If you are going to rent your house for short-term renting in Portugal, there are some issues you should be aware of, such as getting a “Alojamento Local” permit, opening activity in the Portuguese Tax and Customs Authority and finding out about the mandatory taxes you will have to pay. Find out in this article how to do the math to understand the best option to rent your house.
Open service rendering activity
One of the first steps to legalize your short-term rental in Portugal will be the opening of service rendering activity in the Portuguese Tax and Customs Authority portal, where you should subsequently declare your income and make appropriate discounts and tax payments.
Once the activity is open, the owner of the house can issue the receipt invoices to all guests staying at his house (choosing the option of issuing electronic green receipts in the finances portal), thus ensuring the payment of mandatory taxes.
As soon as you start renting your house and issuing invoices, you will have to worry about two taxes: VAT – Value Added Tax – and IRS – Personal Income Tax – (or, if you own a company, with IRC – Corporate Income Tax).
The obligation to pay VAT varies according to the gross annual income – you can have an exemption regime if your income does not exceed 10 000 € per year, according to Article 53 of Exemption. As soon as this value is exceeded, you will have to start paying the State 6% of the amounts invoiced (reduced VAT rate in force).
If you exceed the exemption values and your activity is subject to VAT, you must submit the relevant quarterly tax return (you can do so via the portal very easily):
January to March – delivered until May 15th
April to June – delivered until August 15th
July to September – delivered until November 15th
October to December – delivered until January 15th
Regarding personal income tax (IRS) on short-term leases, 65% of income is considered an expense, which means that only 35% of the invoiced amounts will be taxed. The IRS rate varies according to the monthly income and is tabulated by income ranks (you can find this table on the finance site).
Do not forget that the annual income tax return for the previous year must be submitted within the deadline set by law – between May 1st and June 30th (subject to change by the Tax Authority).
Related article: Short renting: do your own management or hire a company?
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