Sovereign - Tax planning

Sovereign – Tax planning

Simplified Regime or Keep it Simple?
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.
Until now, rental income has usually been reported once a year in May, declaring the income, offsetting any expenses, and paying tax on any profit.
With the tax rate for 2013 rental income increased from 16.5% to 28% (a 70% increase!), there are suggestions that individuals should be declaring rental income under what is known as the Simplified Tax Regime, with a lower tax rate but which implies registration as a self-employed business.
Whilst it is called the simplified regime, there are certain obligations that can have costly implications:
Monthly Social Security payments based on previous years’ income –
€145 minimum
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 activity
Not so simple!
Although allowable expenses have been greatly reduced following mass auditing of rental income tax returns throughout Portugal last year, it may still be more cost-effective for anyone receiving under €16,000 rent to continue with the yearly accounting each May.
You are not obliged to register under the simplified regime and, having studied the situation in depth, Sovereign concludes that each case has to be assessed individually. In the meantime, Sovereign is happy to continue to prepare accounts in May for anyone not wishing to pursue the simplified regime.