A note from Steve
Portugal's big new housing law, Build Portugal, is now in force, and nearly every owner I look after has asked me the same thing: does this help me or hurt me? Here is the whole thing in plain English: what it changes for you as an owner in Lagos, and where I think it is genuinely good and where it is not.
Steve
What the law actually changes
Let a home long term at €2,300 a month or less and the tax on that rent drops to 10%. For a non-resident landlord that is down from 28%, an 18 point cut. On an €1,800 a month Lagos let, that is roughly €3,900 a year you keep.
Sell a home and reinvest into property you let at moderate rent, and the capital gain can be wiped out. More on that below, it is the quiet gem in this law.
Buy here as a non-resident and there is now a flat 7.5% purchase tax (IMT). It is refundable if you become resident within two years, or let the place at moderate rent.
The whole thing hinges on one figure: €2,300 a month. Below it you qualify, above it you do not.
Source: Portugal's "Build Portugal" housing package (Decree-Law 97/2026). General information, not tax advice. Confirm your own position with your accountant.
My take, the good and the bad
The 10% rate is a straight gift to owners who let, no complaints there. The 7.5% on non-resident buyers is the one that looks ugly, and on the surface it is, a tax aimed squarely at foreign money. But honestly, I do not entirely mind it. It takes the heat out of speculative buy-and-flip money, and a market with less speculation is a steadier one. Steady is good for everyone who already owns here, because it protects the value of what you hold instead of inflating it and popping it.
The real catch for us is that ceiling: plenty of Western Algarve coastal lets sit well above €2,300, so the rental break rewards the everyday long let, not the premium villa.
Steve's tip, if you are sitting on a big capital gain
This is the part worth a phone call. If you are selling a home here and facing a large capital gains bill, you can now erase it. Reinvest the proceeds into one or more homes that you put on the long-term rental market at €2,300 a month or less, and the gain on your sale can be fully exempt.
The fine print, and please run your own numbers past an accountant: reinvest within three years of the sale, keep the new home let at moderate rent for at least three years within the first five, and hold it for five years. Do that, and a gain that would have cost you tens of thousands can come down to zero.
From my book
Porto de Mós, Lagos — A-Rated 4-Bed Pool Villa, steps from Porto de Mós Beach
4 bed · 4 bath · 347 m² built · 1,883 m² plot · built 2015
€1,625,000
A nice contrast to all that tax talk. At €1,625,000 this is a premium buy, not a moderate-rent let, but its A energy rating is the quiet headline: underfloor heating, seven solar panels, cool summers and warm winters without the utility bills most Algarve villas rack up. Four bedrooms, four bathrooms, a pool with an automated cover, a closed garage, and a flat flip-flop walk to Porto de Mós beach. Five minutes from Lagos marina.
Also this week on the blog: Build a Villa in the Algarve in One Year With CLT →
Got a question this raised?
Tax law is where good intentions go to get complicated. If you read the above and thought "does this actually apply to me, my place, my situation," that is exactly the email I want. Hit reply with your one question about buying, selling, or letting here. I read every one myself, and where it is genuinely a tax matter, I will point you to the people who answer those for a living.
Hey, I'm Steve, a real estate agent in Lagos and the Western Algarve with 25 years in the industry. When I moved here in 2018, I saw a gap between the level of service and international buyers' expectations. That's exactly why I created SunnySteve. Thanks for reading, and feel free to reach out if you ever want to talk property in the Algarve.