As in Belgium, owning or renting property is taxed. This article will explain property taxes in Portugal for non-residents. There are also other taxes it is best to consider.
Municipal property tax in Portugal
The municipal property tax is the IMI. The local tax office calculates the IMI based on the cadastral value. Each municipality can set the terms, but keep in mind rates of between 0.3 - 0.8%. However, if you are resident in a tax haven, the rate is 7.5%. The IMI is set annually on 31 December.
The wealth tax in Portugal
For property owners, there is a wealth tax or AIMI in addition to IMI. There is an exemption of €600,000 per person. However, if you own property in Portugal through a company, this exemption does not apply. The rates for individuals go up to a maximum of 1.5%. For companies, there is fixed rate of 0.4%.
Letting to residents (Anexo F)
We distinguish between rentals to residents and rentals to non-residents. This second category mainly concerns tourists.
The general rate on rental income is 28%. However, the tax regime of your rental income depends on your own residency. For instance, as a tax resident in Portugal, you can opt to include your rental income in the progressive income tax. However, this is only advantageous if your annual (and worldwide) income is less than €7,091 (subject to any deductions or exemptions). In that case, you will be in the lowest progressive bracket of 14.5%.
As a non-resident in Portugal, you will pay the flat rate of 28%. Be aware that you can deduct the proven costs associated with the rental activity. Think of maintenance costs and the IMI.
Letting to tourists (Anexo B)
If you rent to tourists in a professional manner through temporary contracts and subject to having a rental licence, a simplified regime applies. Although the rate of 28% remains unchanged, the taxable base is only 35% of the actual rental income. So for example, if you have a gross rental income of €1,000, you will pay only 28% out of €350, i.e. €98. You cannot deduct any expenses.
However, the disadvantage is that you have to register as a company. This affects your social security contributions and VAT. Know that you do not have to charge VAT if your income is less than €10,000. Above 10,000 euros, you need to charge 6% VAT.
(The above regimes apply if rental income is less than €200,000 per year).