Portugal has attracted foreign investors worldwide to invest in the Portuguese real estate market. Investors are guaranteed favorable rental property income, which has raised the profile of Portugal as an investment destination and a beautiful home to many.
The real estate market has attracted investors for the construction and purchase of properties. And as the world falls in love with Portugal, this has generated many hotels to cater to the millions of tourists in the country – this is the best time to invest in Portugal!
But every investor in Portugal needs to be aware of what is expected of them regarding tax obligations. This article will cover everything about the Portugal Golden visa rental income.
Breaking down the Portugal property rental income:
What taxes should I be aware of?
When purchasing a property in Portugal, you should be aware of two important taxes:
Property acquisition tax (IMT): It can range between 6% and 8%, depending on what kind of property you buy, where in Portugal is located and at what stage the of its construction is when you buy it.
Annual property tax (IMI): It can go between 100 to 500 EUR, also depending on similar factors as the IMT.
You’ll also have to pay stamp duty. This is calculated at 0.8% of the price of the property you’re investing in.
The land registry fees are valued at €1,000 and negotiate lawyer’s fees.
Learn more about buying a property in Portugal here.
Rental income tax in Portugal
As a foreign investor or a resident, if you own a rental property in Portugal, you must pay tax on the income derived from it.
Rental income tax in Portugal has different categories; if you searched for this, you might have seen it is a bit complex.
Here’s a simple overview of the categories in rental income in Portugal:
Individual not resident in Portugal
Rental of a Portuguese building
If you’re a natural person not resident in Portugal and you’re renting under a furnished or unfurnished rental contract, the tax rate is 25%.
This is based on the rent you’ll receive, from which are deducted the property tax and the maintenance costs of the building.
Furnished tourist accommodation for rent in Portugal
You’ll be subject to VAT if your turnover is over €10,000.
However, it is advisable to consult a competent accountant as it is quite possible to adopt a simplified income tax if your turnover from seasonal rents doesn’t exceed €200,000 per year.
A non-Portuguese resident will be taxed here at 25% for a tax base of 35% of the turnover. This amounts to an overall tax of approximately 8.75% of your turnover.
Individual resident in Portugal
Taxes on income from a Portuguese property
If you’re a Portuguese resident and decide to rent out one of your properties in Portugal. Whether furnished or not, you’ll be taxed at 28%.
The basis of taxation is the rents received, net maintenance costs, and property tax.
Rental of furnished apartments for tourists
You’ll be subject to VAT if your turnover exceeds €10,000
Taxation on this type of rental of real estate in Portugal by a resident is between 14.5% and 48% on the basis of 35% of turnover.
Legal person resident in Portugal
Taxes on property rental income in Portugal
Whether the property is rented, furnished, or not, the tax rate is 21% plus a possible municipal tax of up to 1.5%.
Taxation is based on the net accounting result, with the possibility of deducting interest and depreciation.
Rental of furnished apartments for tourists
If you buy an apartment in Portugal on behalf of a company to rent it to tourists, this activity will subject you to VAT at the rate of 6%.
The tax rate is 21% (excluding municipal tax) and the tax base, if the simplified scheme is opted for, is 4% of turnover for a hotel activity.
Non-Habitual Tax Residents Portugal
The Non-habitual tax scheme (NHR) registers foreigners who are residents in Portugal. This registration ensures that double taxation on income earned from other countries doesn’t occur.
If you’re a high net worth person, retiree, or successful entrepreneur with income from other countries, you can benefit from the NHR.
Here’s a list of the benefits granted from registering in the NHR tax scheme in Portugal:
Tax exemption on all foreign earned income
You don’t pay wealth tax
You won’t pay inheritance tax
Subsidized rate for all income earned in Portugal (you’ll pay 20% tax for 10 years on all your income earned in the country)
When you earn your income in Portugal, you’re to pay income tax. Depending on whether you’re a tax resident or not, you’ll still pay taxes. The only difference is the rate at which residents and non-residents pay.