Residential letting and the CIA regime: items 2.42.1 and 2.42.2
There is widespread confusion between the two items that Decree-Law no. 97/2026 added to List I of the VAT Code. They are not the same thing, they do not cover the
same, and they do not take effect on the same date. This page separates them.
Item 2.42.1 already covers letting
Contrary to what many summaries suggest, item 2.42.1 is not the sale item. It covers construction contracts for the building or refurbishment of properties intended for sale as the buyer's own permanent residence, or of properties intended exclusively for residential letting.[1][2] Anyone building to let enters through this door, not through item 2.42.2.
The conditions of the letting branch
Article 10(1)(b) imposes five cumulative conditions.[1]
- The letting is exempt from VAT under article 9 of the VAT Code.[3]
- The lease contracts are reported under article 60 of the Stamp Duty Code.[4]
- The first residential lease contract takes effect within a maximum of 24 months from the issue of the habitation/use certificate documentation.[5]
- The property is the subject of residential lease contracts in force for at least 36 months, consecutive or not, during the first five years after that documentation.
- No possibility of subletting for an amount above the rent cap is agreed.
The fourth condition is the most demanding and the most overlooked. It is not enough to let. The property must be kept let for at least 36 months in the first five years. If it fails, the taxable person has to regularise the tax owed.[1]
The rent cap
The moderate monthly rent cap is 2.5 times the guaranteed minimum monthly wage set for 2026, which corresponds to €2,300 per month.[1] It is an indexed value, not a fixed figure,
and can be updated by ministerial order in accordance with the factor of article 24 of the New Urban Lease Regime (NRAU).[1] For letting, the annual value divided by the number of months elapsed in each year is taken.[1]
So what is item 2.42.2
Item 2.42.2 applies to construction contracts for the building or refurbishment of urban properties, or autonomous units of urban properties, for residential letting or letting for residential subletting, covered by the rental investment contracts regime, the CIA regime, approved as an annex to Decree-Law no. 97/2026 itself.[1]
