Seasonal rental in Portugal

Here is a summary of the main issues related to the existing tax burden on income, whether resident or not, when a building or apartment is rented under a rental agreement (furnished or not) or you need to rent furnished housing  to tourists (short term occupancy). This information does not replace the case by case analysis of each transaction, to properly determine the tax consequences of such operations.

(a) Taxation on income from a property owned by a non resident individual

Property rented under rental agreement (whether or not it is provided).

  • Tax rate: 25%
  • Tax basis: the rent charged, deducted from the property tax and documented maintenance costs (interest and nondeductible amortization)
  • Formalities: Income statement Mod 3 – Annex F, in May of the following year

(b ) Taxation on furnished accommodation rental for tourists by  a non resident private individual:

Activity subject to VAT (6%) if the turnover exceeds € 10,000.00.

Possibility of adopting a simplified scheme for the calculation of income tax, for a turnover of up to € 200,000.00 / year.

  • Tax basis: 15% of turnover
  • Tax rate for a  nonresident: 25% (thus 25% x 15%: effective rate of 3.75% of turnover)
  • Formalities: Tax statement of commencement of the activity  of renting furnished housing to tourists (before starting the activity), statement Mod. 3 – Annex B, in May of the following year

Note: it is up to the property owner to declare their income in their country of residence, if applicable, if the tax paid in Portugal, can be considered for deduction.

(c) Taxation on income from property owned by a resident

Property rented under rental agreement (whether or not it is provided).

  • Tax rate: 28% (proportional rate does not vary according to the overall income of tax residence)
  • Tax basis: rentals collected, deducted from real estate taxes  and maintenance costs (nondeductible interest and depreciation)
  • Formalities: Income statement  Mod 3 – Annex F, in May of the following year

(d) Taxation on furnished accommodation rental for tourists previously managed by a resident private individual:

Activity subject to VAT  (6%) if the turnover exceeds 10,000 , 00 €.

Possibility of adopting a simplified scheme for the calculation of income tax, for a turnover of up to € 200,000.00 / year.

  • Tax basis: 15% of turnover
  • Tax rate for a resident: 14.5% to 48%, to which returns can be added

Note: the taxpayer has the option of being taxed  on the actual results, option which can be chosen at the beginning of the year.

  • Formalities: Tax statement of commencement of the activity  of renting furnished housing to tourists (before starting the activity), statement Mod. 3 – Annex B, in May of the following year

(e) Taxation on income from a property belonging to a non resident legal person (company) without permanent establishment in Portugal:

Property rented under rental agreement (whether or not it is provided).

  • Tax rate: 35%
  • Tax basis: rentals collected, deducted from real estate taxes  and documented joint ownership taxes (interest and depreciation not deductible)
  • Formalities: Income statement Mod. 22 in May of the following year

(f) Taxation on the activity of providing tourist accommodation  by a non resident legal person (company) with permanent establishment in Portugal:

For the exercise of this activity by a non resident company, the creation of a permanent establishment or branch is mandatory. Subject to VAT activity rate 6%.

  • Tax rate: 21%
  • Tax basis: net accounting results  (deductible interest and depreciation)
  • Formalities: Tax statement of commencement of the tourist accommodation activity (before starting the activity), statement Mod. 22, in May of the following year.

(g) Taxation on the income from a property owned by a resident company

Property rented under rental agreement (whether or not it is provided).

  • Tax rate: 21% (plus possible municipal tax of 1.5% maximum)
  • Taxable Basis: net accounting results (deductible financial participation and depreciation)
  • Formalities:Tax statement of commencement of the  activity  (before starting the activity), statement Mod. 22 in May of the following year.

(h) Taxation on income from  accommodation rented  to tourists by a resident company

Activity subject to VAT rate of  6%.

Possibility of adopting a simplified scheme for calculating the income tax, with a turnover of up to € 200,000.00 / year and total maximum assets of 500,000.00.

  • Simplified regime tax basis: 4% of turnover for the hotel business
  • Tax rate: 21% (plus possible municipal tax of 1.5%)

Notes:

  • The taxpayer can choose to be taxed on the actual result, option to be made at the beginning of the year;
  • A chartered accountant (TOC) should be appointed in the case of a participation by a company under Portuguese law  or a non resident company permanently established in Portugal.
  • Formalities: Tax statement of commencement of the touristo accommodation activity  (before starting the activity), statement Mod. 22, in May of the following year.

There is a tax agreement between France and Portugal, with regard to income tax . This convention allows for the obtaining the of the Non-Habitual Resident status (the famous RNH regime).