Rental property in portugal

[siobhanwf]

DETAILS I REQUESTED FROM A CLUED UP FRIEND ON PROPERTY RENTAL:



Hello

I went to a seminar on Wed morning (February 2nd 2011) , organized by Eurofinesco and AFPOP about Portuguese income tax for 2011.

One thing came up which I thought may interest you. There are new arrangements for taxing rent from furnished property rentals to tourists after 01 Jan 2011.

It doesn't matter if the property is your own home and you rent it out for a few weeks in the summer while you go on holiday yourself; it's a holiday home you occupy some of the time and rent out the rest, or it's an investment property you never occupy yourself. It's all the same :- what matters is you rent to tourists.

First of all you need to get some papers together, a floor plan, the habitation licence, and the escritura to show it's a legal building and you are entitled to rent it out. Then you apply to your local Camara for a Local lodging Licence. This is more like a registration and you will get it if your paperwork is in order.

Next you have to tell the Finanças ( local HMRC ) you are starting a business renting property to tourists, you expect the turnover to be less than €160K pa, and want to be in the Simplified Regime. In the SR 80% of your revenue is treated as expenses, and 20% as taxable profit. No receipts are needed;. the division is arbitrary and fixed. Most tradesmen here operate in the SR. At the end of the year you account for your income and declare 20% as profit. That is then added to any other income and taxed in the usual way if you are a resident here for tax purposes.

If you're non resident then you pay 25% income tax on the 20% - that is, you pay 5% of your total income and that's it. Because of an EU wide tax treaty your rental income is not liable to tax in your country of residence if within the EU.

If your rental income crosses the ( low ) IVA/VAT starting point of €9,975 p.a. you have to also register for IVA at the Finanças and do at quartely return. The IVA on tourist activities is 6.0%. However this is a double edge sword because when you do your IVA account the IVA paid on anything where you paid 23% IVA, like your utilities.pool chemicals, linens, appliances can be put againt your 6% IVA bill and if the 23% IVA bill exceeds your 6% one you can have a refund of the excess IVA you paid.

if you want to follow up on this I suggest you contact Eurofinesco at WELCOME TO EURO FINESCO S.A. | FISCAL & EXPATRIATE SERVICES | Finesco is a full service company, helping expatriates to make the most of their new life in Portugal since 1991 or go to their offices in Lisboa or Guia.

It seems to me that if you rent a property out it is stupid to be illegal for the sake of 5% tax. I have heard stories of people being caught out by advertising on line. The Finanças identify the properties being advertised and then check the income has been declared.

[siobhanwf]

FURTHERUSEFUL INFORMATION CAN BE FOUND AT:

rental-licences-in-portugal

Thank you Derek

[R666]

Thanks for the info

[Algarve]

do not forget the property also has to comply to gas, so all must be in inox (stainless steel) so no rubber tube from the gas bottle to the cooker or boiler, also must display emergancy info ( ie 112 ) police fire ambulance, and have easy access for emergency, to the property

[kimberlyRocha-Jones]

Thanks! this is good information for someone planning to move to Portugal. I have been asking my family many questions in regards to the mainland Portugal. My family is from Azores and I am looking to find a job, rental property, and eventually continue my graduate degree. If anyone has further information that may be of help for a soon to be newbie like myself I would appreciate it. Thanks, Kimberly

[Aden'Soph]

It seems to me that if you rent a property out it is stupid to be illegal for the sake of 5% tax.

This post is a very useful 'reminder' that Finanças are looking into these long lost sources of revenue. Is not about 50% of all tourism beds in Portugal .. grey ?

The sting in the tail that caught us out is Social Segurança. The instant you declare at Finanças you are also 'declared' by them for social security. Yes ... you get 1 year before you need to make any payments but after this you will be liable for about 140 euros a month. Each month - whether you are renting out or not.

Yes - you can 'step out' of this by declaring a period you are not renting but you must then 'step back in' and declare when a rental happens. And the clock starts ticking for social security instantly again.

And presumably you are also now paying for a contablista to help out your accounts.

Perhaps not such a problem for the mega-rental 1,000 euro a week plus places but an issue for the 'smaller player' just trying to survive out here.

Doing this properly also involves the outlay of having quality insurance - which interestingly is not on the check list at the Municipal.

Has anyone additional views about the advantage of registering as a single person or even limited liability business in your homeland (if EU based this was the original reason the UK was sold this Common Market 'nonsense' - that we would all one day be on the same playing field) ... if you are Portugal based.

Or would the 6 month residency rules identify you as a Portuguese tax payer and negate this ?

[siobhanwf]

Resident in Portugal....tax in Portugal!

An individual in Portugal is liable for tax on his income as an employee and on income as a self-employed person. In the case of an individual who answers the test of a "permanent resident" of Portugal, tax will be calculated on his income earned in Portugal and overseas.
A foreign resident who is employed in Portugal pays tax only on his income in Portugal.
To be considered a Portuguese resident, the requirements must be met of residency in Portugal of at least 183 days in any calendar year, and occasionally also if residency is less than 183 days. If the individual has a home in Portugal that is his main residence, he will be considered a Portuguese resident.
An employer is obligated to deduct, immediately, each month, the amount of tax and national insurance due from a salaried worker.
Certain payments are deducted from taxable income


as far as CORPORATE TAX is concerned:
the standard corporate tax in 2010 is 25% for income exceeding EUR 12,500 with the addition of up to 1.5% municipal tax making a total of 26.5% thaat is in mainland Portugal

However companies in the free trade zone of Azores and Madeira are eligible for a reduced tax rate depending on the type of company and the year in which the company was set up in the free trade zone

[siobhanwf]

There is a full explaination of the rental laws to be found at :

http://www.eurofinesco.com/newsletter/newsletter.php

[paulrees]

Does anyone now how much a rental license costs. I am sure this will vary from Camera to Camera so if anyone knows the Silves Camera rate please let me know.

[siobhanwf]

Hi Paul

Contacts for the camara of Silves can be found at : Câmara Municipal de Silves


why not send them an email and ask