# Tax on rental income



## betelnutz (Jun 19, 2015)

Considering purchasing an apartment in Lisbon to generate rental income via websites like airbnb. I would not live in the apartment, it would only be used for the purpose of rental income. 

I also plan to purchase another house for my family and I and become a resident, not sure if that changes the tax rate.

Can someone tell me what tax rate is on rental income?


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## TonyJ1 (May 20, 2014)

You have various alternatives, but the most common are:

You can run it as kind of 'hotel', declare all income and expenses. The income will be added to your other income and the appropriate tax tables will be applied. If a non resident, have a look at the terms of the double tax treaty.

The alternative, ie the 'forfeit' system, if the gross income is less than €200,000 per annum, you can opt to include 15% of the income as taxable income and it will be taxed as per the above. In this case, all expenses are ignored.
For example, on an hypothetical rent of €20,000, only €3000 would be subject to taxation i.e. will be added to other income to determine the tax payable. 

An issue that cannot be avoided is VAT. If the turnover is more than €10,000 in the previous year, you have to be included in the vat regime. However, the VAT on 'hotel' type business is only 6% and the Vat incurred can be set off, so that in most cases the vat payable is residual, though the administration effort is higher.

There are registration and other requirements - you may not 'just' place it on a web site, without going through the formalities.


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## travelling-man (Jun 17, 2011)

You've also got other issues such as the AL (Alojemento Locale) to consider and from my experience that's confusing as hell and everyone will tell you something different about it. 

It's very often said that if you have the AL, not only do you have to pay the tax but you also have to pay the social security payment each and every month whether you're getting rental income or not............ I've no idea at all whether that's right or not and for what it's worth, the last time I visited my local tourist office, they also admitted they don't know how it works! 

Gotta love PT bureaucracy. LOL


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## TonyJ1 (May 20, 2014)

travelling-man said:


> You've also got other issues such as the AL (Alojemento Locale) to consider and from my experience that's confusing as hell and everyone will tell you something different about it.
> 
> It's very often said that if you have the AL, not only do you have to pay the tax but you also have to pay the social security payment each and every month whether you're getting rental income or not............ I've no idea at all whether that's right or not and for what it's worth, the last time I visited my local tourist office, they also admitted they don't know how it works!
> 
> Gotta love PT bureaucracy. LOL


If the 15% is below €2500 i.e if the gross income is less than i.e about €16,700, social security is not an issue.

As I pointed out above, there are other bureaucratic issues.


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## travelling-man (Jun 17, 2011)

Tony

The problem is that everyone says something different....... I've been told the version you've mentioned on several occasions but also been told a variety of other versions as well. 

Is there any Government site that actually states in simple terms how it works?


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## TonyJ1 (May 20, 2014)

The version I have above is available in the social security web site i.e. onlyif the income is above +-€2500 is it subject to social security contributions. But if you are retired i.e. receive a pension, the social security is not an issue at all - you can get an exemption from these obligations.

I am not aware of any government site that puts all these issues together.


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## travelling-man (Jun 17, 2011)

Thanks Tony....... do you by any chance have a link to that please?

The local Govt offices here are absolutely useless when I ask them!


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## TonyJ1 (May 20, 2014)

*Social Security*

Look at a the social security site Trabalhadores independentes - SeguranÃ§a Social

Look specifically under the heading ' isenção de pagamento de contribuições' - hope this helps


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## travelling-man (Jun 17, 2011)

Thanks Tony........ I'll go through it and try to make sense of it all!


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## betelnutz (Jun 19, 2015)

Thanks for the information guys, I will look into it some more.

I did see another thread similar to this one where the poster was saying you only have to pay 5% tax on income generated from rental property that confused me a bit.

http://www.expatforum.com/expats/po...-portugal/69732-rental-property-portugal.html


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## TonyJ1 (May 20, 2014)

I suppose this was under previous rules. The 15% forfeit used to be 20%, and in the case of non residents, 25 tax on the 'alojamento local' income. Therefore 20% x 25% = 5%

Now 15% x 25% (non resident rate) = 3.75%. However for residents the 15% incme will be added to other income (e.g. pensions, annuities, salaries, etc) to determine tax rate as per tax tables.


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## betelnutz (Jun 19, 2015)

Thought I would share this .. I contacted the firm that was in other thread that I linked in my last post.

This is what they told me on the topic.

----
Thank you for your enquiry.

The tax office allows 85% of the gross income for any operational expenditure on the property, so that then the owner is only taxed on the remaining 15%. If you become resident in Portugal , this 15% will be added to any other worldwide income that you would need to declare in Portugal , or if you remain as a non-resident, you would benefit from a 3.75% tax rate on the gross income. 
----


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## TonyJ1 (May 20, 2014)

As I said above in other words!!


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