# VAT on rental income



## Clive&Chris

Hi, I read in another thread that the threshold for VAT registration in Portugal is e9,995 - does this apply to rental income on a holiday let?


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## canoeman

Yes, but holiday related rental is 6% IVA and you can claim back allowable related expenses at 23%, be aware if you intend holiday rental then property must be registered for AL Licence and a tax return made under Simplified Regime, this year for Holiday rental the allowed "taxable profit" is 85% of declared income taxed at 25%


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## travelling-man

canoeman said:


> Yes, but holiday related rental is 6% IVA and you can claim back allowable related expenses at 23%, be aware if you intend holiday rental then property must be registered for AL Licence and a tax return made under Simplified Regime, *this year for Holiday rental the allowed "taxable profit" is 85% of declared income taxed at 25%*


I don't know if I'm being dense or not but don't understand that........ can you explain a bit more please?


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## canoeman

Sorry should have made clear the 85% is allowed expenses & 15% is taxed profit

Simplified Tax Regime allows you to register your "self employment" providing your turnover is *less than 150,000€*
Under this scheme you are allowed a* specified percentage as taxed profit*, the percentage varies slightly depending on trade, service or profession

Simple accounts etc must be kept and receipts given, you might also reguire to keep receipts etc for other reasons like IVA or CGT, but from a profit point you get the fixed percentage as profit and *cannot* claim additional expenditure but then you *save money* in the tax charged and also *not* having to employ an accountant to file monthly returns for you

AL registered "holiday let, B&B" profit allowance for 2014 under Simplified Regime (presumably/hoping this will be continued) is 85% of declared income (previously 80%)
So if your turnover was 8,500€ expenses = 7225€ profit = 1275€ @ 25% = 378,75€

A Non Resident would be taxed at 25% on allowed profit, and if a Dual Tax Treaty in place would not have any further tax issues

A Resident the allowed profit would be added to any other income and be taxed accordingly


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## travelling-man

OK thanks

We're currently registered for tax in the UK because we hav private UK pensions....... can we declare this additional income there or must we do it here & if we must do it here, do we need to change our pension declaration from the UK to here as well?


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## canoeman

As your Residents then your primary responsibility is to make a IRS return in Portugal *not* UK and you should declare any worldwide, UK income/pension and any worldwide or UK Tax paid, too late for this year should have been in by end April, I'll PM you later


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## Clive&Chris

ok, think I'm following it so far! Thanks to you both.

Regarding IVA, I take it it's the actual IVA paid out that you can reclaim so is this just on items such as cleaning materials, repairs etc. How about utilities like water etc? And if you employ an agency for meet n greet, cleaning etc?

Is there an official site written in English covering this ?

We run a small business in Scotland and know all about keeping the books straight so we will start with the AL and declare income as and when it comes in. Also we will then have to declare this income (and tax paid) to the UK Tax Office.

Of course the main reason to buy a place is a base for us to use!


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## travelling-man

Clive&Chris said:


> ok, think I'm following it so far! Thanks to you both.
> 
> Regarding IVA, I take it it's the actual IVA paid out that you can reclaim so is this just on items such as cleaning materials, repairs etc. How about utilities like water etc? And if you employ an agency for meet n greet, cleaning etc?
> 
> Is there an official site written in English covering this ?
> 
> We run a small business in Scotland and know all about keeping the books straight so we will start with the AL and declare income as and when it comes in. Also we will then have to declare this income (and tax paid) to the UK Tax Office.
> 
> Of course the main reason to buy a place is a base for us to use!


Sounds like you're buying a holiday home here that you want to rent out when you're not using it whilst we live here permanently but (will) have a guest apartment that we plan to rent out from time to time & I wonder if that makes a difference between our two cases?


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## canoeman

Makes no difference at all, if your holiday renting both Residents and Non Residents require AL licencing, Portugals tax laws are quite clear for Residents and Non Residents in that any income earned here must be declared in Portugal and appropriate tax paid, for a Non Resident if there is a Dual Tax Treaty in place then you need take no further action, might not be the case if Scotland votes to leave Union as then there won't be a Dual Tax Treaty in force. 

Re IVA you can reclaim the difference between the 6% you charge and IVA paid on allowable expenses, I've not delved into that too deeply so an account advice should be taken

Afraid very little re tax and IVA is available in English, Financas that cover this is all in Portuguese


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## travelling-man

Are we talking tax AND IVA (VAT) here and is IVA/VAT chargeable on all rentals or only if you go over a set limit of income for the year?

We're only expecting to be able to get paying tenants for just a few weeks a year.


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## canoeman

Any income should be declared but it is only necessary to register and charge IVA if your turnover/earnings are + 9,995€ in a Fiscal year.

This is Guide on Portuguese Tax system published by Financas http://info.portaldasfinancas.gov.p...-6A7B34F53371/0/Portuguese_Tax_System_CEF.pdf although most information is current the amounts, rates, percentages aren't and relate to 2009

and a slightly easier to digest version with up to date information
http://www.kpmg.com/global/en/issue...nal-executives/portugal/pages/income-tax.aspx

Afraid though when it comes down to specific information on Simplified Regime, IVA etc it's all in Portuguese and good initial advice should be sought with care made to insure the Accountant is familiar with AL licenced property, some aren't 

If you read the KPMG you'll see it explains the 6 major areas A to H income etc is reported under, for Holiday Lets AL licensed property to the best of my knowledge should be reported in Anexo B under the Simplified Regime which attracts the 85% fixed expenses and 15% taxed profit.

Some people are advised to report under Anexo F this is for longer term (leased) lets +30 days i.e. not short term licensed holiday -30days, and will attract different claimable allowances and a higher rate of tax 28% or greater


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## travelling-man

Good to see they like to keep things simple to encourage business & prosperity. LOL!


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## Clive&Chris

I'll have a look at the KPMG site, as you say an accountant is worthwhile at least initially and if we buy this year we certainly won't hit the IVA threshold until well into next year if at all.

The plan is to get an apartment and use it/let it then buy a hoose once we are able to reside in Portugal


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## maidentales

You may be best to chat to a Portuguese accountant who can usually clarify your personal situation. They are usually friendly and provide advice without charge, or so I've found so far anyway.

The reason? Yes, there are Portuguese Laws but then it gets complicated for non residents or if you just own a property here - how do you receive your funds etc. etc. due to the bilateral agreement with Portugal and the UK.


I was advised by the EU Advice Line to try these following departments for clarification direct rather than through either the EU Advice Line nor through hearsay from forums, whilst the forum member's advices are always usually correct for Portuguese Tax Laws, the bilateral agreement between the UK and Portugal may mean your personal situation is different so you need to check for yourself as per the advice I also received:

"However, please note the definition of fiscal residence varies from one Member State to another. Bilateral tax conventions have been concluded between Member States of the Union, particularly with a view to avoiding double taxation (please see the COM(2006) 823 final Co-ordinating Member States' direct tax systems in the Internal Market mentioned below). In these bilateral tax conventions, the right to tax different types of income is allocated between the host country and the country of origin. These agreements also make it possible to determine where people are resident for tax purposes if, according to the legislation of the host country and the country of origin, they could be considered as being resident in both countries. Bilateral conventions determine which of these two countries is obliged to eliminate the international double taxation and which method (e.g. credit-method or exemption-method) is applicable. People resident for tax purposes in an EU country must normally declare there all of their income. In case of double residence the declaration must/might be made in both countries

In Portugal:
Direcção de Serviços das Relações Internacionais (Taxation authorities International Relations Office)
Av. Eng. Duarte Pacheco, no 28 4o andar, 1099-013 Lisboa, Portugal
Tel : +351 21 383 42 00
Email address [email protected]
Portal das Finan?as
Legislation:
COM(2006) 823 final
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2006:0823:FIN:EN:DOC
Directive 2004/38/EC
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:229:0035:0048:EN:pdf

Bilateral Convention between Portugal and UK regarding taxation:

Portal das Comunidades Portuguesas - Reino Unido
DT15600+ - Double Taxation Relief Manual: Guidance by country: Portugal: Contents
http://www.hmrc.gov.uk/taxtreaties/dta.htm"

Hope the advice I received from the EU Helpine helps you to sort out your situation or at least point you in the direction to finding out for certain.

Canoeman is always a great source of knowledge in these matters although individual circumstances can create confusion in the matters of taxation so that's what I feel you need to explore depending on what you decide to do.

However, I was advised by an accountant that if my home in Portugal was rented, then I had something to declare to the Portuguese Tax Office and that the accountant could help me with this. However, I don't rent out my home so this wasn't taken forward.


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## canoeman

Portuguese Tax Law is extremely clear on the issue of earning money in Portugal which this question relates to, whether you're a Resident or a Non Resident your primary responsibility for declaring any earnings in Portugal regardless of their source is Portugal, and if necessary being taxed on those earnings, if your a Non Resident then depending on if there is a Dual Tax Treaty in force will determine whether you might have a further liability for reporting or paying tax in your "home" country


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## bambooo

Hi there !
Reading this thread with interest I am wondering how easy it is or not for a property to be registered for AL Licence ?
Also is it relatively easy to get change of use and relevant permissions from say a small Quinta (1-2 Ha) into a small scale Rural Tourism business , for example converting outbuildings to Cottages or even placing nice wooden cabins on the property !

One would have thought Rural Tourism would be encouraged but we all know what Europe can be like for 'red tape' , just hoping it's a little easier there !

Thanks


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## canoeman

Depends on scale of what you want to do
The AL is specifically designed to reduce Reduce red tape and bureaucracy to cover holiday lets for up to 30 days in 3 types of properties Villa semi or detached, apartment or accommodation comprising several quest rooms/B&B and should be more of a rubber stamp application than any other Tourist permissions.
Depending on Camara and layout then outbuildings especially if attached could probably be converted without permissions it all depends on the wording in Articles or Escritura

What your asking about is Rural Tourism which I'm afraid is a far more involved and complicated process, it's not that it's not encouraged just more steps/hurdles, the Camara of the Municipality you buy in are the responsible body and it's them you need guidance from as the outbuildings might well reguire planing permission to convert and the cabins certainly would


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## bambooo

Hi canoeman !
Thanks for the info , So then maybe I should change my wording to AL 'alojamento local' rather than 'Rural Tourism' when seeking permissions , not wishing to fly under the radar but if that would make things easier then so be it ! .

Are there any Camara municipalities that are 'softer' than others , though I am really interested in the Castelo Branco area around the Tejo !

Thanks again


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## canoeman

I can tell you Lagos are the pitttsssss not dealt with Castelo Branco so can't comment, re flying under radar as a plan must be filed designating rooms, annex used for the AL Letting and proof of Habitation Licence or it's equivalent is required then it all depends on how these outbuildings might be described in the Escritura a point to consider when looking at property.

You might notice that TM's post earlier in thread says his conversion was an annexe and didn't reguire separate planning permission to convert.


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## bambooo

Hi canoeman !
Thanks , yes definitely a consideration when looking at property and of course checking with the local Camara would probably be a good idea too to provisionally see what may or may not be allowed ! 

Thanks


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## bambooo

Hi canoeman !
Thanks , yes definitely a consideration when looking at property and of course checking with the local Camara would probably be a good idea too to provisionally see what may or may not be allowed ! 

Thanks


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