In Portugal, rental properties are classified into several categories based on their purpose, duration, and specific legal requirements and Tax responsibilities.
Here are the main rental classifications:
PERMANENT RESIDENTIAL RENTALS (Arrendamento Permanente)
. Long-Term Rentals
These are leases of properties typically for a term more than one year. They are regulated by the New Urban Lease Act (NRAU) and are intended for primary residential use.
. Short-Term Rentals
These are leases for a term shorter than one year, often used for temporary housing needs, such as for students or workers on short-term assignments.
LOCAL ACCOMODATION (Alojamento Local, AL)
. Entire Place Rentals
These are properties rented out entirely to guests, including villas, apartments, and houses. They are popular among tourists.
. Private Room Rentals
This classification covers properties where individual rooms are rented out while the owner or other guests may also occupy the property.
. Shared Accommodation
Includes hostels and guesthouses where multiple guests share common facilities.
TOURIST DEVELOPMENTS (Empreendimentos Turísticos)
. Hotels and Resorts
Classified as tourist accommodations and regulated under specific tourism laws.
. Tourist Apartments and Resorts
These designated properties provide more residential-like facilities within a tourist development framework.
Rural Tourism (Turismo em Espaço Rural)
COUNTRY HOUSES
These are properties in rural areas used for tourism, typically offering a more rustic and nature-oriented experience.
STUDENT ACCOMMODATION
. Student Residences
Properties specifically catering to students, often with lease terms aligned with the academic calendar.
CORPORATE HOUSING
. Serviced Apartments
Properties are furnished apartments available for short to medium-term stays, often catering to business travelers and expatriates.
These classifications help ensure that different types of rentals meet the appropriate legal and regulatory standards while catering to the diverse needs of residents, tourists, and business travelers.
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The tax implications for various property categories in Portugal for 2024 are as follows:
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NON RESIDENT LANDLORDS
If you are not a tax resident in Portugal, rental income is subject to a flat rate of 28% withholding tax at the source. This means that 28% of your gross rental income (before expenses) will be withheld and paid to the Portuguese tax authorities by the tenant or property management company on your behalf.
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TAX RESIDENTS IN PORTUGAL
If you are tax resident in Portugal, rental income is included in your annual tax return and taxed according to progressive income tax rates, which range from 14.5% to 48% for 2024, depending on your total income. Additionally, you may deduct certain expenses related to the rental property, such as property management fees, maintenance costs, and property taxes (IMI).
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VALUE ADDED TAX (Vat)
. Short Term
VAT may apply to short-term rental activities (e.g., tourist accommodations), where the income exceeds a certain threshold.
. Long Term
For long-term residential rentals, VAT generally does not apply.
PERMANENT RESIDENTIAL RENTALS (Arrendamento Permanente)
. Income Tax
Rental income is subject to personal income tax (IRS)
. Residents
For residents, this ranges from 14.5% to 48%, depending on total income.
. Non Residents
Non-residents face a flat rate of 25%.
. IMI (Municipal Property Tax): Between 0.3% and 0.45% of the property's taxable value. Lower rates apply to rural properties .
LOCAL ACCOMMODATION (Alojamento Local, AL)
. Income Tax
Rental income is taxed as business income. For individuals, it's included in the IRS rates, whereas non-residents are taxed at a flat rate of 25%.
. VAT (Value Added Tax)
AL services are subject to 6% VAT, which applies to short-term rentals.
TOURIST DEVELOPMENTS (Empreendimentos Turísticos)
. Income Tax
Similar to AL, income is taxed as business income. The same rates for residents and non-residents apply.
. VAT
Also subject to 6% VAT for services provided.
RURAL TOURISM (Turismo em Espaço Rural)
. Income Tax
Income from rural tourism is taxed as business income, falling under the same IRS rates as AL and tourist developments.
. IMI
Rural properties are taxed at a lower IMI rate, typically up to 0.8%.
STUDENT ACCOMODATION
. Income Tax
Rental income from student accommodation is taxed similarly to residential rentals, with residents facing progressive IRS rates and non-residents paying a flat rate of 25%.
. IMI
Standard IMI rates apply.
CORPORATE HOUSING
. Income Tax
Rental income from corporate housing is subject to IRS rates for residents and a flat 25% for non-residents.
IMI
Standard rates apply, with additional AIMI (Adicional Imposto Municipal Sobre Imóveis) for high-value properties (0.7% to 1.5%).
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CAPITAL GAINS TAX
For residents, 50% of capital gains from property sales are added to taxable income. Non-residents are taxed on 50% of the gain at a flat rate.
NHR STATUS
While the Non-Habitual Resident (NHR) program closed in 2023, those who already have NHR status can still benefit from its tax advantages for up to 10 years.
. Wealth Tax
AIMI is applicable to high-value properties. Individuals are exempt for properties up to €600,000, with rates ranging from 0.7% to 1.5% beyond that threshold.
ALOJAMENTO LOCAL UPDATES​
ALOJAMENTO LOCAL
For 2024, several new requirements and regulations have been introduced for AL (Alojamento Local) properties in Portugal.
Here are the key points you need to be aware of:
. License Suspension
The issuance of new AL licenses in urban areas is suspended until December 31, 2030. Existing licenses will expire in 2030 but can be renewed for five years thereafter. Exceptions are made for rural areas.
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REGISTRATION PROCESS
Registration now requires submission to the local Town Hall, "Câmara Municipal" and "Turismo de Portugal" and is subject to a 10-working day period for possible opposition by the Câmara Municipal. The Town Hall can oppose registrations due to incorrect submissions, inappropriate property licenses, or if the property is in restricted AL zones.
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CONDOMINIUM REGULATIONS
Condominiums can oppose AL activities in buildings by a simple majority (51%) based on documented disturbances caused by AL activities. Condominiums can also demand an additional payment of up to 30% of property owners' fees due to the increased use of common areas by holiday makers.
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IINSPECTION
The Town Hall, "Câmara Municipal" has the power to inspect AL properties within 30 working days after registration submission to ensure compliance with all requirements. They can also carry out other inspections as allowed by law.
RESTRICTED AREAS
. Town Halls
"Câmara Municipals"can designate restricted areas where the number of AL establishments is limited. In these areas, AL registration is personal and non-transferable, expiring with any change in property ownership.
. Information Book
AL establishments must have an information book in Portuguese, English, and two other languages, detailing the functioning of the establishment, internal rules, and contact information. This book should also include the relevant condominium rules.
INSURANCE
AL operators must have multi-risk insurance covering civil liability, fire hazards, and non-property damage caused to guests and third parties.
TAXATION
New measures include an extraordinary contribution for residential property, with a taxable base rate of 35%. Additionally, AL properties will no longer benefit from reductions in property tax (IMI) based on the age of the building.
These measures aim to regulate the AL sector more stringently and encourage the shift of properties to the long-term rental market. For further details and updates, it's recommended to check with local authorities or consult with a legal expert specializing in Portuguese property law.
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Legal Updates for Rental Classifications in Portugal (2024)
PERMANENT RESIDENTIAL RENTALS (Arrendamento Permanente)
The government continues to incentivize long-term rentals to address housing shortages, offering tax benefits such as a reduced IRS rate for landlords who opt for longer rental agreements. New regulations ensure stronger tenant protections, including extended notice periods for eviction and caps on annual rent increases.
LoOCAL ACCOMMODATION (Alojamento Local, AL)
. Strict zoning laws have been enforced, especially in urban centers like Lisbon and Porto, where new AL licenses are limited to control housing availability and affordability (Lagos Homes) .
. Enhanced regulatory requirements include mandatory civil liability insurance and regular municipal inspections to ensure compliance with safety standards (Lagos Homes) (Lisbon Apartments) .
. The introduction of a new tax, the CEAL (Contribuição Extraordinária sobre o Alojamento Local), applies to properties registered as AL, further impacting the profitability of short-term rentals (Lisbon Apartments) .
TOURIST DEVELOPMENTS (Empreendimentos Turísticos)
. Tourist developments must comply with rigorous standards set by the Turismo de Portugal, including environmental impact assessments and sustainable practices.
. Recent amendments focus on improving accessibility and energy efficiency within these establishments.
RURAL TOURISM (Turismo em Espaço Rural)
. Enhanced support and subsidies are available for rural tourism initiatives that promote local culture and sustainable development.
. Updated regulations ensure rural tourism accommodations adhere to traditional architectural styles and environmental conservation practices.
STUDENT ACCOMMODATION
. There is an increased focus on creating affordable student housing to support the growing international student population in Portugal.
. New guidelines mandate that student accommodations provide specific amenities and services, including study areas and high-speed internet.
CORPORATE HOUSING
. Corporate housing developments now need to meet higher standards for worker welfare, including provisions for privacy, security, and communal spaces.
. Tax incentives are available for companies that invest in high-quality corporate housing solutions for their employees.
These updates reflect the Portuguese government's efforts to balance housing availability, affordability, and the growth of the tourism sector, ensuring sustainable development across different rental categories. For more detailed information, refer to the updated legislation and municipal guidelines applicable to each rental classification.
Disclaimer:
All content within these descriptions is based on the personal opinions and experiences of Walker Christie Realty Broker. Therefore, all facts and information provided should be verified by clients and confirmed by the relevant professional entities governing their specific classifications, which Walker Christie Realty Broker can suggest upon request.