Short-term lets to pay 10% IRS

The new 10% IRS tax that Portugal’s government aims to apply to income from renting buildings will now include all rental contracts for rents within the so-called moderate values, regardless of the length of the contract, providing the contracts meet limits foreseen in the Civil Code law.

In general terms this means that the contract should respect a minimum contract length of one year “except in cases of contracts for non-permanent housing, or housing for special transient ends.

The latter ‘ends’ means for professional reasons, education, training or holiday stays by tourists.

This clarification came from the Ministry of Infrastructures and Housing (MIH) that explains that the “requirement for a minimum timeframe of three years (a rental contract for a permanent residence) applies for the simplified affordable rental regime”.

In the other cases, the minimal contract length under the current law in force applies, which is one year, expect in the housing rental for special transitory aims”, as foreseen in the Civil Code.

Up until now, the IRS Code foresees a tax of 25% for housing rental but with reductions according to the length of the contracts.

For example, for a contract term of between 5 and 10 years landlords now pay IRS at 15%. Between 10 and 20 years that tax falls to 10%.