Portugal’s parliament has passed  a tax reform package designed to invigorate the capital market and promote affordable housing. This legislation, approved on 14 June 2024, awaits presidential ratification and gazetting.

The first major aspect of the package is the reduction in capital gains tax on long-term securities. For securities held for more than two years but less than five years, there will be a 10% exclusion from personal income tax (PIT), resulting in an effective tax rate of approximately 25%. Holdings between five and eight years will see a 20% exclusion, with an effective rate of 22%. For securities held for more than eight years, a 30% exclusion will apply, reducing the effective tax rate to 20%.

The reform also introduces incentives for investments in Pan-European Personal Retirement Products. Capital gains from the sale of primary residences will be tax-exempt if the proceeds are used to acquire these retirement products. Additionally, there will be tax deductions of up to 20% of taxable income for investments in these products, with deduction limits set at EUR 400 for individuals under 35, EUR 350 for those between 35 and 50, and EUR 300 for those over 50.

Securities investment companies and loan funds will be exempt from corporate income tax (CIT). Income from these funds will be taxed at a 10% rate for residents, unless aggregated with other income types, while non-residents will be exempt from this tax.

The package addresses the housing crisis by providing tax incentives for Real Estate Collective Investment Schemes (CIS) investing in affordable rental housing. CISs will receive partial tax exemptions based on the proportion of assets allocated to affordable rentals, with exemptions ranging from 2.5% to 10%. Additionally, CISs with more than 25% of their assets in affordable housing will benefit from a 25% reduction in the 0.0125% stamp duty rate.

The reform also includes incentives for trading on regulated markets. Expenses for the first admission to trading of securities by micro, small, and medium-sized enterprises (SMEs) will be 100% deductible. For subsequent admissions, a similar regime applies, allowing for a 50% increase in deductible expenses without requiring a minimum share capital dispersion.