Tax on property rental

[steve]

It used to be the case some years ago that the Portuguese tax authorities had a tougher line than HMRC as to what could be offset against income when determining the gross profit for the purposes of applying taxation - with the risk that more tax was payable in Portugal than the UK so that overall you could finish up paying more tax than if the profit were just subject to UK taxation. I do not know whether this is still the case though.

[djprescott]

Thanks for that Richard. Very well explained.

[laserblazer]

Does the Portuguese tax system allow for claims against building maintenance costs such as having the roof repaired?

[RichardHenshall]

Yes. Quoting from an official translation of the Codigo IRS from around 2010:

From the gross income referred to in Article 8, there shall be deducted expenses of repair and maintenance that are the responsibility of the taxpayer and that are borne by him and supported by documentation as well as the annual municipal property tax that applies to the value of buildings or part of buildings the rental from which has been included in reported income.

The highlighting is mine. You need to have a fatura showing your NIF, in case you need to prove your expenditure. The good news is that the rate of IRS tax saved is now greater than the rate of IVA charged, so there is a small incentive to be legal.

[laserblazer]

Thanks, that's good news.

[Aldo]

Just to clarify
In the UK you can no longer claim for repairs etc as it just rolls forward. But in Algarve you can claim back repairs an expenses to reduce tax bill and potentially obtain refund???

[Geoff]

Repairs are allowable for UK tax, see :
http://www.hmrc.gov.uk/cnr/revised-guid ... etting.pdf

[pato]

The main problem is the cash payments, no receipt, usually demanded by the contractors.

[pato]

My company chartered accountant has assured me that the way I pay tax on my property in Portugal in the UK is correct, if the claim that I don't have to pay if I only let for a certain period during the year is correct, then I should not pay any tax, has anyone conformation of this ruling? I'd dearly like to prove him wrong and save a few bob in the process.

[EMM]

The way you pay tax in the UK may be correct but under Portuguese law which is where your property is situated Portugal is where you should initially pay your tax.
There is nothing to stop the Financas asking you to pay tax in Portugal according to Portugals rules and regulations.

[pato]

The way you pay tax in the UK may be correct but under Portuguese law which is where your property is situated Portugal is where you should initially pay your tax.
There is nothing to stop the Financas asking you to pay tax in Portugal according to Portugals rules and regulations.

But you can't pay tax in two EU countries, can you?

[RichardHenshall]

... if the claim that I don't have to pay if I only let for a certain period during the year is correct, then I should not pay any tax, has anyone conformation of this ruling? ...

Could you give us some background about this? I wasn't aware that the length of time that a property is let had a bearing on the tax due.

But you can't pay tax in two EU countries, can you?

Unfortunately you can. We certainly do. However the tax you've paid in the first one (presumably Portugal in this case since it's the 'Property owners forum / Portugal living' section of the forum) is allowable against any tax due in the second so that the total paid between the two should match the tax due in the 'higher tax' country. If the Portuguese tax paid is greater, then there is nothing further to pay. If the tax due in your country of tax residency is higher then you have to pay the extra there in addition to what was already paid in Portugal. The nett result is that the profit is effectively taxed only once but always the worst case once.

[pato]

Thanks Richard, obviously you know what you're taking about, that being the case, what are your views on the posters theory that you are only liable for tax if you let the premises for a certain number of weeks in the year, and, if he's correct, how can I prove that to my accountant?

[RichardHenshall]

I'm confused. Which poster is suggesting that rental duration matters? I thought that was you, Pato?

Has someone deleted a post?

[EMM]

I think the confusion is that some are applying UK tax on rental property regs to a property in Portugal where only PT regs apply.