The price of housing,
redrawn by the taxman.

All insights

How Decree-Law no. 97/2026 redraws the cost of buying, building and renting a home in Madeira, and what escapes those who don't learn to play within the rules.

Some tax laws adjust margins. Others change decisions. The Housing Package, approved in May 2026, clearly belongs to the second category: it touches VAT on construction, the capital gains of those who sell a home, the withholding tax of those who let, the IMT of those who buy, and it does all of this in the name of a single criterion, as simple to state as it is demanding to apply: moderate value. It is national law, but the figures that follow are read for Madeira, where the VAT rates are the Region's own.

The promise is attractive. The small print, less so. Every benefit comes tied to deadlines counted in months, declarations that must be made in writing, and penalties that fall on those who least expected them, the buyer who changes plans, the landlord who charges one month too many above the limit. This article separates real opportunity from the condition to watch.

The criterion that decides everything: what «moderate» means

Before any benefit, there is a filter. None of the measures that follow apply outside these limits, and it is they, not the wording of the law, that will determine whether the benefit reaches you.

Criterion	Limit in 2026
Monthly rent	€ 2,300
Sale price	€ 660,982

These are moving figures: they are updated every year by ordinance, following the rent coefficient published in the official gazette (Diário da República). What is «moderate» today may not be so in two years, it is worth confirming the exact limit at the date of each transaction, rather than trusting the number left in memory.

Building and renovating: VAT falls, but it demands proof

This is where the package has the most immediate impact, and the most ingenious design.

A reduced VAT rate of 4%, the rate in force in the Autonomous Region of Madeira, now applies to construction or rehabilitation works on properties intended for sale as an own permanent home, or for residential letting, provided the price or rent does not exceed the moderate-value limits. For the developer, it is a cash-flow advantage. For the final buyer or tenant, it is, in theory, a cheaper home.

But the law does not trust good intentions, it demands proof, and deadlines:

• The sale must take place within 24 months of completion of the works;
• The deed must expressly mention the application of the reduced rate;
• In the case of letting, the property must remain let for at least 36 months, consecutive or spread out, within the first five years.

To this is added a technical change with practical weight: in certain transactions, it is no longer the builder who pays the VAT to the State but the client, through the reverse-charge mechanism. In practice, this means the owner of the works must inform the builder, in writing, before the works begin. Without that declaration, the invoice always comes with VAT at the standard rate, 22% in Madeira.

A draft law under discussion may extend this mechanism to any acquisition of civil construction services, regardless of moderate values. It is worth following the outcome before finalising any works contract.

Those who build their own home as private individuals, without being developers, have a parallel route: they can request a partial refund of the VAT borne on the works, the equivalent, by another path, of the same tax relief.

Selling, letting, paying rent: what changes in IRS

A second life for capital gains

The rule was always rigid: only those who sold their own permanent home and reinvested in another own permanent home escaped tax. The package opens a second route, less obvious and potentially more useful: it is now possible to sell any residential property, whether or not it is the home you live in, and exclude the capital gain from tax, provided the sale proceeds are reinvested in buying a property to let at a moderate rent.

The timetable is tight: the reinvestment must occur between 24 months before and 36 months after the sale; the intention to reinvest must appear in the IRS return for the year of the sale; and the property bought must be let, at a moderate rent, within six months, and remain let for at least 36 months in the first five years. Failing any of these points does not cancel the benefit immediately, it defers the bill, with interest. The measure applies to sales between 1 January 2026 and 31 December 2029.

Two pieces of good news, for tenants and for landlords

Those who pay rent continue to deduct 15% in IRS, but the ceiling rises, from € 800 to € 900 in 2026 and € 1,000 from 2027. On the other side of the contract, the landlord who receives a moderate rent sees the withholding tax fall from 25% to 10%, whenever the paying entity has organised accounts, as is the case, for example, of companies that rent housing to accommodate relocated workers.

Buying a home: IMT as an instrument of policy, not just revenue

IMT ceases to be merely a cost of the transaction and starts to work as a lever of behaviour, more expensive for some, cheaper for others, according to the effect the legislator wants to produce.

Non-residents now always pay the maximum rate, 7.5%, with no exemptions or reductions, unless they have already been tax resident in Portugal, become resident within two years of the purchase, or allocate the property to residential letting at a moderate rent for at least 36 months in the first five years. Once any of these conditions is met, it is possible to request from the State a refund of the difference between the 7.5% paid and the rate that would normally be due. In force since 25 May 2026.

At the same time, anyone who buys a first own permanent home under the cost-controlled housing regime obtains a full IMT exemption up to € 330,539, with the caveat that this benefit depends on a resolution of the municipal council, and is therefore not guaranteed in every municipality.

And there is an administrative easing, discreet but welcome: the deadline to pay IMT is no longer the working day following assessment but 30 days, more room for manoeuvre for those closing the financing of a purchase.

For landlords with scale and institutional investors

Beyond the individual owner's radar, the package reserves a second tier of benefits for those operating at greater scale:

• Autonomous taxation of 10%, instead of the usual 28%, on income from moderate rents, until 2029;
• 50% exclusion of residential letting income at a moderate rent, for companies and for self-employed workers with organised accounts;
• Reduced taxation for those who invest through real-estate funds with assets allocated to affordable letting.

To these is added a regime designed specifically for large developers: the Housing Rental Investment Contracts (CIA), signed directly with the State through the IHRU, valid for up to 25 years and with exemptions from IMT, IMI and Stamp Duty in exchange for long-term commitments to letting at a moderate rent. They come into force on 1 September 2026.

On the same date, the Simplified Affordable Rental Regime (RSAA) is also born, successor to the former Affordable Rental Programme: those who let within rent limits tied to the municipality's market median, with contracts of at least three years for permanent residence, have their income fully exempt from IRS or IRC, subject to prior notice through the IHRU's electronic platform.

What separates those who benefit from those who overpay

None of these measures applies on its own. All depend on documentary proof, exact deadlines and, above all, decisions taken before the transaction happens, not after.

Before signing any promissory contract, deed or lease under these rules, it is worth confirming three things: whether the value in question is, in fact, moderate in light of the updated limits; whether there is written documentation to support that condition before whoever will demand it, the tax authority, the municipal council or the contractual counterparty; and whether the deadlines arising from the transaction (six months, 24 months, 36 months, as the case may be) are clearly identified and scheduled, not merely known in the abstract.

The design of the package rewards those who plan ahead. It penalises, with interest and sometimes fines, those who treat these conditions as an administrative detail to sort out later.