27 December 2018
The Tax Authority stated that it would grant the tax benefit while the home is rented.
The Tax and Customs Authority (AT) ruled that the reduction to 5% in the IRS (personal income tax) rate has no time limit for people who renovate their homes for placement on the rental market.
The agency released a binding ruling on Thursday in which it stated that the tax benefit would be available while the home is rented.
The 5% reduction is one of several tax incentives that are currently offered to homeowners who renovate property located in Urban Rehabilitation Areas (ARU).
To gain access to the benefit, any renovations must have occurred between January 1, 2008, and December 31, 2020, and the property must have been rented, subject to renewal, in accordance with the New Urban Rental Regime (NRAU).
Having met these conditions, any rents paid to the owner will accrue a 5% personal income tax rate, as opposed to the full rate of 28% that currently applies to most property income.
Since the Tax Code does not state a specific limit on the benefit, the AT ruled that it “shall remain in force while the property is leased.”
The tax authorities’ response came as a result of a query from a taxpayer about the temporal scope of the tax advantage.
In addition to the 5% rate, rehabilitated houses in Urban Rehabilitation Areas (which, in the case of Lisbon, for example, currently coincides with practically the entire city) also allow homeowners to benefit from reductions to the IMI and the IMT and to claim deductions to the individual income tax for expenses with construction, up to 500 euros.
Capital gains resulting from the sale of rehabilitated properties located in ARUs are also subject to IRS tax at a rate of 5%.
Original Story: Renascença
Photo: Photo: Marília Freitas / RR
Translation: Richard Turner