Portugal Rent Update Coefficient 2026 (NRAU): How to Apply It as a Landlord

What NRAU is and why it matters in 2026

NRAU, the Novo Regime do Arrendamento Urbano (New Urban Rental Regime), is the legal framework governing urban rental contracts in Portugal since 2006 (Law 6/2006) ^[1]. It covers everything from contract execution to termination, including annual rent updates, tenant pre-emption rights, denunciation and opposition to renewal. For landlords, two NRAU aspects drive most annual decisions: the rent update coefficient and the taxation of rental income.

In 2026 these become especially relevant. The coefficient published for the year is 1.0224 (+2.24 %), below the 2023/2024 peak but still meaningful, and Cat. F taxation with duration-based reductions has nuances many landlords overlook.

Rent update coefficient 2026: 1.0224

The rent update coefficient for 2026 was published in a Portuguese Ministry of Finance Ordinance, set at 1.0224, equivalent to a maximum increase of 2.24 % ^[2]. The coefficient reflects the variation of the Consumer Price Index (IPC) excluding housing, over the 12 months ending August of the year prior to the update.

Historical context: the 2024 coefficient was 1.0694 (+6.94 %), 2025 was ~1.0220 (+2.20 %), and now 1.0224 in 2026. The drop from 2024 reflects inflation deceleration. The landlord can apply the full coefficient or a lower value at their discretion. There is no obligation to use the maximum allowed.

How to apply the coefficient in practice

1. Identify the contract anniversary date (date it was signed or entered into force; check the specific contractual clause).
2. The update applies to the rent of the month immediately following the anniversary, or on the anniversary if the contract explicitly allows.
3. Calculate the new rent: Current rent × 1.0224. Example: rent €800 × 1.0224 = €817.92.
4. Notify the tenant in writing with 30 days advance notice minimum (registered letter with acknowledgement of receipt recommended).
5. The notification must indicate: updated rent, coefficient applied, legal basis (Ordinance of the year and Law 6/2006).
6. If the tenant does not contest within 30 days, the updated rent is due from the indicated month.

Exceptions and limitations

Some contracts have the NRAU coefficient applied partially or have special regimes:

• Contracts with conditioned rent (pre-2006 transitional RAU): specific transition regime rules apply, with their own limits.
• Properties rented by the State or municipalities (social housing regime): different or non-applicable coefficient depending on the programme.
• Contracts with specific contractual update clauses (different index, own formula): the clause prevails if legally valid.
• Properties in Urban Rehabilitation Areas (ARU) with tax benefits: update may be limited by the municipal contract.

For the typical case, a contract signed after 2006 without special clauses, the Ordinance coefficient applies in full.

Taxation of rental income (Cat. F)

Rental income is taxed under IRS in Category F (rental income), based on the IRS Code ^[3]. The base rate is 25 % on net income (after deductible expenses), but duration-based reductions can lower it significantly.

Duration-based rate reductions

The relevant duration is the initial contract. Automatic renewals do not count toward the reduction. The gap between the base rate and the maximum reduction is 20 percentage points of net income — significant cumulative tax savings over long contracts.

These reductions are designed to incentivise long-term rentals and stabilise the market. For the landlord, the difference between 25 % and 5 % IRS on a monthly rent of €1,000 (€12,000 annually) is €1,200/year. Over 20 years, that is €24,000 of pure tax savings.

Deductible expenses in Cat. F

• IMI on the rented property.
• Condominium fees (proportional to the rented period).
• Conservation and maintenance expenses (minor works, repairs).
• Energy certificate and mandatory inspections.
• Property insurance (civil liability, multi-risk).
• Commissions paid to agents to find tenants.
• Stamp Duty applied to the contract (10 % on 1 month of rent on execution).

Expenses that are NOT deductible: capital amortisation, mortgage interest tied to the rented property (with specific exceptions), the landlord's personal expenses.

Cat. B as an alternative

For landlords with significant rental property volume, opting for Cat. B (business income with simplified or organised accounting regime) can be tax-advantageous. It requires AT business-activity registration and additional reporting obligations. The Cat. F vs Cat. B simulation is a typical accountant decision. Book a consultation hour if you have 2+ rental properties.

Tenant pre-emption right

One NRAU aspect that can surprise landlords at sale time: tenants with more than 2 years on the contract have a pre-emption right to acquire the rented property, under Article 1091 of the Portuguese Civil Code ^[4]. This means that before selling to a third party, you must communicate the sale intent to the tenant and give them the opportunity to buy on the same terms.

How the pre-emption right works

1. Check if the tenant has ≥2 continuous years on the contract at the time of sale intent.
2. Notify the tenant in writing (registered letter with acknowledgement of receipt) with the essential sale terms: price, payment timeline, identification of the potential buyer.
3. Tenant has 30 days to exercise or waive the pre-emption right.
4. If exercised: the sale is made to the tenant under the notified terms.
5. If waived (or no response): you can sell to a third party under terms identical to those notified.
6. If you sell to a third party under MORE favourable terms (lower price, better timeline), the tenant can annul the sale and exercise pre-emption retroactively.

Other holders of pre-emption rights (with priority depending on the case): co-owners, neighbouring rural properties, municipality in Urban Rehabilitation Areas, State/IHRU in some programmes. In practice for normal urban rental, the most common conflict is tenant vs external buyer.

Termination, eviction and default: what you can (and cannot) do

Three landlord-side scenarios cause the most confusion and cost the most when mismanaged: terminating the lease for the landlord's or a family member's own use, recovering the property in case of rent default, and asking for a security deposit. Knowing the rules avoids litigation and losses.

Termination for own or family housing need

Article 1101 of the Civil Code allows the landlord to terminate the contract on grounds of housing need for the landlord or a first-degree descendant (a child who is getting married, for example), by notifying the tenant 2 years in advance if the contract has a duration exceeding 5 years, or 6 months if the contract is shorter or equal ^[5]. The need must be real and demonstrable. A landlord who terminates and then rents to a third party is liable to compensate the evicted tenant. Termination can also be based on the need for deep refurbishment that makes the property uninhabitable during the works, with specific re-accommodation rules.

Rent default and eviction via BNI

When the tenant stops paying rent, the landlord has two paths. The extrajudicial procedure via the National Tenancy Office (Balcão Nacional do Arrendamento, BNI) is the fastest: after default exceeding 2 months (or 1 month repeated on at least 4 occasions in 12 months), the landlord can request eviction at the BNI for a fixed fee. If the tenant does not regularise or oppose within the deadline, BNI issues an enforcement title and eviction is executed in 30-60 business days ^[6]. The second path is judicial action: slower (6-18 months) and costlier, recommended only for cases with substantive contestation.

In any case, before proceeding to BNI or court, notify the tenant in writing (registered letter with acknowledgement of receipt) granting a 1-month deadline to regularise. This notification is a formal requirement for BNI and proves the landlord acted in good faith.

Security deposit and Porta 65

The maximum security deposit chargeable to the tenant corresponds to 2 months of rent (a practice stabilised in case law and various statutes). Higher amounts expose the landlord to a refund obligation with interest. The deposit must be returned at the end of the contract, deducted only for proven default obligations or property damage. Porta 65, the IHRU programme that subsidises rent for young people aged 18-35, is paid directly to the tenant by the State. The landlord receives full rent from the tenant as in any other contract but may be asked to confirm the lease and rent value at application time. It is not an additional obligation, just documentary verification.

Annual reporting obligations

1. Report rental contracts to AT within 30 days of execution (IMI Form 2).
2. Declare income in Annex F of Form 3 of IRS in the year following the income.
3. Issue electronic rent receipts monthly via the Portal das Finanças.
4. Pay Stamp Duty on contract execution: 10 % on 1 month of rent.
5. Pay annual IMI on the property.

Failure to notify AT (IMI Form 2) or to issue electronic receipts triggers fines. AT cross-references IRS data from the tenant (rent deduction) with landlord declarations. Discrepancies are detected automatically.

Common mistakes that cost money

1. Forgetting notification at the contract anniversary → losing that year's update (no retroactive option).
2. Not issuing electronic receipts via Portal das Finanças → fine.
3. Not reporting the contract to AT within 30 days → fine + risk of inability to prove legitimacy.
4. Selling a rented property without notifying the tenant of the pre-emption right → deed annullable.
5. Applying the 25 % base rate in IRS when the contract has ≥5 years and would qualify for reduction. Losing 10-20 percentage points of IRS.
6. Mixing personal expenses with deductible rental property expenses. AT inspection detects and disallows.
7. Thinking automatic renewal counts toward the duration relevant for rate reductions. It does not — only initial duration counts.

AL vs long-term rental: the trade-off

Landlords in tourist-pressure cities face the decision between long-term rental (NRAU/Cat. F regime) and Short-Term Rental (DL 128/2014/Cat. F or B regime). The math shifted in 2024-2026 with AL contention and inflation stabilisation. For AL specifics, see the Short-Term Rental guide for 2026.

In AL contention zones (Lisbon centre, Porto centre, Funchal), new AL registrations are blocked, so NRAU is the only residential route. For premium properties in tourist areas with professional management, AL can still pay off; for standard properties in urban zones, NRAU tends to be more efficient under the 2026 regime.

Before January: four decisions to optimise 2026

If you're a landlord in Portugal and want to optimise 2026: (1) mark the anniversary date of each contract in your calendar and prepare update notifications with 30 days advance notice; (2) confirm whether any contract qualifies for duration reduction (≥5 years) and adjust IRS accordingly; (3) if considering selling a rented property, anticipate the pre-emption right. Notify the tenant before signing a promissory contract with a third party; (4) for sale, complement with the capital gains HPP guide if the sale involves reinvestment exemption. For buyer-side tax impact, consult the IMT and Stamp Duty 2026 guide.

This article was written with AI assistance and reviewed editorially by The Agent Trust. All cited sources are official and verifiable in the links above.