A new 35% tax on revenue from the rents on short renting to be included in IRS is confirmed

  • ECO News
  • 17 October 2016

The preliminary 2017 State Budget draft confirms speculations about a raise on a tax for short renting – ‘alojamento local’, a specific type of accommodation defined by a decree-law in 2014.

It is now official: government will move forward with and increase on taxation of short rentings – ‘alojamentos locais’ (AL) a type of accommodation fairly recent, legally established to regulate the terms of temporary accommodations for tourists in apartments, dwellings and hostels.

According to the State Budget proposal, the taxation on AL will now fall on 35% of revenues from their exploitation, specifically from accommodations on the category of apartments and dwellings.

This taxation will apply to landlords who have chosen the simplified taxation system (Regime Simplificado de Tributação – for entrepreneurs and one-person business owners with a gross annual salary of less than 200,000.000€), in both Personal Income Tax and Company Income Tax (IRS and IRC). The government seeks to standardize the taxation systems for both housing and tourist rental, avoiding further distortions in the market.

As an alternative, landlords who rent their houses to tourists may choose to be taxed in the F category, applied to income from property (that is, they can choose to pay 28% of the rents’ revenue to the State).

Assuming a landlord chooses the first type of taxation, he must, as before, register in IRScategory B, where one finds the income of business activities. Assuming that person earned 100 thousand euros in rents, they will have to include 35 thousand euros (35% of the total amount of rents) in their IRS (Personal Income Tax). In the still current taxation system, a landlord with the same 100 thousand euros in rents only has to include 15 thousand euros in his IRS.