In Portugal, there is a new tax benefit that allows, under certain conditions, to benefit from a substantially lower flat rate compared to the one that has been practiced on your IRS.
As a result, instead of seeing your income liable to a flat tax of 28%, you can enjoy, at the most, a 10% rate! By getting a reduction of your taxation by 18 percentage points!
This new reduction is directly related to the term of your rental agreement, that is, the longer the term of the rental agreement, the greater the reduction to be applied.
These rates are only applicable to agreements concluded after January 1, 2019 (and related renewals), and to renewals of agreements prior to 2019 that occur after January.
André, a client of UWU Solutions, has obtained an annual tax saving of €600 for 5 years! Let's see how this benefit was possible...
André is the owner of a property in Lisbon and, in January, decided to rent this property to Carolina, for a term of 5 years, for €1.000 per month.
Before signing the rental agreement, André intended it to last for 3 years. He did a little research on the taxation which this monthly income would be liable to, and obtained the following tax payable:
- Annual income = €12.000
- Tax Rate = 28%
- Tax Payable (during the 3 years) = €3.360
However, before signing the rental agreement, he contacted UWU Solutions to double-check this taxation!
Our team presented him with the new tax benefit and suggested that he should go for the 5-year term option. This is because over the 5 years, his incomes would be liable to a tax rate of 23%, instead of 28%.
That is, by opting for this scenario, he would reduce his taxation by 5 percentage points:
- Annual Income = €12.000
- Tax Rate = 23%
- Tax Payabale = €2,.760
Therefore, we helped André get a tax saving of €600 a year for five years. A total saving of €3.000 at the end of the 5-year term agreement!