How rental income is taxed in Portugal in 2026: 10%, 25% and 0%

From 1 January 2026, rent from a long-term residential lease in Portugal is taxed at a flat 10% if the monthly rent is €2,300 or less, the lease is for housing only, and the income is received by 31 December 2029. Above that limit the standard flat rate of 25% applies, and longer leases can bring it down to 15%, 10% or 5%. A few lets are fully exempt. The rules turn on the contract, not on where you live, so owners resident abroad pay the same rates. Below we explain each rate, the options for englobamento (being taxed at progressive rates), and what the numbers look like in practice.

Which rate applies to your lease

Portuguese tax law treats rent as rendimentos prediais (property income, "Category F"). The tax is charged on the net amount: the rent you received during the year minus the deductible expenses for that property. For most private owners, that net figure is taxed at a flat "autonomous" rate. It is not added to your other income.

When more than one rate could apply, you get the lowest. The new law says so expressly.

The new 10% rate: who qualifies

The 10% rate is in a new article 45-C of the Estatuto dos Benefícios Fiscais (Tax Benefits Statute), added by Decree-Law 97/2026 of 20 May 2026. It has three conditions:

• Housing only. The lease must be exclusively for housing. A contract that also allows an office, a registered company address or business use does not qualify.
• Moderate rent. The monthly rent must not exceed 2.5 times the 2026 minimum monthly wage of €920, which is €2,300. The government can update this limit by portaria (ministerial order) in line with the annual rent-update coefficient. No update had been published at the time of writing.
• Time limit. It covers rent received from 1 January 2026 to 31 December 2029.

Points owners often ask about:

• Existing leases qualify. You do not need a new contract. The rate applies to leases already running.
• The limit is per contract, and it is a cliff. It is measured on the whole rent of the contract, even if there are several tenants or several co-owners. If the rent is €2,301, the whole contract is taxed at 25%, not just the excess.
• Extras count. The rent for the test includes amounts for furniture, equipment, attached parts of the property and services that add to its value, even if they are charged under a separate agreement. Splitting a €2,600 rent into €2,250 of rent plus €350 for "furniture" does not work.
• Rent changes during the year. The test uses the annual rent divided by the number of months that have passed in the year.
• No minimum lease length. Drafts of the measure in early 2026 mentioned a three-year minimum, and some websites still repeat it. The final text of article 45-C and the decree-law contain no minimum term. The general rules on lease length in the Civil Code still apply.
• Letting to a company. In binding ruling PIV_30751 (reported 22 September 2026), the Autoridade Tributária (tax authority, AT) accepted the 10% rate on a lease to a company. The home had to be used solely as the permanent home of an individual named in the contract, and the contract had to ban subletting and business use.

Does the 10% rate apply if you live abroad?

Yes, on the wording of the law. Article 45-C has no condition about the landlord's tax residence. Rent from a property in Portugal is Portuguese-source income wherever you live, and it falls under the same article 72 rates as for residents.

This matches how earlier measures have been read:

• The Portuguese chartered accountants' body (OCC, opinion PT28608, May 2025) confirmed that the lease-length reductions apply to non-residents.
• The AT confirmed in January 2025 that the ex-AL exemption also covers non-residents, saying residence was "irrelevant".

We found no AT ruling or circular yet that addresses non-residents and article 45-C directly. The 2026 tax return forms will not be published until early 2027. If a lot of money is at stake, ask your adviser to confirm this for your case.

The 25% rate and the lease-length reductions

If the rent is above €2,300, the base rate for a housing lease is 25% (CIRS art. 72(2)). This was cut from 28% by Mais Habitação (Law 56/2023) from 2023 income onwards. Longer leases for permanent housing cut that rate (art. 72(3) to (5)):

• 5 to under 10 years: minus 10 points, so 15%. Each renewal for the same length takes off another 2 points, up to 10 extra points in total. The lowest possible rate on this route is 5%.
• 10 to under 20 years: minus 15 points, so 10%.
• 20 years or more: minus 20 points, so 5%.

These reductions apply on any rent, so they are the main tool above €2,300. Below €2,300, a lease of 20 years or more still beats the 10% rate.

There is a catch. If the lease ends early for a reason attributable to you as landlord, you lose the reduction from the start of the contract or renewal. You must then report this and pay the difference with compensatory interest (art. 72(20)).

The 0% regimes

Affordable rent (RSAA). The Regime Simplificado de Arrendamento Acessível (simplified affordable-rent regime) took effect on 1 September 2026 and replaces the old affordable-rent programme. Rent from a qualifying contract is fully exempt from IRS. The conditions are:

• The rent must not exceed a cap per home type, set at 80% of the INE median rent for the municipality.
• The lease must be for at least 3 years for a permanent home, or at least 3 months for a temporary stay by someone whose tax residence is in another municipality.
• By 15 January of the year after you sign, you must upload the contract and proof that it was registered with Finanças to an IHRU (housing institute) platform.

As of late September 2026, the portaria setting the rent caps and the IHRU platform were still not available, so the regime cannot yet be used in practice. Check before you rely on it.

Former short-term lets. Rent is IRS-exempt until 31 December 2029 if both of these are true:

• The home was registered as Alojamento Local and used for short-term letting by 31 December 2022.
• It was moved to a long-term housing lease that was signed and registered on Portal das Finanças by 31 December 2024.

The deadline to sign a qualifying lease has passed, so new conversions cannot use this exemption.

If you opt for englobamento, exempt RSAA rent must still be counted when working out the rate on your other income.

Englobamento: when progressive rates can help

Englobamento (aggregation) means adding your net rent to your other income and taxing the total at the progressive IRS rates. For 2026 these start at 12.5% on the first €8,342 of taxable income and reach 48% above €86,634.

• Portuguese residents can choose it each year in their tax return (art. 72(13)). If you do, all your Category F income must be included (art. 22(5)). The lowest band is 12.5%, so englobamento almost never beats the 10% rate. It can help where rent is taxed at 25% and your total income is low. Run both options in the Portal das Finanças simulator before you file.
• Residents of another EU/EEA state can choose to be taxed as a resident under art. 17-A. This applies only if Portuguese income is at least 90% of their worldwide income. The rate is then set by reference to worldwide income, so this mainly suits people whose only real income is the Portuguese rent. Art. 72(15) also gives EU/EEA residents a progressive-rate option, but its wording refers to the 28% category and not expressly to the 25% housing rate. Ask an adviser to confirm whether it applies to your housing rent.
• Residents outside the EU/EEA (for example the UK, US, Switzerland or Brazil) have no englobamento option. They pay the flat rates above.

Deductions, withholding and filing

• Deductions (art. 41). These are expenses actually paid to earn the rent: IMI, condominium charges, repairs and maintenance, rent-default insurance, and stamp duty on the lease. Repairs paid in the 24 months before the first lease also count. Financing costs, depreciation, furniture and appliances, and AIMI cannot be deducted. Keep invoices issued to your NIF. These rules are the same for residents and non-residents.
• Withholding. A tenant with organised accounts (most companies) must withhold tax from each rent payment: 10% for leases that qualify under article 45-C, otherwise 25% (art. 101). The amount withheld counts against your final bill. Private individual tenants do not withhold.
• Filing. You declare the rent on the annual IRS return (Modelo 3, with Anexo F) between 1 April and 30 June of the following year. Non-residents with Portuguese rent must file too. Any tax due is normally payable by 31 August. Rent received from January to May 2026, before the decree-law was published, still gets the 10% rate. Any extra tax withheld at 25% in those months is settled on the return.

Your home country may also tax the rent. Under most tax treaties, Portugal taxes first and your home country then gives relief by credit or exemption.

Worked examples

These are for one owner and one housing-only lease over a full year of 2026, with no special regime. Expenses are illustrative.

At €2,500 a month, a 5-year lease would cut the tax to €4,125 (15%), and a 10-year lease to €2,750 (10%).

Setting the rent at €2,300 instead of €2,500 makes the net taxable rent €25,100 and the tax €2,510. Your income after tax and expenses rises from €20,625 to €22,590, even though you collect €2,400 less rent.

Checklist

• Make sure the contract says it is for housing only and bans business use and subletting.
• Keep the total monthly rent, including any furniture, parking or service charges, at or below €2,300 if you want the 10% rate.
• Register the lease with Finanças and keep the proof. The RSAA and other benefits depend on it.
• If the rent is above €2,300, consider a lease of 5, 10 or 20 years, and make sure you will not end it early yourself.
• Keep invoices for IMI, condominium charges, insurance and repairs, issued to your NIF.
• If you are an EU/EEA resident with little other income, check the art. 17-A option before filing.
• File Modelo 3 with Anexo F between 1 April and 30 June 2027 for your 2026 rent, and pay by 31 August.