While Portuguese taxes have recently increased on many forms of income, euroFINESCO has unlocked a fully compliant strategy that can dramatically reduce tax assessment on short-term lets to holidaymakers.
Letting to Holidaymakers
Historically, Non-Residents reported rental income both in Portugal as well as in their home jurisdiction. Up until now, double taxation was eliminated via international credits for tax paid in Portugal. This extra rental income often “top-sliced”, increasing income tax and reducing profits.
For those engaged in short-term tourist lets, our Local Lodging Plan allows you to reduce substantially your income tax assessment. Local Lodging allows you to operate on a Commercial Basis, with many associated benefits, rather than a long-term Rental Basis. Under current legislation, only 35% of your Local Lodging invoicing is subject to taxation. This should equate to an effective tax rate of 8,75% on gross income versus the existing 16.5% rate for long-term rental income for Non-Residents.
Equally important, according to Double Taxation Treaties throughout the EU, there is no further assessment on this income in your home jurisdiction as these business profits are solely taxable in Portugal. Therefore, you are safeguarded against being taxed on any balance due above and beyond what you pay in Portugal.
While there are a number of choices that can prove to be truly viable solutions, only one option disappears in the end: "do nothing". If you fail to choose and take action, it may well be an Inspector who makes the choice for you. Besides the threat of inspections and fines, there are serious civil liability questions to contend with in addition to eventual tax evasion enquiries.
Given the benign compliance requirements, it hardly seems worth the risk. Compliance is the order of the day. Although a nuisance, the options are surprisingly favourable in the long run and will allow both you and Portugal to create a win-win solution for all concerned.
For more information, please consult our euroFINESCO publications.