Selling a home and using the proceeds to buy another property to rent out may allow some or all of the capital gain to be excluded from taxation. The relief depends on the amount reinvested, the rent charged and compliance with several obligations over the following years.
This option, introduced by Decree-Law No. 97/2026, covers sales made between 1 January 2026 and 31 December 2029. It may apply to the sale of a main residence or other residential properties. Source: Article 18 of the decree-law and Article 10(7) of the Portuguese Personal Income Tax Code (CIRS).
Which purchases can qualify?
The scheme provides for reinvestment in the acquisition of ownership of properties in Portugal for residential letting at a rent within the legal limit. Buying a holiday home or a property for short-term tourist accommodation does not meet the intended use under this rule.
The purchase must take place in the 24 months before or the 36 months after the sale. You must also declare your intention to reinvest, including the amount, in your Portuguese personal income tax (IRS) return for the year of the sale, even if you reinvest only part of the proceeds. Source: CIRS, Article 10(7).
Are moderate rents and affordable letting the same thing?
For this relief, the law refers to the moderate monthly rent limit in Article 2 of Decree-Law No. 97/2026. The initial formula is 2.5 times the statutory minimum monthly wage for 2026, and the limit may be updated by ministerial order.
With a minimum wage of €920, the reference limit for 2026 is €2,300 per month. Check the limit applicable on the date of the tenancy agreement: the law provides for updates by ministerial order, rather than an automatic increase in line with each year's minimum wage. Sources: DGERT and Article 2 of the consolidated decree-law.
The limit applies to the entire agreement and property. Certain amounts associated with equipment, ancillary areas and services that enhance the property's value also count towards the limit, even when contracted separately. Source: Articles 2 and 3 of the consolidated decree-law.
The Simplified Affordable Letting Scheme is a separate scheme with its own rules. The informal description “letting at an affordable price” is therefore not enough to establish that an agreement meets the requirements for this capital gains tax relief. Source: Article 2 and Annex III of Decree-Law No. 97/2026.
How long must the property be rented out?
Several deadlines need to be monitored. For the following requirements, the periods begin on the date of reinvestment, or on the date of the sale if that is later:
| Obligation | Rule |
|---|---|
| Enter into the tenancy agreement | Within six months. The law allows justified impediments, particularly urgent works, for the period strictly necessary. |
| Keep the property rented out | For at least 36 months, continuously or in separate periods, within the first five years. |
| Comply with the rent limit | For the first five years, including any rent increases. |
| Retain the property | Do not sell or give it away for five years. |
Failure to comply may result in the loss of the relief and taxation of the capital gain, plus the amount equivalent to compensatory interest provided for by law. Source: CIRS, Article 10(8), (9) and (31).
Must you reinvest the sale price or only the profit?
The reference amount for reinvestment is the sale proceeds, less the repayment of the loan taken out to acquire the property sold. It is not simply the difference between the purchase and sale prices.
It also differs from the money left in your account after paying commission, taxes, moving costs and other expenses. Some expenses may be relevant when calculating the capital gain without reducing the amount required for full reinvestment. Sources: CIRS, Article 10 and Article 51.
Example: selling for €370,000 and buying for €200,000
Consider this simplified scenario, in which the purchase is paid for using the sale proceeds, with no new borrowing and without including works, taxes or other expenses in the reinvestment amount:
| Item | Amount |
|---|---|
| Sale proceeds | €370,000 |
| Loan used to acquire the property sold, repaid on sale | €40,000 |
| Relevant amount for full reinvestment | €330,000 |
| Eligible reinvestment in the rental home | €200,000 |
| Proportion reinvested | 60.61% |
Provided the other requirements are met, the exclusion would cover approximately 60.61% of the calculated capital gain. The other 39.39% would remain subject to the applicable tax rules; that percentage is not an IRS tax rate.
If the capital gain calculated for tax purposes were, hypothetically, €100,000, approximately €60,606 would be excluded through this reinvestment. The remaining €39,394 would be taken into account under the tax rules applicable to the taxpayer. These figures alone cannot determine the final tax liability. Source for the proportional calculation: CIRS, Article 10(12).
Estimating the capital gain and tax
For an initial estimate, use the Doutor Finanças property capital gains calculator. Check that the available options match your circumstances. The result depends on the data entered and does not, by itself, confirm compliance with the legal conditions for exclusion from taxation.
In this case, check specifically whether the tool supports reinvestment in rental properties. An option limited to a “new main residence” does not represent this scheme.
What if some of the money is used for works on your parents' home?
It is advisable to consider the two decisions separately: buying the rental property and financing works on another home. The new scheme refers to the acquisition of ownership of properties for letting; works on your parents' home are not covered by that purchase.
Whether works can qualify under the scheme for reinvestment in a main residence requires a different assessment, including ownership of the property and its use as a residence. Moving into a relative's home or paying for the works does not, by itself, demonstrate eligible reinvestment. Source: CIRS, Article 10(5) and (7).
Does the tax relief make the investment profitable?
To decide, make two calculations: the tax on the sale and the annual result from letting.
Your purchase budget should include acquisition taxes and charges, necessary works and a cash reserve. Your letting budget should allow for condominium charges, annual municipal property tax (IMI), insurance, maintenance, periods without a tenant and tax on rental income. Gross monthly rent is not the landlord's disposable income.
If you intend to move into that property when you retire, include that date in your plan. The period during which you expect to let it must be compatible with the tax obligations and the agreement signed with the tenant.
Before selling and buying
Gather the deeds, purchase and sale dates and amounts, loan documentation, evidence of expenses and works, the expected rent and the letting schedule. Request a calculation that explicitly identifies the reinvestment scheme being considered.
To organise both transactions, see our guide Selling a home to buy another: which should happen first?.
The examples are illustrative; the treatment depends on the facts and documents of each transaction.
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General information reviewed against official sources available on September 16, 2026. It does not replace legal, tax, financial or technical advice for your circumstances.