Rental properties Portugal

Rental properties Portugal

Seasonal rental of a Portuguese vacation home is quite common and mortgage lender Portuguese banks are fine with it. Only when a property is overwhelmingly going to be the source of the (only) income in the future do people not want to finance it regularly. Rental income is taxed in Portugal and not in the Netherlands. A tax return on this income must therefore be filed in Portugal.

Portuguese banks have no problem with seasonal rental of a house bought with a mortgage based on existing income. What is important is that the property is not too commercial in nature. So existing Bed & Breakfasts, hotels, or properties with multiple cottages or lots of rooms (with separate bathrooms) may lead the bank to conclude that there are plans other than purely private use and occasional seasonal rentals. When banks suspect that prospective clients have plans to “change course” and start or take over a tourism business in Portugal, they conclude that the existing income will end and that the requested mortgage is in fact business financing is.

The tax treaty between the Netherlands and Portugal provides that Portugal may levy taxes on assets in the form of real estate located in Portugal such as a second residence. As a result, the (net) value of a Portuguese house is taxed in Portugal and no longer in the Netherlands (box 3). Rental income is taxed in Portugal and therefore should be taxed in Portugal. Quarterly returns must be filed and a tax rate of 28% on the rental income -/- deductible expenses is involved.

Renting out a Portuguese house partially financed by a mortgage can be an interesting addition to retirement. When rental income covers the mortgage and other expenses then the house “comes to you” because after full mortgage repayment there remains a mortgage-free home that generates rental income.

There are several rental platforms for second homes. These platforms offer services of varying degrees. From rental mediation only (via a booking module) to complete outsourcing of the rental including local handling.