Income tax for foreigners in Portugal on property rental income
Rental income tax in Portugal – Taxes in Portugal
HOLIDAY LETTING OR LOCAL LODGING IN LISBON PORTUGAL
This document contains information about the tax treatment of letting out properties in Portugal to holidaymakers. This topic is even more pertinent today (November 2014) with the introduction this month of the new law governing Local Lodging (Alojamento Local). Let’s look at the various types of rental operations.
- SHORT-TERM HOLIDAY LETS LISBON PORTUGAL (INCLUDING HOSTELS)SHORT TERM RENTAL FOR INVESTORS ARE TAXED AT JUST 28% OF 35% OF THE GROSS INCOME (NOT 28% OF EVERYTHING) ! THIS IS MUCH LOWER THAN PEOPLE THINK
- Before the new Local Lodging Law, it was necessary to obtain a license from the local municipality and then register a business activity (Category B) at the tax office. As many property owners did not have such a license, they either did not declare the income from letting or else declared this as Category F income. With the steep increase in the taxation of Category F income (to 28%) in 2013, plus the introduction of the new legislation, it is advisable to register as operating a business activity (furnished accommodation for tourists – Category B): not to do so will result in steep fines (up to € 3,749 for individuals and between 25 and 35 thousand Euro for companies).As mentioned above, for residents of other EU countries, it is not mandatory to appoint a local tax representative, although this may be advisable in order to handle all the bureaucratic issues.
When registering it is possible to opt for one of two tax regimes: the Simplified Regime or the Organized Accounting Regime.
Under the former, the record keeping is simpler. One is taxed on 35% of the total rentals received, with no allowable deductions. If you are non resident, the tax rate is 25%, making an effective tax rate of 3.75% of gross income – versus 28% under Category F income. If you are resident in Portugal, the tax rate depends on your general IRS rate bracket taking into account your other income. But even if you are in the 40% tax bracket, then the tax payable on holiday rentals is an effective 6%. Of course, it is necessary to issue invoices for the letting income and communicate those invoices every month to the Tax Authority. It may also be necessary to register for VAT purposes if the income exceeds € 10.000,00 in any year, although once you are registered for VAT, you can deduct the VAT on your expenses.
Under the Organized Accounting Regime, one must appoint a registered accountant to keep proper accounts and submit the periodic and annual returns. Under this regime, the property owner is taxed on the accounting profit i.e. rental income less business-related expenses, which include advertising, mortgage interest, building depreciation, accounting fees, repairs and maintenance, etc. One would typically opt for this regime when the amounts involved are significant and the tax saving warrants the cost of a statutory accountant (c. 1,000 euro/year).
In any event, registration of the commencement of business form is imperative this year and a prerequisite for application of the Local Lodging license under the new rules.
There are other formalities to be observed: the house or apartment must be registered with the local municipal council, by way of a prior communication to the addressed to the Mayor via the “Balcão Unico Electronico” (Single Electronic Counter) – which is free of charge. This may be followed by a physical inspection of the property to ensure it has the basic amenities – sanitation, running water, fire equipment, complaints book etc.
RENTAL OF ROOMS FOR TOURISTS (INCLUDING B&B’S)
A recent Tax Authority directive clarifies the tax treatment of this activity, even where no meals (including breakfast) are included.
Residential: letting out rooms to students – category B income, exempt from VAT;
Tourism: letting out rooms as part of a tourism / hotel-type activity – category B income, subject to VAT at the reduced rate.
LONG-TERM RENTALS LISBON
Rental contracts for longer terms, i.e. more than 1 month, which must be registered at the tax office, fall under Rental Income (Category F). This also applies to property owners who rent out their holiday properties for a fixed sum per annum / holiday season to property developers/agents who in turn let them out to holidaymakers on short-term lets.
If your rental falls under the above category, and regardless of whether you are resident (and do not opt for the inclusion (aggregation basis) or non-resident, you are taxed at the flat rate of 28% on the rental income less the following deductible expenses:
- – Property services (cleaning, pool & garden maintenance, security, concierge)
- – Maintenance (insurance, painting)
- – Annual IMI and other municipal charges
- – Repairs (appliances, plumbing, gas, electrical problems)If you are not resident in Portugal, this income may have to be declared in one’s country of permanent residence and any tax paid in Portugal claimed as a credit under a double tax treaty.If you are resident in another EU country, although it is no longer compulsory to have a tax representative in Portugal, it may still be useful to have one in order to deal with the submission of your local tax return. In this regard, the Portuguese Tax Authority’s website does not have an English version of the annual tax return (Modelo 3).
350.000 Golden Visa Properties
Lisbon Golden Visa Apartments
Portugal Golden Visa Property Investment
Property Lisbon Golden Visa Apartments
Luxury residence with pools and balconies just outside the Lisbon historic centre – €615,000-€3,850,000
Luxury residence with pools and balconies just outside the Lisbon historic centre €615,000-€3,850,000 In one of the most cosmopolitan locations in Lisbon, known for its urban and business lifestyle, the French School, Amoreiras shopping mall and its proximity to Avenida da Liberdade with luxury brands offer. Living on the top of Lisbon’s skyline, these exclusive […]
Principe real Lisbon renovated 1 bed with Balcony Fully renovated with rental guarantee option and fully managed The building “Principe Real Residence”, is in the famous Príncipe Real neighbourhood in the heart of Lisbon. It is located between “Chiado” and “Avenida da Liberdade”. This area is an important A wonderful opportunity to buy in one […]
4 Bed Duplex luxury Lisbon apartments already completed Available and complete now from just 370,000 – 790,000 Placed in one of Lisbon’s coolest neighbourhoods, on 4 floors and is comprised by 14 apartments from T1 to T4 Duplex, with areas ranging between 35 and 150 sqm. With a refurbished look, Intendente is one of Lisbon’s […]
New development in Chiado Lisbon – 2 Bedroom only 630,000 Euro Studio -1-2 beds from only 285,000 In between the fashionable Chiado neighbourhood and the cool river breeze, find your new apartment on a perfect combination of a pombalin traditional architecture with contemporary comfort. From a studio up to 2 bedroom apartments, This comprises of […]
350,000 Golden visa commercial property Lisbon Rental Guarantee can be provided for overseas clients Bairro Alto is minutes from the Avenida da Liberdade the most expensive street in Lisbon. 1 and 2 bedroom apartment and 2 shops all costing 350,000 including all works and licensing. This building sits in vibrant Bairro Alto. Close to some of […]
350,000 Golden visa opportunity in central Lisbon. Rental Guarantee can be provided for overseas clients Bairro Alto is minutes from the Avenida da Liberdade the most expensive street in Lisbon. 1 and 2 bedroom apartment and 2 shops all costing 350,000 including all works and licensing. This building sits in vibrant Bairro Alto. Close to some […]
PROPERTY LISBON NEWS
Golden Visa – Citizenship by Investment The Golden Visa program has been put in place by the Portuguese government in order to make the Portuguese citizenship, residency, and immigration, simpler, easier, and faster to acquire by foreign investor, and PropertyLisbon.com is here to be your closest partner on this
Portugal’s Golden Visa – Benefits and Timeline Benefits of the Program – Permanent free entry and travel throughout Portugal – Permanent free entry and travel throughout the other 25 countries that are part of the Schengen Zone. – Legal permission to live and work in Portugal, while keeping another residence
Golden Visa – Immigration and Residency Through Investment Investment for Residency in Europe The EU and many of its countries offer a wide variety of investment programs that also grant residency to the investors.
Reduced Waiting Times for Portugal’s Golden Visa Portuguese media sources report that waiting times for appointments with the SEF in Lisbon have been reduced from more than three months on average, to one day. As reported by the SEF, Portugal’s Borders and Immigration Service, its application waiting list has