Rental Agreements for Housing Purposes – 10% of PIT on the net income?

29 November 2021
Sérgio Varela Alves

To stimulate the rental market in Portugal the Portuguese legislator has set out in the Personal Income Tax Code (PIT Code) a variety of flat tax rates on the net income, which varies depending on the term of the contract.


Any contract for the above-mentioned purposes will be at least liable to a flat tax rate of 28% on the net income, but if its term is equal or superior to two years and inferior to five, the tax rate is reduced to 26%, if equal or superior to five years but inferior to ten the reduction will be of 5 base points to 23%, when equal or superior to ten years and inferior to twenty to 14%, but if the term of the rental agreement is equal or superior to twenty years, the tax rate on the net income will be only 10%.


The net income itself is obtained by deducting to the gross income, all the costs effectively supported and paid by the taxable person to obtain or guarantee such income, except for expenses of financial nature, those related to depreciations and furniture, appliances, comfort or decoration items, as well as the additional to the Municipal Tax on Real Estate.


Expenses incurred and paid in the 24 months prior to the start of the lease may also be deducted, not only the ones incurred during its duration, if related to conservation and maintenance works on the building, provided that in the meantime the property has not been used for any purpose other than the lease.


This means that the effective tax rate applied may in some cases be less than 10%.


Sérgio Varela Alves

Tax Consultant

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