Below is a brief summary of the main changes:
VAT
The reduced VAT rate of 6% now applies to construction or rehabilitation works on properties intended for:
- sale as the purchaser’s own permanent primary residence, provided, in particular, that (i) the sale price does not exceed the upper limit of the 2nd bracket of the IMT rate table (i.e., currently €660,982) and (ii) the sale takes place within 24 months from the date of issue of the document allowing the start of use of the property; or
- residential leasing, provided, in particular, that (i) the monthly rent does not exceed 2.5 times the monthly minimum wage set for 2026 (i.e., €2,300, which may subsequently be updated by ministerial order), (ii) the first residential lease agreement enters into force within 24 months from the date of issue of the document allowing the start of use of the property, and (iii) the property is leased for at least 36 months, consecutive or non‑consecutive, during the first five years after the date of issue of the document allowing the start of use of the property.
The reduced VAT rate (i) applies to construction or rehabilitation works relating to development operations whose procedural initiation occurs between 25 September 2025 and 31 December 2029 and for which the tax becomes chargeable on or after 1 January 2026, and (ii) ceases to apply on 31 December 2032.
IRS/IRC
Rental income arising from residential lease agreements with a monthly rent of up to 2.5 times the monthly minimum wage set for 2026 (i.e., up to €2,300/month, which may subsequently be updated by ministerial order) will be subject, for individuals, to a 10% flat tax rate. For corporate income tax purposes (IRC), as well as for personal income tax taxpayers with organised accounts, such rental income will only be taken into account at 50%.
These new rules take effect as from 1 January 2026 and apply to income earned up to 31 December 2029.
Alternative Investment Vehicles (OIA)
New incentives are introduced for real estate investment funds and companies that allocate at least 5% of their assets to properties leased under the Simplified Affordable Rental Regime (see below) or other legally qualified similar regimes, including: (i) taxation at 5% of part of the distributed income corresponding to affordable residential rents; (ii) partial exclusion from taxation (between 2.5% and 30%) of the remaining amount; and (iii) a 25% reduction in stamp duty for vehicles with a higher proportion of eligible assets.
These new rules take effect as from 1 January 2026, and such investment vehicles must be incorporated (or amend their constitutional documents) by 31 December 2029.
IMT/Stamp Duty
Tax benefits are introduced in respect of IMT and stamp duty for purchasers of their first permanent primary residence, where the property acquired is qualified as “controlled‑cost housing” under its own specific regime, including an IMT exemption up to the upper limit of the 1st IMT bracket (currently €324,058) and a reduction of stamp duty.
Investment Contracts for Rental
A new contractual regime is created, taking effect as from 1 September 2026, allowing investors, through the execution of an Investment Contract for Rental with IHRU for a term of up to 25 years, to benefit from a broad package of incentives, namely: reduced VAT rate (6%) on construction works, IMT exemption on the acquisition of land and properties, IMI exemption for up to 8 years, a 50% reduction of IMI for the remaining period, full exemption from AIMI and a reduction of stamp duty.
For an investment to be eligible, the investor must allocate at least 70% of the construction area to residential leasing and the rents may not exceed 2.5 times the monthly minimum wage set for 2026 (i.e., €2,300, which may subsequently be updated by ministerial order).
Simplified Affordable Rental Regime
A Simplified Affordable Rental Regime is created, providing for full exemption from IRS and IRC on rental income arising from residential lease agreements, leases for sub‑rental and sub‑rental agreements that qualify as “affordable rental”. To benefit from this regime, lease agreements must comply with a minimum term (3 years for permanent residence and 3 months for temporary residence) and the rent must not exceed 80% of the median rent per sqm in the relevant municipality (to be set by ministerial order).
This regime takes effect as from 1 September 2026.
