IRS / IRC (“Imposto sobre rendimentos - Rendimentos Prediais”)


IRS / IRC (“Imposto sobre rendimentos - Rendimentos Prediais”) Income Tax on Rental Income What is IRS and IRC?

Any rental income arising from immovable property located in Portuguese Territory is subject to payment of:

- IRS: Individual Income Tax (applicable to individuals)
- IRC: Corporation Tax (applicable to companies)

The computation of IRS or IRC takes into account the total rental income and the deductible expenditures (tax relief) which must be quantified and processed.


What is a Rental Income?

The rental income corresponds to the gross amounts, received by the property owner with the lettings of the related property.


Which expenditure may I deduct?

In order to determine the taxable profit, specific expenditure may be deducted to the gross rental income, namely:

- IMI Municipal Property Tax. This is a tax paid each year to the Town Hall where the property is located. (see section regarding IMI);
- Basic Services (if applicable). These are villas / private communities common expenses (such as garbage disposal, common areas maintenance, etc);
- Building Insurance. The premium referring to the contents is not allowed for deduction;
- Condominium charges (if applicable);
- Maintenance Expenses. These are expenses referring to repairs and normal maintenance of the property.

Note that utility bills (water, electricity, gas, telephone and cable tv), maid service, garden and swimming pool 4maintenance are not allowed for deduction. All expenses must be substantiated by production of legal invoices, subject to vat, issued with a clear indication of the property Owner name and his/her individual Portuguese tax identification number.

These expenses are only allowed for deduction if the rental activity is carried out as a trading activity, and the property Owner is properly registered at the local tax office.



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