Key figures — as of 2026-08-26: Non-resident buyers of residential property now pay a flat 7.5% IMT from 25 May 2026, with no access to the lower progressive rates residents use — Decree-Law 97/2026, published 20 May 2026 — while landlords letting at "moderate" rents (up to €2,300/month) get an autonomous IRS rate cut from 25% to 10%, running through 31 December 2029 — non-residents can claw back the IMT surcharge if they become tax resident within 2 years, or let the property at moderate rent for at least 36 months within the first 5 years.
What actually changed
Portugal's housing reform arrived as Decree-Law 97/2026, enacted on 20 May 2026, reshaping how residential property is taxed across the country, including Madeira. It was signed off after months of political wrangling under an authorisation law passed in March, and was pitched as a response to a housing shortage estimated at a structural deficit of around 300,000 homes.
Buried inside a package that also cuts construction VAT and sweetens deductions for tenants is a change that lands squarely on foreign buyers: the decree introduced a fixed 7.5% rate for non-resident buyers acquiring residential property in Portugal, replacing the progressive scale they previously shared with residents. The rule took effect on 25 May 2026, and until 24 May 2026, non-resident buyers paid exactly the same IMT rates as residents, on the normal progressive brackets, with no surcharge.
At the same time, the same law hands resident landlords a genuine break. The autonomous IRS rate on rental income drops from 25% to 10% for landlords charging rents up to €2,300 a month, regardless of whether it's a new or pre-existing contract, and this reduction applies to rental income earned between 1 January 2026 and 31 December 2029. Tenants get something too — the annual IRS rent deduction rises to €900 in 2026 and €1,000 from 2027.
Why the split matters for foreigners
The pairing is not accidental. The government's logic is to reward people who commit to living in — or renting out affordably within — Portugal, and to make speculative or purely investment-driven foreign purchases costlier. There is a way out of the 7.5% rate: the surcharge doesn't apply if the buyer has already been considered a tax resident, becomes one within two years of the purchase, or lets the property for residential use at a rent not exceeding €2,300, and the tenancy must be signed within six months of the purchase and maintained for at least 36 months, consecutive or interpolated, during the first five years. Miss those conditions and the higher rate simply stands — no refund, no appeal on the merits, just the flat charge.
Crucially, this isn't a soft cap. The measure aims to discourage the acquisition of properties for purely speculative purposes by non-residents who don't intend to establish residence in Portugal. For anyone buying a holiday home, a retirement base they'll only occupy part-time, or a straightforward buy-to-let they won't personally manage under the moderate-rent scheme, the 7.5% is simply the new cost of entry.
GrowIN's calculation
Here's what that actually means in euros. Take a €500,000 apartment bought by a non-resident who would previously have landed near the top of the old progressive IMT bracket — roughly 6% on a purchase that size. Under the old rules, that's about €30,000 in transfer tax. Under the flat 7.5% rate, it's €37,500 — an extra €7,500 simply for being a non-resident buyer, before stamp duty, legal fees or notary costs are even added. On a €300,000 property where the old effective rate might have sat closer to 5%, the gap narrows to roughly €7,500 as well once the full 7.5% is applied against what would have been a lower blended rate — the surcharge bites hardest precisely on the mid-market homes many relocating foreigners actually buy, not just luxury purchases.
GrowIN Portugal Editorial: "This reform pays residents to rent responsibly and charges non-residents extra simply to buy in the first place."
Practical implications
If you're planning a purchase and expect to become a Portuguese tax resident soon after — through a D7, D8 or other residence route — it's worth documenting your residency timeline carefully, since the two-year window to reclaim the difference is monitored by the tax authority on request, not automatically. If letting the property is realistic, structuring the tenancy to meet the €2,300 cap and 36-month minimum before or shortly after completion is the other route back to the standard rate. Either way, budget for the full 7.5% at the deed unless you can prove an exemption in advance — refunds happen after the fact, not at signing. Our tax and NIF guide covers the residency and filing mechanics that determine which side of this line you fall on.
What to watch next
Municipalities still have discretion over exemptions for "controlled cost" housing, and the Autoridade Tributária has yet to publish detailed guidance on how refund requests will be processed in practice. Anyone with a purchase already underway should confirm timing with a notary against the 25 May 2026 cut-off, since deals signed either side of that date fall under different rules entirely.