The Mais Habitação law which was passed last year and came into effect on 7th October 2023, included a measure which afforded owners complete exemption from income tax on long-term rental earnings when the property was previously an Alojamento Local property. There are certain conditions to be eligible for this income tax exemption, which we discuss in this post, as well as how to declare such earnings when doing your IRS income tax return.
The exemption conditions for these long-term rental earnings are outlined in Artigo 74.º-A do Estatuto dos Benefícios Fiscais (Article 74 of the Fiscal Benefits Statute), namely:
– the earnings come from the transfer to a long-term rental of a property that was previously an Alojamento Local
– the contract has to be registered as a permanent residence rental (habitação permanente)
– the Alojamento Local has to be registered as such before 31st December 2022
– the long-term rental contract has to be signed and registered with Finanças before 31st December 2024.
Earnings from rentals complying with the above conditions are exempt from IRS income tax until 31st December 2029.
HOW TO DECLARE THE TAX EXEMPTION
Today, Friday 2nd February 2024, the ordinance Portaria n.º 39-B/2024 de 2 de fevereiro has been published in the Diário da República. The full document of this ordinance approves the new IRS forms which will be used to declare that these earnings should be exempt from income tax.
Long-term rentals earnings in general are declared in Annex F, called Rendimentos Prediais. Section 4.1 of this annex should be used to specify the start date of the lease, the property information, the lease value, and the tenant’s details,
Section 6F is then used to identify which properties and contracts should benefit from the income tax exemption. In this section you simply refer to the row number used in Section 4.1, where the contract information was specified.
Note that although these forms can be downloaded and printed using the links above, the IRS income tax return is down via the Finanças portal, and the forms will be replicated there, to be completed online. IRS income tax declarations are done between 1st April and 30th June, every year.