Fiscal measures proposed in the government’s latest housing package are expected to cost between €200 and €300 million, the finance minister said on Wednesday.
In a parliamentary hearing, Joaquim Miranda Sarmento pointed out that the budgetary cost of the housing measures “is difficult to estimate because it depends on the number of people who place houses on the market and the number of houses built at the price set by law”.
Measures proposed include cutting income tax (IRS) on rental income for landlords from 25% to 10% on contracts with monthly rents up to €2,300; introducing a more favourable capital gains regime for those who buy houses to subsequently rent out and for those who place properties on the market, in a bid to increase housing supply; and reducing VAT on construction from 23% to 6%.
“We estimate these measures could cost around €200 to €300 million,” he said, responding to a question from the Communist Party (PCP) MP Alberto Maia.
Parliament will debate and vote on the government’s new package of measures to address the housing crisis this Friday, January 9, as house prices continue to rise for a sixth consecutive quarter, according to the National Statistics Institute (INE).
The draft bills aimed at boosting housing supply are largely fiscal in nature and seek legislative authorisation for Luís Montenegro’s administration to amend VAT rules, income tax legislation, the Tax Benefits Statute and the property transfer tax framework.
For landlords, there is a planned reduction in income tax from 25% to 10% aimed at freeing up more houses for rent.
The proposals also include an exemption from capital gains tax for homeowners who reinvest the proceeds from a property sale into rental housing offered at government-defined “moderate” rents of up to €2,300 per month.
In the case of properties owned by companies, the executive proposes that only half of the property income should count towards corporation tax.
For developers and builders, a VAT cut from 23% to 6% is proposed, provided that houses to be built are sold for prices up to €648,000 or rented for up to €2,300 per month.
The draft bills will be discussed and voted on tomorrow morning (Friday) in parliament. In order to be approved, the government needs political support because it does not have a parliamentary majority. If the proposals are given the green light, they will still require promulgation by the President of the Republic.
