Rental Income Tax Returns – Q & A

You must register with the Social Security office but if you are a non-resident of Portugal and are already paying social security in your home country, you will be exempt from payments in Portugal.

If you are retired you will also be exempt from paying social security in Portugal.

Yes, the rental income must be declared in Portugal via a yearly personal income tax return submitted by the property owner, whether the income is received inside or outside Portugal. This return is known as the IRS – short for ‘Imposto sobre rendimento das pessoas singulares’.

Sovereign can prepare and submit the return on your behalf!

Yes. Regardless of where you are paid and in what currency, your primary responsibility is to report the activity in Portugal because this is where the business activity takes places and where the property is located.

A non-resident of Portugal will also be required to report this income in their home country, but the tax due in Portugal can potentially be offset against any tax due in their home country under a bilateral double tax agreement (DTA).

Tax returns must be submitted between May and June (inclusive) each year in respect of the previous year’s income. The Portuguese tax year runs from January to December.

All tax returns must be submitted online, so you should ensure that you have your Tax Department passwords. Sovereign can apply for your passwords if they are your fiscal representative.

As a non-resident of Portugal you will pay tax at a rate of 28%, but only on 35% of the total rental income because the remaining 65% is deemed to be expenses in running the business. This means you are paying an effective tax rate of less than 10%.

As a resident of Portugal your rental income will become part of your worldwide income and the IRS tax rate is on a progressive scale from 14% to 48%.

Your tax bill will be issued in August for payment in September.

Yes. An invoice/receipt must be issued under your name for each rent received and submitted via the Tax Department online site. This can be monthly, bi-annual, annual etc. Sovereign can issue these for you.

Yes, the rental income must be declared in Portugal via the annual IRS tax return submitted by the property owner, whether the income is received in Portugal or outside of Portugal.

A non-resident of Portugal will pay tax at a rate of 28% on the profit after the deduction of the following expenses from the total rental income received:

• Structural maintenance and repairs
• House Insurance
• Condominium fees
• Property taxes – Imposto Municipal Sobre Imóveis (IMI) and Adicional Imposto Municipal Sobre Imóveis (AIMI)
• Villa management fees
• Utilities – provided these are the responsibility of the landlord to pay.

All eligible expenses must be substantiated by an invoice that includes the individual’s name, fiscal number and the rented property’s address otherwise they will be rejected by the Tax Department. Always request proper VAT invoices (Fatura) with these details on them. Residents of Portugal may also deduct the above expenses but may elect to be assessed autonomously at a flat 28% or aggregate this income with their worldwide income and be taxed at progressive rates for the IRS personal income tax on a scale from 14% to 48%. Sovereign will assess the eligibility of every invoice when preparing your tax return.

Yes. The passport details and the names and addresses of tenants should be submitted to the Serviço de Estrangeiros e Fronteiras (SEF) via its online registration portal. Sovereign can perform this reporting for you.

Yes. The company must submit a tax return for corporate tax – Imposto sobre o Rendimento das Pessoas Colectivas (IRC) – each year by the end of May to declare the previous year’s rental income.

The tax rate is 25% on the profit after deduction of eligible expenses for:

• Structural maintenance and repairs
• Insurance
• Condominium fees if property is in a complex or resort
• Property taxes – IMI and AIMI
• Villa management fees
• Utilities

All eligible expenses must be substantiated by an invoice that includes the company’s name, fiscal number and the rented property’s address or they may be rejected by the Tax Department. Always request proper VAT invoices (Fatura) with these details on them.