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Property rental income tax declarations: What you need to know

By law, if your Portuguese property is rented out, you must declare the rent via a tax return submitted in Portugal, even if the funds are administered and received outside Portugal.
There has been much publicity in recent months of the benefits of declaring rental income as a business enterprise rather than by way of a simple income declaration but as always there are pros and cons for each method.
It should be understood that there is absolutely no obligation to report such income under the business method, known as Category B, which has certain obligations that can have costly implications, such as:
▪ Social Security payments based on previous years’ income – €145 minimum per month
▪ Preparation and submission of full accounting and document control
▪ Issuing of invoices via the online tax department for every rental
▪ Registration for VAT returns for income in excess of €10,000 per year
▪ Submission of ongoing reports to social security and other entities that regulate all business activities
Despite this added cost and bureaucracy, it may still be advantageous for some individuals to register as a business particularly in respect of higher income levels, but there is no obligation for those on lower income levels to do so and they can still continue with a yearly income declaration.
For those clients who have obtained registration under the Alojamento Local (AL) letting scheme, it should be noted that there is no obligation whatsoever to report the income under the Category B system.
Having studied the situation in depth, Sovereign concludes that each case must be assessed independently to the best advantage for the individual and Sovereign is happy to offer clients either option.
For more information contact Sovereign:
Sovereign – Consultoria Lda
Parque Empresarial Algarve
8400-431 Lagoa – Algarve
282 340 480 | Fax: 282 342 259
icosta@SovereignGroup.com
www.SovereignGroup.com