Portugal has introduced a specific framework designed to encourage investment in residential rental properties. Rental Investment Contracts (Contratos de Investimento para Arrendamento — CIA) provide tax benefits for eligible projects, subject to compliance with the applicable legal requirements.
The scheme was established by Decree-Law No. 97/2026 of 20 May and regulated by Ministerial Order No. 447-A/2026/1 of 30 September. The latter sets out the application procedures, investor eligibility requirements and obligations associated with these contracts.
The aim is to encourage private investment in the acquisition, construction and rehabilitation of properties intended for residential rental, helping to increase the supply of housing at moderate rents.
Rental Investment Contracts are entered into between investors and the Institute for Housing and Urban Rehabilitation (Instituto da Habitação e da Reabilitação Urbana — IHRU), acting on behalf of the Portuguese State.
The scheme covers investments in the acquisition, construction or rehabilitation of buildings intended for residential rental or for rental with a view to residential subletting.
Contracts have a term of between 10 and 25 years, except where specific conditions apply to projects incorporated into public-private partnerships.
To qualify, projects must comply with the requirements relating to the use of the properties, rent ceilings and investor eligibility conditions.
The CIA regime provides for several tax benefits, the application of which depends on compliance with the relevant legal and contractual requirements.
The main benefits include:
— Exemption from IMT (Property Transfer Tax) on the acquisition of certain building plots and properties intended for residential rental covered by the contract.
— Exemption from Stamp Duty on the transfer of eligible properties.
— Exemption from IMI (Municipal Property Tax) for a period of up to eight years, starting from and including the year of acquisition.
— A 50% reduction in the IMI rate for the remaining term of the contract, within the applicable legal limits.
— Application of the reduced VAT rate to certain eligible construction or rehabilitation works involving properties covered by the scheme.
— A refund equivalent to 50% of the VAT incurred on certain architectural, engineering, design and study services related to construction or rehabilitation, subject to the exclusions established by law.
— Exemption from Additional IMI for the duration of the contract.
— A 50% reduction in a specific Stamp Duty rate for certain alternative investment funds, in proportion to the assets covered.
It is important to note that the application of the IMT and IMI exemptions provided for under the scheme is subject to a municipal decision, in accordance with the law. These benefits should therefore not be considered automatic in every municipality or for every investment.
Before making an investment, it is essential to verify which benefits actually apply to the property and contract concerned.
Individuals, companies and other entities may submit an application, provided they meet the requirements established by law.
The main requirements include:
— Appropriate technical and management capacity for the investment.
— Properly maintained accounting records.
— Taxable profit that is not determined using indirect assessment methods.
— Up-to-date tax and social security compliance.
— Compliance with the other legal requirements applicable to the activity.
— Proven experience of more than three years in property investment or development, property management or residential rental management.
Under certain conditions, the regulations allow experience gained by shareholders, certain entities holding a stake in the investor or owned by the investor, and members of administrative, management or governing bodies to be taken into account.
An additional important requirement concerns the use of the buildings: at least 70% of the total construction area covered by the contract must be allocated to residential rental or rental for residential subletting.
Rents must also comply with the applicable legal ceilings. Applications are submitted through the electronic platform provided by the IHRU.
For the purposes of this scheme, Decree-Law No. 97/2026 provides that moderate monthly rent may not exceed 2.5 times the guaranteed monthly minimum wage applicable in 2026, subject to any updates provided for by law.
This criterion is essential in determining whether properties can be included in a CIA.
This limit should be distinguished from the rules of the Simplified Affordable Rental Scheme (Regime Simplificado de Arrendamento Acessível — RSAA). Where a CIA falls under the RSAA, the requirements and rent ceilings specific to that scheme also apply.
For investors, understanding the applicable rent ceilings is essential to estimating potential rental income and assessing the financial viability of a project.
The Algarve remains an important region for property investment. However, the viability of each rental project depends on several factors, including location, purchase price, construction or rehabilitation costs and permitted rents.
Rental Investment Contracts may be an option worth considering for investors wishing to develop medium- or long-term residential projects who meet the scheme's legal requirements.
The acquisition of buildings for rehabilitation and the construction of new homes intended for rental are examples of projects that may be considered under this framework.
Tax incentives may contribute to the financial viability of certain investments. However, they do not, on their own, guarantee that a project will be profitable.
Before making a decision, it is therefore important to assess total costs, projected income, contractual obligations and the conditions specific to the property market in each municipality in the Algarve.
Before entering into a Rental Investment Contract, it is important to assess:
— The eligibility of the investor and the project.
— The applicable rent ceilings.
— The available tax benefits and the conditions for obtaining them.
— The duration and obligations established in the contract.
— The costs of purchasing, constructing, rehabilitating and managing the property.
— The expected return over the investment period.
A preliminary assessment helps investors better understand the scheme's requirements and determine whether the project aligns with their investment objectives.
If you are considering purchasing a property in the region, Algarve Property.com also provides a property buying guide to explain the main stages of the purchasing process in the Algarve.
The legislation applicable to Rental Investment Contracts can be consulted in the following official legal texts:
Rectification Declaration No. 26/2026/1 — Diário da República
Ministerial Order No. 447-A/2026/1 of 30 September — Diário da República
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