The deadline to file Portuguese personal income tax returns is June 30, and in this context, several issues arise as to the deductibility, for tax purposes, for tax purposes, for landlords, regarding net rental income obtained, and for tenants, related with rents paid under residential lease agreements.
Landlords
Owning a property comes with costs, even when it is rented out. For tax purposes, certain expenses related to the property can be deducted from the rental income, thereby reducing the amount of tax owed. All expenses effectively incurred and paid by the taxpayer to obtain or secure rental income may be deducted, including:
- Insurance costs;
- Property taxes;
- Stamp duty;
- Condominium fees;
- Expenses for the conservation and maintenance works.
However, financial expenses, such as those related to depreciation, furniture, appliances, and items of comfort or decoration, as well as the additional municipal property tax, are not tax deductible.
Foreign rental income obtained by tax residents in Portugal follow the same rules, therefore deductions allowed under the legislation of the country from where it originates might not match Portuguese deductibility rules.
If a loss occurs, the taxpayer can offset this loss against any rental income earned over the next six years. However, to take advantage of such loss, net rental income will be liable to progressive tax rates (up 48%, plus surcharges), instead of the standard flat tax rate of 25% (residential property).
Tenants
For tax residents in Portugal, 15% of the gross amount of rents paid by the tenant, for permanent housing purposes, can be deducted from income tax due up to a limit of € 600/year, which can be claimed upon filing the income tax return.
This deduction may reach € 900/year, depending on yearly taxable income.
For more information and assistance with taxes or real estate transactions, please contact us through geral@sbpslegal.com.