The announcement was made by Prime Minister Luís Montenegro in a press release during the Council of Ministers meeting. "We are talking about a measure that integrates the entire market context covering the whole country, and a specific market up to this amount in areas of greater price pressure. We are acting across the whole territory, and practically all buildings will be covered by this tax rate in most of the country, and in Lisbon or Porto this amount is part of the concept we bring to our housing policy, which is access to moderate prices."
The reduced VAT rate will cover the construction and renovation of housing and rental projects with rents of up to €2,300. Recognizing a relatively high price ceiling, Luís Montenegro explained that the idea is that virtually the entire rental market will be covered by this tax benefit. “We are talking about a ceiling that gives the middle class and families with some economic capacity a new ability to settle down and build the human resources that our companies and public administration need to be competitive. This is an ambitious project, but it is for everyone, it is inclusive, and it leaves no one out, except those who really have a much higher income.”
This scheme is expected to remain in place until 2029. “It is a shock political initiative, because we want to ‘shake up’ the construction and rental market during our term in office.”
Luís Montenegro also confirmed an increase in the income tax deduction for rental expenses to €900 in the first phase and €1,000 thereafter, and the application of a 10% income tax rate for landlords who place their properties on the market at controlled prices, i.e., up to €2,300, and with three-year contracts. Rents that are 20% below the median for the municipality in question will be eligible for zero IRS and IRC. The government is basing this on a household effort rate of up to a maximum of 40%.
Increase in IMT for non-residents and changes to AIMI
Another new development is the increase in IMT for the purchase of housing by non-residents in Portugal, “excluding our emigrants.” In the case of housing placed on the market for rent up to €2,300, the AIMI currently in force will not be applied.
"These tax measures aim to make an increased, ambitious, and bold effort to give our society, developers, builders, and citizens greater confidence, greater predictability, and the conditions to solve this constraint we have on people's quality of life and the competitiveness of our economy. We are acting with financial responsibility, without jeopardizing the balance and health of public finances, preserving our goal of continuing to have budget surpluses in the coming years.“ The objective of all these measures is to ”increase supply, contain and reduce prices," added the prime minister.
“Moderate-priced housing” replaces “affordable rent”
“This week, the government focused on rental policies and simplifying processes,” said Miguel Pinto Luz, Minister of Infrastructure and Housing, on the same occasion. “We are well aware that, in order to address the housing problem in the short term, the only way is to guarantee social support for those who need it most,” recalling the investments in Porta 65 in recent years or IMT Jovem. He thus ensured that Supported Rent will continue to exist, because “those who need it most cannot be forgotten in any public housing policy.”
“We wanted to do away with the concept of affordable rent and create the concept of moderate-value housing for everyone, particularly for the middle class, which has been forgotten.” Miguel Pinto Luz emphasizes that the €2,300 limit is based on an average family in the urban areas of Lisbon and Porto, respecting the internationally recommended effort rate of 40%, and includes all families with incomes and rents below that ceiling.
Build to Rent contracts created
Miguel Pinto Luz highlighted the creation of Build to Rent investment contracts, with 6% VAT on construction, total exemption from IMT and IMI for the first 8 years, 5% for income distribution in OICs, and exemption from capital gains tax for reinvestment in housing for rent at controlled prices. The idea is to encourage investment in the construction of new rental housing, and “we also encourage individual savers.”
Simplification of processes – changes to the RJUE
Luís Montenegro also mentioned that decisions are being made to simplify and streamline urban planning processes. Miguel Pinto Luz highlighted the revision of this regime, noting that the Government has approved “a request for legislative authorization.” “We want to reduce deadlines, simplify processes, and be absolutely strict in combating bureaucracy and discretionary power, which must cease to exist. The State is a good person and must be understood as such.”
The Government intends to reduce the deadlines for simple or qualified prior information requests, whether in all licensing applications. “It is not a reduction by decree, but by changing the procedure.” In terms of opinions, “we have introduced the need for and obligation to carry out procedural checks, meaning that we no longer have deadlines for each of the entities that must be consulted. It is clear that all opinions have a date and deadline for being included in the process.”
The government also wants to change and reduce the expiry date for successive control, which was 10 years. “Municipal councils will have one year to carry out this successive inspection.”
Also noteworthy is the new digital platform that will make this entire procedure operational, in conjunction with BIM, AI, and other technology, “to facilitate all decision-making processes, making them more transparent.”
Image credits: © James Sullivan | Unsplash
Translated with DeepL.com (free version)
