End of new Golden Visas voted today in Parliament

Five months after the approval of the first version of the ‘Mais Habitação’ (More Housing) programme by the cabinet, it will be put to a final overall vote on Wednesday.

Here are some of the main points of a proposal that, despite the changes introduced following the public consultation to which it was submitted, contains measures that have aroused strong opposition.

• End of ‘golden’ visas

With the entry into force of the new law, new applications for residence visas for investment activities will not be admitted, which will not affect the possibility of renewing authorisations already granted.

Applications for the granting and renewal of residence permits for investment activity remain valid, including those that are “pending prior control procedures in the municipalities” on the date of entry into force of the law.

Also excluded from the adopted limitation is the granting or renewal of residence permits for family reunification.

• Limitations on rent rises for new contracts

The initial rent of new contracts for houses that have been on the rental market in the last five years may not exceed 2% compared to the previous one. To this value can be added the automatic update coefficients of the previous three years (if they have not been applied), considering 5.43% in relation to 2023.

This 2% limitation does not apply to contracts whose value is lower than the rents considered in the affordable rent.

• Family council rates deduction increases

The amount of the council rates deduction that councils can grant to residents, depending on the number of dependents, will increase.

Currently, this deduction is €20, €40 and €70, depending on whether there are one, two, three or more dependents, respectively.

With the entry into force of the Mais Habitação law , the value of the deduction increases to €30, €70 and €140 for the same number of dependents.

• Reduction from 28% to 25% of the special IRS rate on rents

Rental income (when the taxpayer does not opt for its aggregation) will now pay a 25% income tax rate instead of the current 28%.

In addition, the reduction in the tax rate that already exists for longer-term contracts is reinforced – with the longest term, over 20 years, falling from the current 10% to 5% – and maybe even more pronounced if the rent is lower than the previous one.

The rate reduction does not apply, however, to lease agreements entered into as of 1 January 2024 when the rent exceeds the general limits of rent price by typology by 50%, depending on the municipality where the property is located. In addition, the income tax reduction for contracts lasting between two and five years ends.

• Forced renting of vacant houses

It was one of the measures of Mais Habitação that generated the most controversy and is aimed at vacant houses for more than two years and not located in the interior of the country, with owners having 90 days to respond after being notified to do work or use the property.

If there is no response from the owner within the defined period, the municipality may proceed with the forced lease of the property.

It is also foreseen that the municipality may, ex officio or at the request of any interested party, determine the inspection of the conditions of use of the property.

Holiday homes, those vacated because the owner is in a nursing home or providing permanent care as an informal carer, and those of emigrants, as well as those of persons displaced for professional, health or training reasons, are not considered vacant for this purpose.

• Immutability of rent support or subsidised interest

Extraordinary support, such as rent support or subsidised interest, cannot be seized. In the case of rent support, this is a monthly subsidy with a maximum value of up to €200 when the tenant has an effort rate of more than 35%.

The measure is designed to last five years.

• Capital gains from houses sold to the state and municipalities exempt from personal income tax

Capital gains resulting from the sale of real estate to the state or municipalities are exempt from income tax, with only those earned by residents on the list of territories and countries that Portugal classifies as tax havens or those resulting from sales through the exercise of the right of first refusal being excluded from this measure.

Currently, 50% of the capital gain generated must be included in the remaining income and is subject to progressive income tax rates.

• Urban rehabilitation tax benefits end for investment funds +++

The company tax exemption attributed to income obtained by investment funds established between 2008 and 2013 with assets in real estate subject to urban rehabilitation has been revoked, also ending the tax benefit attributed to those who held units in investment funds.

However, a reduction in the taxation of real estate investment funds and real estate investment companies is foreseen when “at least 75% of their assets are real estate for affordable housing rental”.

• Extraordinary contribution on short-term rents

Short-term rent accommodation will now pay an extraordinary contribution (CEAL), whose taxable base is constituted by the application of an economic coefficient (which takes into account the area of the property and income) and urban pressure. The rate applicable to this taxable base is 15% and cannot be deducted when determining taxable profit in company tax.

This CEAL leaves out residential properties that are not autonomous units or parts or divisions susceptible to independent use, as well as short-term rent accommodation that functions as own and permanent housing, provided that the operation does not exceed 120 days per year.

The rate, another of the measures that generated the most controversy, does not apply to properties located in the interior of the country, with the value dropping from the 35% initially proposed by the Government to 15%.

On the other hand, the taxable value for council rate purposes of short-term rent accommodation houses is always equal to 1, and they no longer benefit from the reduction of the coefficient of ageing that accompanies the age of the property.

• Expiry and review of short-term rent accommodation registrations

Holders of inactive short-term rent accommodation registrations must provide proof of the maintenance of the activity within two months of the entry into force of the new law.

In case of non-compliance, the registrations will be cancelled by the decision of the mayor of the territorially competent municipality.

On the other hand, short-term rent accommodation in own and permanent housing whose operation does not exceed 120 days per year will not be subject to the expiry of the registration.

The new rules also establish that local accommodation registrations will be reviewed during the year 2030 and, from the first review, renewable for five years.

The only exception is short-term rent accommodation that constitutes a real guarantee for loan agreements that have not yet been fully settled on 31 December 2029.

• Condominium owners can oppose new short-term rent accommodation

Condominium owners will now be heard in advance about new short-term rent accommodation that they want to set up in residential buildings. On the other hand, it is stipulated that “the constitutive title of the horizontal property can be modified by public deed, with the agreement of all the condominium owners”.

• Suspension of new short-term rent accommodation licences

The issuance of new local accommodation registrations outside the country’s interior territories will be suspended, according to the new rules.

This suspension, which does not apply to the operation of properties integrated in the Revive Nature Fund or to the autonomous regions, “remains in all or part of the area of the municipality in which the housing shortage situation has been declared”.

• Incentive to move houses from short-term rent to rental

Owners who remove their homes from short-term rent accommodation by the end of 2024 and place them in residential rental will be exempt from personal or company income tax on rents until the end of 2029 and are not subject to any limit on the amount of rent they wish to practice.

To this end, the lease must be made by 31 December 2024, and only properties registered as s hort-term rent accommodation by 31 December 2022 are eligible.

• Old rents updated for inflation

Old lease agreements (prior to 1990) that have not been transferred to the New Urban Lease Regime will no longer be transferred, and the rent will be updated according to inflation and will benefit from personal income tax and council rates exemption. It is also foreseen the payment of compensation to landlords.

• Renting to sub-let

In order to increase the supply in the rental market, the state proposes to rent vacant houses to private individuals and then sublet them.

The rent paid to the landlord will have tax benefits provided that the contract has a duration of not less than five years and the rent value is in line with the prices and typologies provided for in the Affordable Rental Support Programme (PAA).

• Tenant and Landlord Counter

The Tenant and Landlord Counter is created to ensure the processing of the special eviction procedure and the injunction in matters of rent. The eviction request is submitted to the Tenant and Landlord Counter, which notifies the tenant, who has 15 days to oppose or request a deferral of the eviction of the property under the terms provided for by law.

The new law also makes several changes to this eviction process in case of non-payment of rents.

• State pays rent arrears after three months of non-compliance

The state will replace the tenant and pay rent in cases where there is a default of more than three months to strengthen the rental market. In this way, it will be up to the state to assess the situation of the tenant and may proceed to collect the missing amounts using the means currently existing for the collection of other debts. If the default is due to a lack of means, the case is articulated with social security.

The payment has a maximum monthly value of 1.5 times the national minimum wage up to the total limit of an amount equivalent to nine times the national minimum wage.

• Tax benefits for works on affordable rental housing

The government wants to expand the number of houses available in the affordable rental programme (PAA), and to this end, a VAT rate of 6% is foreseen for construction or rehabilitation works of houses that are mostly allocated to this programme, as well as exemption from council rates for three years (extendable for another five) and exemption from property sales tax on acquisition for rehabilitation.

• Tenants can communicate lease contract to the tax authorities

Tenants will now be able to communicate to the tax authorities the lease contracts, sublease, promises and respective changes or termination if the landlord does not do so. The deadlines and terms for this will be regulated by the ordinance of the Ministry of Finance.

• Exemption from capital gains on the sale of the property to repay a loan

The programme provides for exemption from capital gains on the sale of family property, provided that the amount is intended to pay the loan for the owner’s own permanent home or that of his descendants.

This exemption covers properties sold between 1 January 2022 and 31 December 2024.

• Land or buildings made available to housing cooperatives

The government also provides for the provision to housing cooperatives of land or public buildings for construction or conversion into affordable rental housing.

• Simplification of licensing

Architectural projects will now be licensed only on the basis of the designers’ term of responsibility, and public entities will be penalised in case of delays in issuing opinions.

• €250 million for housing at controlled costs

The programme provides for the approval of a credit line, with mutual guarantee and interest rate subsidy, for affordable housing projects, namely construction or rehabilitation and for the acquisition of the property, which must be placed on the rental market.

The houses promoted using this support are allocated to affordable rental for at least 25 years, with a longer-term being fixed in the lease agreement, after which the municipalities and the IHRU have a right of first refusal to acquire them.

The entities that can apply this measure are cooperatives, commercial construction companies, municipalities and misericórdias or other social solidarity institutions.

• €150 million line for municipalities to carry out coercive works

It is planned to create a financing line of €150 million through Banco Português de Fomento for municipalities to carry out coercive works, reinforcing the fulfilment of the prerogatives of municipalities under the Legal Regime of Urbanisation and Building.