More Housing – Tax measures

© Catarina Mantero

Law 56/2023 was published on 6.10.2023.

Here are the main takeaways from this new regime:

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Limitations on resale tax relief

  • The RETT exemption applicable to the purchase for resale of property will now have a resale deadline of 1 year (as opposed to the previous 3 years) and will be subject to compensatory interest from the time of acquisition if not complied with (as opposed to the previous situation).
  • There is no longer a suspension of RET for construction companies (unlike the previous situation for the acquisition of building land) or the resale of property (unlike the previous situation for the acquisition of any building). On the other hand, an exemption scheme is created for land for housing construction with a licence that has been started but not yet issued.

Limitations on the reinvestment of real estate capital gains in PIT

  • The PIT exemption applicable to the reinvestment of capital gains generated on the sale of own permanent housing is maintained, but with two additional requirements:
    (a) The taxpayer or household has lived in the house sold for at least 24 months (unlike previously, when there was no minimum housing requirement); and
    (b) the taxpayer has not benefited from the same exclusion regime in the last 3 years (unless there is a justifiable reason).
  • The general reinvestment period of 36 months remains, but is considered suspended between 01.01.2020 and 31.12.2022.
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PIT relief

  • Housing rents will now benefit from lower rates in all rental duration brackets:
Length of lease Before Now
< 5 years 28%  25%
>= 5 years < 10 years 23% 15%
 >= 10 years < 20 years  14%  10%
 >= 20 years  10%  5%
* Renewals follow a specific regime. Termination of the lease (for reasons attributable to the landlord) determines return of the relief, plus compensatory interest.

End of PIT tax benefits for rehabilitated buildings

  • Owners of rehabilitated buildings will no longer benefit from (i) the reduced rate of 5 per cent on the first transfer following the intervention, as well as (ii) the reduced rate of 5 per cent for rental income.
  • It remains to be seen whether or not buildings that were already rehabilitated before the new law came into force will be able to continue to benefit from these tax benefits.

New PIT and CIT exemptions

  • They are now exempt from PIT and CIT:
    1. Sale of residential property to the State, Autonomous Regions or Local Authorities (except when exercising pre-emption rights).
    2. Rental until 31.12.2024 of properties previously used for local accommodation (benefit will last until 31.12.2029).
    3. Sale between 01.01.2022 and 31.12.2024 of building land or second homes with reinvestment – within 3 months – of the price in the amortisation of the mortgage loan incurred in the purchase of the home where the taxpayer or their descendants have their permanent home.
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Rental Support Programme

  • Properties allocated to the Rental Support Programme will be exempt from RETT, RET (for 3 years, renewable for a further 5 years) and RET Surtax .
  • In addition, rental contracts for properties allocated to the Rental Support Programme will be exempt from Stamp Duty.

VAT on refurbishment

  • The concept of “urban rehabilitation construction work” (item 2.23 List I of the PT VAT Code) is replaced by “building rehabilitation construction work”.

  • In practice, this excludes new construction in urban rehabilitation areas from the reduced VAT rate (except in the case of operations of recognised national public interest or new construction of public facilities for collective use).

  • Ongoing works at the time the new law comes into force can still benefit from the previous wording of the law in certain circumstances (see it here); the previous wording, being broader, allowed new construction to be included in the reduced rate when carried out in an urban revitalisation context
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Entry into force

  • It enters in force on 07.10.2023 and applies to all income and property transactions obtained/realised after its entry into force, without prejudice to the general rules safeguarding the effects of tax benefits whose constitutive event has already occurred under the previous law.
  • In terms of VAT, there are transitional measures to consider, which you can see below here.
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