Portugal’s ‘housing package’, which received presidential approval on May 12 2026 and was gazetted on May 20 2026, introduces an aggravated 7.5% IMT on acquisitions of urban residential property by non‑residents. The objective is clear – cooling external demand amid a housing affordability crisis – and seems politically intelligible. From an EU law standpoint, however, a residence‑based surcharge at the moment of acquisition squarely engages Article 63 of the Treaty on the Functioning of the European Union (TFEU) on the free movement of capital.
Pursuant to Article 17 of the IMT Code, resident purchasers face progressive rates (with zero‑rated or reduced bands for primary residences) based on consideration. The new rule superimposes a flat 7.5% whenever the purchaser is non‑resident, severing the link to value‑based progression applied to residents. Acquisitions and disposals of real estate are classic capital movements; Directive 88/361/EEC and Court of Justice of the European Union case law treat ‘acquisition of real estate’ and ‘secondary residences’ as falling within Article 63 of the TFEU.
Article 63 of the TFEU and case law
Discriminatory housing tax policies are not a novelty within the EU. In Hollmann (C‑443/06), Portugal’s higher effective personal income tax burden on non‑residents’ real estate gains versus residents was struck down under Article 63 of the TFEU. The court emphasised an identical taxable event (Portuguese‑situs real estate gains), comparable positions of residents and non‑residents, and a systematically heavier burden on the latter.
That logic has been reaffirmed and extended – including to third‑country residents – in Patrício Teixeira (C‑184/18), XG (C‑255/21), and related orders. Commission v Portugal (C‑267/09) similarly rejected disproportionate compliance barriers imposed only on non‑residents (mandatory representatives). Although these matters arose in income tax, the court’s analysis centres on effects and comparability, not the tax head; a differentiated transfer tax can therefore restrict capital movements in the same way.
The aggravated rate applies because the acquirer is non‑resident, to the same taxable event (Portuguese‑situs acquisition) faced by residents. Residents continue to benefit from progressive scales and primary‑residence reliefs, which in many mid‑market cases yield effective rates below 7.5%. The measure thus:
Targets a specific capital movement;
Treats objectively comparable situations differently by residence; and
Will systematically impose a heavier upfront burden on non‑resident buyers.
Following Hollmann and subsequent case law, this is a restriction under Article 63 of the TFEU that may struggle to pass the proportionality test, mitigated only where the buyer becomes a Portuguese tax resident within two years or promptly rents the property at moderated rents for minimum periods. The tax differential treatment deters cross‑border real estate investment through a heavier upfront tax burden on non‑resident investors.
Potential conflicts
We can anticipate the government’s arguments, targeting legitimate aims – curbing speculation, protecting resident access, and social cohesion. Even if such aims are recognised, proportionality remains exacting. Portugal already deploys residence‑neutral, use‑shaping tools (primary‑residence reliefs, VAT/IMT nudges for affordable rental, rent‑cap/Simplified Accessible Rental Regime pathways, investment contracts for housing rental). A residence‑neutral anti‑speculation surcharge triggered by short holding periods, early disposals, vacancy, or failure to lease at moderated rents could ultimately achieve the same goals with less treaty tension. Also, the new rules seem to presume that when the buyer becomes resident within two years, tax residency equals a benign use, whilst, conversely, non‑resident acquisitions can credibly expand the long‑term rental stock.
Other carve-outs could have been considered, such as clawbacks for early disposals, or use‑conditioned surcharges, each applying irrespective of residence. Also, IMT is due at acquisition, whilst post-acquisition refunds (for later residency or rental compliance) only partly mitigate the financial effect of the measure, given liquidity constraints. The European Court of Justice (ECJ) tends to be sceptical on the neutralisation effect of refunds over an initial discriminatory burden borne upfront by non‑residents.
It should also be noted that Article 63 of the TFEU protects movements to/from third countries. Although the trigger is residence rather than nationality, in tax contexts residence often proxies nationality and as such, combined with Article 63, this can sharpen scrutiny under Article 18 of the TFEU.
A final comment in this respect: the carve-out based on a prior tax residency – even if the non-resident acquirer is no longer tax resident nor becomes so within the two-year residency – needs further explanation, as this seems misaligned with the aims of the package and introduces an additional layer of discussion.
Summing up
The aggravated 7.5% IMT for non‑residents has vulnerabilities under Article 63 of the TFEU. Legitimate social aims are not in doubt, but the residence‑based trigger, breadth, and limited remedial effect of conditional refunds collectively raise discrimination and proportionality concerns. There is no doubt this is a new hurdle for qualified foreign investors, whilst significant litigation can be anticipated. The good news is that Portugal has a relatively efficient arbitration system, allowing referrals to the ECJ, and as such the debate and controversy will not take long to be resolved.
