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I rent out a property on a long-term basis. Is a contract required with the tenant?
It is customary to have a formal rental agreement. There should be three copies: one for the landlord, one for the tenant, and one registered with the Finanças. In this way, the tenant can
receive a tax credit for rent paid, just the same as if he/she were paying a mortgage.
I rented to holidaymakers and the income never came into Portugal. Do I still have to declare this income?
Yes. Even if those renting were foreigners and you were paid outside of Portugal, it is always the nature of the income (in this case the letting of Portuguese property), not where or how payment was made, that determines tax liability.
What expenses can I deduct from my rental income?
There are four broad categories of expenses that may be deducted, thereby reducing the taxable income from rents:
1 Services included in the rent
2 Maintenance
3 Repairs
4 Imposto Municipal sobre Imóveis or IMI - council rates.
Also, in apartment buildings, collectively shared expenses:
- doorman and common area
- cleaning costs
- building security
- energy and maintenance of elevators
- condominium expenses
What expenses are not allowed?
The following expenses are examples of expenditures that are not tax deductible:
- construction which alters the structure of the building.
- building acquisition
- installation of air conditioning
- other capital improvements, such as the installation of an automatic irrigation system, etc.
While not deductible on an annual basis, capital improvement expenses may enter into the calculation of the taxable base of the building for capital gains purposes when the property is
eventually sold.
Some of the tradesmen who have done work for me did not give me a receipt. How do I document these expenses?
To be deductible, all expenses must be documented by proper facturas - formal receipts. Value Added Tax (IVA) paid must also be included. So if you can’t get a receipt - get a discount!
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