Framework

The general crisis in access to housing, increased by the European Central Bank’s increase in inflation and interest rates, has had a significant impact on the lives of young people, favouring the emigration of the most qualified.
In response to this problem, the Portuguese Government has approved several policy measures aimed at facilitating access to first homes for young people up to the age of 35. The most important of these is Decree-Law 48-A/2024, which exempts young people from Municipal Property Transfer Tax (IMT) and Stamp Duty (IS) when they buy their first permanent home, by amending the respective codes.

Main changes in the acquisition of own and permanent housing

In tax terms, Decree-Law 48-A/2024 provides:

• The law provides for young people up to the age of 35 to be fully exempt from paying IMT and IS on property purchases up to a taxable value of 316,772.00 euros.
• In these cases, in addition to the exemption from IMT and IS, young people will also be able to add the exemption from the fees for registering the first onerous purchase of a property intended exclusively for their own permanent home, established by Decree-Law no. 48-D/2024 of 31 July. In fact, if the purchase of the first home is made using a loan (which requires the corresponding mortgage to be registered), the saving amounts to 450.00 euros. If there is no need for a mortgage, the amount saved on registration will be 225.00 euros.
• There is also a partial exemption for properties with a value of 633,453.00 euros, which will be taxed at the rate corresponding to that bracket, which is 8 per cent. In other words, when the value on which the tax is levied is higher than the limit of the 1st bracket, it is divided into two parts, one equal to the limit of the highest bracket it falls into and the other, equal to the excess, to which the marginal rate for the immediately higher bracket is applied.
• In order to be eligible, young people cannot be considered dependents for IRS purposes in the year in which they buy the house, and they can only benefit from the exemption if they are buying their first permanent home.
• The exemption does not apply to taxpayers who hold ownership rights, or partial ownership of such rights, over an urban residential property at the time of the transfer or within the previous three years. With regard to properties that become the joint property of a married couple, the application of the exemption is assessed individually in relation to each spouse.
• The benefit applies only to the purchase of urban buildings or autonomous fractions of urban buildings, exclusively for own permanent residence, excluding the purchase of land for construction.
• In order to implement the IMT exemption, considering that this is a tax whose revenue is municipal, a compensation mechanism is created for the loss of revenue calculated as a result of the application of the exemption, so that no municipality is harmed.

All these measures took effect on 1 August 2024.

In parallel, the following measures were also approved

Personal guarantee to be provided by the State, by Decree-Law no. 44/2024, of 10 July

This law establishes the conditions under which the state can provide a personal guarantee to credit institutions with a view to making it possible to grant loans for permanent housing to young people.
To be eligible, borrowers must be between 18 and 35 years old, tax resident in Portugal and:

• They cannot have an income higher than the 8th IRS bracket;
• They cannot own urban housing properties;
• They cannot have previously benefited from the state’s personal guarantee;
• The value of the transaction may not exceed €450,000.00;
• The state guarantee may not exceed 15 per cent of the transaction value of the property; and
• The State’s personal guarantee is intended to enable the credit institution to finance the entire transaction price of the urban building or autonomous fraction of an urban building.

These measures took effect on 11 July 2024.

Exemption from registration fees, by Decree-Law no. 48-D/2024, of 31 July

This law establishes exemptions from the fees due for the registration of the first acquisition of property intended exclusively for own and permanent habitation, as well as a reduction in the fees due for the special procedure for the transfer, encumbrance and registration of real estate, by amending the Emoluments Regulations for Registries and Notaries, approved by Decree-Law 322-A/2001 of 14 December, in its current wording.
The main measures include:

• Exemption from fees for registering the first purchase of a permanent home;
• Exemption from the fees payable for registering the mortgage associated with the purchase;
• Reduced fees for the special procedure for the transfer, encumbrance and registration of real estate:
  • 225, if only one fact is recorded;
  • €450, if more than one fact is recorded.
• When there are several purchasers and the conditions for the reduction are not met for all of them, the fees due for the procedure are reduced by one:
  • € 112.50, if only one fact is recorded;
  • € 225, if more than one fact is recorded.

To gain access to these measures, applicants must fulfil the following conditions:

• Age up to 35;
• Property whose value does not exceed the maximum value of the 4th bracket of the IMT table;
• They cannot be considered dependents for IRS purposes in the year of the transfer.

These measures took effect on 1 August 2024.

Main changes in the acquisition of rents

Considering the current difficulties in the housing rental market, which is particularly onerous for young people, the government has made new efforts to support young people in paying their rents. It is therefore important to note the publication in the Diário da República of Decree-Law no. 42/2024, of 2 July, which extended the conditions for young tenants to access the Porta 65 programme.
The new rules approved include:

• End of the maximum rent ceiling: there is no longer a maximum rent ceiling, which varied according to the type and municipality of the house;
• Apply first, find a home later: it is no longer necessary to present a rental contract or a promissory contract beforehand;
• Simplified proof of income: submit 3 payslips instead of 6, or the IRS declaration;
• Extended eligibility: for young people aged between 18 and 35, and for couples, one person can be up to 37 if the other is 35, inclusive;
• Covering cohabiting young people: aged 18 or over and 35 or under.

All these changes took effect on 1 September 2024.

Written by Ladislau Gomes and Francisca Quaresma, lawyers at the Tax Law Department.