Regardless of the type of house or the date of the contract, owners with rented properties may benefit from a significant reduction in their tax bill. The draft housing bill, submitted by the Government to Parliament on Tuesday, provides for the autonomous IRS tax rate on property income to fall from the current 25% to 10% on rents up to €2,300 per month, covering both new and existing contracts.
The Minister for Infrastructure and Housing, Miguel Pinto Luz, made a point of dispelling any doubts during his speech at the CNN Summit on Wednesday, emphasising that this reduction in income tax applies without distinction: "it is for all contracts, current ones, as long as they charge rents below €2,300," he explained at the time. Furthermore, in cases where landlords agree to charge rents 20% below the median for their municipality, the tax incentive will be total: "they will have 0% income tax," Pinto Luz assured.
The legislative authorisation proposal approved by the Council of Ministers on 28 November thus provides for a reduction in corporate income tax and the autonomous income tax rate applied to property income from residential rental and subletting contracts entered into until the end of 2029. In contracts with monthly rents of up to €2,300, the autonomous tax rate drops to 10%, provided there is no other more favourable rate. In the case of IRC, property income will now only be considered at 50%.
The proposal also introduces an income tax exemption on capital gains resulting from the transfer of residential properties, when there is reinvestment in the purchase of houses intended for residential rental with a moderate monthly rent (not exceeding €2,300). Reinvestment may take place from 24 months before to 36 months after the sale, and the taxpayer must express their intention to reinvest. This measure is expected to remain in force until the end of 2029.