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Decree with Tax Benefits for Landlords Promulgated

2 January 2019

Two decrees included in the legislative package focused on housing have already been promulgated by the President of the Republic of Portugal, Marcelo Rebelo de Sousa. The head of state gave a “green light” to the proposal granting tax benefits to landlords depending on the duration of the rental contracts and the one that authorises the Government to create the Affordable Rents Program.

Portugal’s president approved tax benefits for long-term rental agreements. The law provides for benefits to landlords based on the length of rental contracts, by reducing the IRS (individual income tax) rate, currently at 28%, on rents. The benefit will automatically be applied to new contracts and existing contracts upon renewal. The measure was approved with the votes in favour by the PS and PSD, the CDS-PP and PAN abstaining, and votes against by the PCP, BE and the ENP on December 21. From now on, there will be four new levels of taxation, explained in detail in this guide.

The new Affordable Rents Program provides for an exemption from the IRS or IRC (corporate income tax) for property owners who enter into new rental agreements at prices that are 20% below the current market rate.

Some property owners will not receive any IRS exemptions

The expected reduction in IRS fees will not necessarily apply to all property owners. The law granting the tax benefits only applies to new contracts or renewals, so landlords whose rents are frozen – including any contracts entered into before 1990 – will continue to pay the maximum IRS rate.

“It is a very unfair, even ridiculous situation,” Luís Menezes Leitão, of the Lisbon Association of Property Owners (ALP), complained to the Diário de Notícias. “Of course, these landlords, who are providing social security in place of the state, should get a total exemption from any related income taxes. The representative also believes that the Government and Parliament “have been attacking and fiercely persecuting landlords.”

Hugo Pires, a Socialist deputy who coordinates the parliamentary working group on housing, admitted to the same publication that it is “an unresolved problem that has not been settled by this law.” “It is a pertinent question, but in this State Budget we cannot go as far as we would like,” he said.

“The Basic Law is a major reform for Housing,” says Rosetta

Helena Rosetta, the former coordinator of the parliamentary working group on housing, said that “much remains to be done”, but that “important steps” have been taken with the new legislation.

“We were unable to create an affordable rental market overnight, nor will the necessary housing appear that quickly. However, we created important tax benefits to encourage landlords to allocate houses to the open market – many of which are empty, “the Socialist MP told the publication.

Ms Rosetta believes that it is imperative to create a Basic Housing Law “to streamline all these measures, which have appeared in a little bit of a staggered and haphazard way.”

“Housing has never had a Basic Law – Social Security has a Basic Law, Education also, Health as well, Environment as well. However, Housing has never had one, and it was seen to be an individual problem. It is not though, it is a collective problem,” the deputy reinforced. “The Basic Law is a major reform for Housing and I would like the mandate to not end without this,” she said.

Proposals regarding the Basic Housing Law submitted the by PS, PCP and BE will be voted upon during the first week of January.

Original Story: Idealista

Translation: Richard Turner