits to which you are entitled, resulting in a higher tax bill. Therefore, even after the deadline has passed, the best option is to regularise your situation as quickly as possible.
Source: Adobe Stock Author: Redaction Tax authority rejects capital gains tax exemption for ruined properties The Portuguese Tax and Customs Authority (AT) has clarified that the purchase of a ruined property cannot be considered a valid reinvestment to qualify for exemption from IRS capital gains tax. The interpretation applies to taxpayers who sell their main residence and intend to reinvest the proceeds in the purchase of a ruined property, even if the aim is to rebuild it as their future home. According to the tax authority, a ruined property does not meet, at the time of purchase, the conditions required to be classified as a main residence, which is an essential requirement to qualify for the tax benefit provided by law. Reinvestment must comply with legal requirements The clarification follows a request submitted by a taxpayer who sold their main residence in 2023, repaid part of the mortgage and intended to use the remaining amount to purchase an urban property in ruins. The intention was to carry out reconstruction works and turn the property into a new main residence, but the reinvestment related only to the purchase of the ruined property. The AT concluded that this transaction does not qualify for exemption from capital gains taxation under IRS, as the acquired property cannot be considered a main residence at the time of reinvestment. Conditions to qualify for the IRS capital gains exemption The legislation provides that the exemption from IRS capital gains tax applies when the proceeds from the sale of a main residence are reinvested in the purchase of another property for the same purpose, in land for construction and the corresponding building works, or in the extension or improvement of another property intended exclusively as a main residence. In addition, the reinvestment must take place within the deadlines established by law, be declared in the relevant IRS tax return and the new property must become the taxpayers main residence within the legally established period. Purchase of a ruined property does not guarantee tax relief The Tax and Customs Authority considers that a ruined property cannot serve as a main residence at the time of acquisition and, for that reason, cannot be accepted as a valid reinvestment for the purposes of the IRS capital gains exemption. In practice, this interpretation means that the purchase of a ruined property alone is not enough to secure the tax benefit. Even if the owner intends to rebuild the property and use it as their permanent home, the amount invested in purchasing the ruin is not considered eligible for the reinvestment of capital gains under IRS.
Source: Adobe Stock Author: Redaction Anyone who rents out a home before selling it loses IRS capital gains exemption Anyone who places their main private residence on the rental market before selling it may lose the exemption from IRS on capital gains. The Tax Authority clarifies that maintaining the tax address does not, on its own, guarantee access to the exemption from IRS on capital gains. The decisive factor is the effective use of the property as a main private residence in the 12 months prior to the sale. Legal conditions for IRS capital gains exemption The exemption from IRS on capital gains depends on cumulative requirements set out in the Personal Income Tax Code. To benefit from the exemption from IRS on capital gains, the proceeds from the sale must be reinvested in the purchase of another main private residence, land for construction or renovation works. In addition, the intention to reinvest must be declared in the IRS return. The reinvestment period for the exemption from IRS on capital gains runs between the 24 months before and the 36 months after the sale. Main private residence and loss of benefit The Tax Authority defines a main private residence as the place where family life is stably centred. When the property is rented out, it no longer meets this requirement, potentially jeopardising the exemption from IRS on capital gains. Even if the tax domicile remains unchanged, this is not sufficient to guarantee the exemption, as the effective use of the property is decisive. Tax risk when renting before selling Renting out the home before selling it may change its tax classification and lead to the loss of the exemption from IRS on capital gains. The Tax Authority’s interpretation reinforces that the exemption from IRS on capital gains depends on the actual use of the property as a main private residence. Therefore, any decision to rent it out beforehand should be carefully assessed, as it may result in the loss of the associated tax benefit.
Source: Adobe Stock Author: Redaction Obligation to declare income abroad Income earned abroad must be mandatorily declared by all taxpayers with tax residence in Portugal. Even if tax has already been paid in another country, this does not remove the obligation to report it in IRS. During the IRS campaign, this rule continues to apply to those who worked remotely for foreign companies, received international pensions or have investments outside the country. The Tax and Customs Authority requires these amounts to be included in the annual return. Annex J and types of income to declare Income earned abroad is declared through Annex J of the IRS Model 3 form. This annex is used to report amounts received outside Portugal and the taxes paid abroad. Several types of income must be declared, including employment income, self-employment income, foreign pensions, bank interest, dividends, property rental income, capital gains and certain cryptoasset income. Correct completion requires indicating the country of origin, gross amount and any tax paid outside Portugal. Double taxation and international rules Income earned abroad may be subject to double taxation, meaning tax is charged in two countries on the same income. To avoid this, Portugal applies international conventions and tax credit mechanisms. Even when tax has already been withheld abroad, income earned abroad must still be declared in IRS. Only afterwards are agreements applied to eliminate or reduce double taxation. Portugal maintains several active treaties that help regulate international taxation and prevent the same income from being taxed twice. Common errors and foreign accounts One of the most common errors in declaring income earned abroad is omitting dividends from foreign brokers, declaring net amounts instead of gross amounts, or failing to correctly indicate tax paid abroad. There are also questions regarding foreign bank accounts. Even with a Portuguese IBAN in some cases, accounts previously opened abroad may need to be declared in Annex J, including IBAN and SWIFT/BIC code where applicable. Correct reporting of income earned abroad is essential to avoid tax corrections and ensure compliance with IRS obligations.
Source: Adobe Stock Author: Redaction A new framework for the housing market The new housing tax package approved by the Government comes in a context of strong pressure on access to housing in Portugal. Rising house prices, high rental costs and expenses associated with mortgage credit make it necessary to create measures that stimulate supply and facilitate access to properties. This set of tax changes aims to act on several fronts, from the purchase and sale of properties to renting and renovation, through adjustments in taxes such as IRS, IMT, VAT and Stamp Duty. However, the real impact of these measures depends on how they are implemented and on consumers’ ability to make informed financial decisions. Tax benefits in rental housing One of the most relevant changes relates to support for tenants. The possibility of deducting rents under IRS remains, but with an increase in the annual limit to 1,000 euros for residential lease contracts. To benefit from this deduction, it is essential that the contract is properly registered on the Tax Authority portal and that rent receipts are issued. This measure may represent a significant relief for households living in rented accommodation, especially in a context where housing represents a large share of monthly income. In parallel, the importance of regularising contracts is reinforced, allowing tenants to report rental agreements directly to the Tax Authority if landlords have not done so in time. Capital gains and reinvestment incentives Another relevant change concerns the taxation of capital gains from the sale of primary and permanent residences. Until now, there was an IRS exemption when the amount obtained was reinvested in a new primary and permanent residence. With the new framework, this exemption may also apply to situations where the sale proceeds are reinvested in properties intended for rental housing at affordable or moderate rents, provided that the legal conditions are met. This change aims to encourage the availability of properties in the rental market, promoting a better balance between supply and demand. Buying a home with lower initial costs On the purchase side, the tax package introduces measures that may reduce the initial costs associated with buying a primary residence, especially in properties considered cost-controlled. In certain situations, there may be an IMT exemption on the first purchase, as well as additional benefits in Stamp Duty. These reductions have a direct impact on the initial stage of the buying process, which is often one of the biggest barriers for families looking to purchase a home. The real impact depends on financial decisions Despite the opportunities created by these tax measures, their impact on consumers’ lives is not automatic. The evolution of the housing market will continue to depend on factors such as income stability, access to credit and households’ ability to plan financially. Thus, more than a set of tax benefits, this package represents a change in framework that requires careful analysis. Decision-making must be considered, taking into account each household’s reality and the long-term financial commitments associated with housing.
Source: Adobe Stock Author: Redaction Rental programme with low uptake The Lisbon Association of Landlords considers that bureaucracy and the complexity of processes are undermining the results of the affordable rental housing programme in Portugal. According to the organisation, the difficulty in submitting and approving applications, both from landlords and tenants, has discouraged participation in the scheme. At issue is the Rental Support Programme (PAA), created in 2019 with the aim of increasing the supply of more affordable housing, through tax incentives such as exemptions in IRS, IRC and IMI for landlords who charge rents below the market median. Bureaucracy and weak programme participation According to data referred to regarding the programme, there are around one thousand active contracts since its launch, a figure considered far below initial expectations. The goal of reaching a significant share of the market has fallen short, representing only a small percentage of the rental housing sector in Portugal. The association argues that this result mainly reflects the administrative complexity of the programme, which includes lengthy and unintuitive processes. From its perspective, landlords seek stability and predictability in the market more than isolated tax benefits, pointing to trust as a key factor for participation. Oversight, data and market impact Another critical issue relates to programme oversight. Despite the tax exemptions granted, there are concerns about monitoring compliance with the rules, particularly in cases where rents may exceed the defined limits. The lack of more effective control mechanisms raises doubts about the overall effectiveness of the scheme. The absence of automation in tax information processing is also highlighted, particularly in the completion of IRS declarations related to rental income, which requires additional steps from taxpayers, even though the information is already available to the tax authorities. In addition, the suspension of essential statistical data on the rental market makes it harder to track updated trends in rents. In a context of strong pressure on housing prices in Portugal, the lack of up-to-date information and the bureaucracy associated with support schemes are seen as additional obstacles to the development of affordable rental housing.
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