Landlords, Investors & Tenants All Win Under Portugal's New Tax Laws

Daniel, let's Daniel, let's talk about changes talk about changes talk about changes in the rental market. What are in the rental market. What are in the rental market. What are the updates? the updates? the updates? This year has been This year has been This year has been amazing for amazing for amazing for rentals. Many changes in rentals. Many changes in rentals. Many changes in many different many different many different areas. So, first of areas. So, first of areas. So, first of all, there is a big all, there is a big all, there is a big difference between the changes difference between the changes difference between the changes that have already been made, that have already been made, that have already been made, approved, and approved, and approved, and are being used, and are being used, and are being used, and those that are still those that are still those that are still in the in the in the process of being considered. process of being considered. process of being considered. So, So, So, we had one we had one we had one great change at the beginning of the year. From great change at the beginning of the year. From great change at the beginning of the year. From January 1, all January 1, all January 1, all long-term long-term long-term leases—by leases—by leases—by long-term I long-term I long-term I mean mean mean contracts for a period of contracts for a period of contracts for a period of more than 3 years for more than 3 years for more than 3 years for permanent residents— permanent residents— have a fixed have a fixed have a fixed tax of 10%. tax of 10%. tax of 10%. We used to have 25%, in We used to have 25%, in We used to have 25%, in some situations it some situations it some situations it could be less—15, 10 could be less—15, 10 , but now it's always , but now it's always , but now it's always 10%. Of course, there are 10%. Of course, there are 10%. Of course, there are certain criteria. certain criteria. certain criteria. The criterion is The criterion is The criterion is that the that the that the rent cannot rent cannot rent cannot exceed 2,300 euros exceed 2,300 euros exceed 2,300 euros for long-term for long-term for long-term residents, i.e. residents, i.e. residents, i.e. the person who the person who the person who lives there. But, if these lives there. But, if these lives there. But, if these requirements are met, you requirements are met, you requirements are met, you will have a flat will have a flat will have a flat tax of 10%.

tax of 10%. tax of 10%. Of course? So, that Of course? So, that Of course? So, that was the first big was the first big was the first big change we had change we had change we had this year. Now, since this year. Now, since this year. Now, since September, we have already had the September, we have already had the September, we have already had the law approved. law approved. It was approved in It was approved in May, I don't remember the May, I don't remember the May, I don't remember the exact day, but that's not a exact day, but that's not a exact day, but that's not a problem, since problem, since problem, since it has been in effect since it has been in effect since it has been in effect since September 1. And what does September 1. And what does September 1. And what does this law say? this law say? This law states that for This law states that for contracts contracts contracts concluded with a concluded with a concluded with a rent that is rent that is rent that is 80% of the statistical 80% of the statistical 80% of the statistical rental value for the rental value for the rental value for the area where the area where the area where the housing is located, housing is located, housing is located, 0% tax can be achieved 0% tax can be achieved . . Wow, I see. Wow, I see. Yes, this is a great Yes, this is a great Yes, this is a great solution, very good solution, very good solution, very good for some areas, in for some areas, in for some areas, in others it may be others it may be different. We have to do different. We have to do different. We have to do some math, but some math, but some math, but it's great. We already it's great. We already it's great. We already had a similar law in had a similar law in had a similar law in the past, but this one is the past, but this one is the past, but this one is even better. And I'll even better. And I'll even better. And I'll explain to you, as I explain to you, as I explain to you, as I said, we can said, we can said, we can get to 0%. We have a get to 0%. We have a website in Portugal, a website in Portugal, a website in Portugal, a national national national statistics website, where statistics website, where statistics website, where you can you can you can Google the price of an apartment Google the price of an apartment Google the price of an apartment on the rental market: on the rental market: on the rental market: studio, one bedroom, studio, one bedroom, studio, one bedroom, two bedrooms—you two bedrooms—you two bedrooms—you choose choose choose . He will give . He will give . He will give you the meaning. If you you the meaning. If you you the meaning. If you enter into a enter into a enter into a lease agreement, it must be lease agreement, it must be lease agreement, it must be registered with the registered with the registered with the tax authorities, tax authorities, tax authorities, of course. But if you of course. But if you of course. But if you create it and create it and create it and set the cost set the cost set the cost at 80% of that at 80% of that at 80% of that average target average target average target price, you will reach 0%.

price, you will reach 0%. OK. The amazing scenario amazing scenario compared to the old compared to the old compared to the old law that we law that we law that we had is had is had is that we don't have to that we don't have to that we don't have to enter into a contract, as enter into a contract, as enter into a contract, as was mandatory was mandatory was mandatory in the past, a contract in the past, a contract in the past, a contract with the government. This is with the government. This is with the government. This is automatic. We automatic. We automatic. We just need to just need to just need to conclude a contract, conclude a contract, conclude a contract, set a price, set a price, set a price, register it, and register it, and register it, and then on January 15th of then on January 15th of then on January 15th of next year, we next year, we next year, we simply notify the simply notify the simply notify the National National National Institute of Institute of Institute of Rehabilitation and Rehabilitation and Rehabilitation and Construction, and it will Construction, and it will Construction, and it will happen happen happen automatically. They will automatically. They will automatically. They will immediately notify the immediately notify the immediately notify the tax authorities, and the tax authorities, and the tax authorities, and the tax office tax office tax office will give you 0% tax. will give you 0% tax. And this is also an amazing, And this is also an amazing, simply amazing simply amazing simply amazing change. change. change. Yes. Yes. Yes. Regarding the rent. There is Regarding the rent. There is Regarding the rent. There is another big change coming, another big change coming, another big change coming, but it is still under but it is still under but it is still under consideration. It has already consideration. It has already consideration. It has already been approved by the government, but been approved by the government, but been approved by the government, but not yet by parliament. not yet by parliament. It is expected that It is expected that we will we will we will have news on have news on have news on this matter by the end of the year. It is this matter by the end of the year. It is this matter by the end of the year. It is about better about better about better landlord protection.

landlord protection. Anyone who intends to Anyone who intends to enter into a enter into a enter into a lease agreement or rent out their lease agreement or rent out their lease agreement or rent out their home home home will know that after will know that after will know that after January, protection will, in January, protection will, in January, protection will, in principle, be higher. principle, be higher. The changes are The changes are that if you that if you that if you sign a contract sign a contract sign a contract today, you know today, you know today, you know how it is, you know the how it is, you know the how it is, you know the Portuguese market Portuguese market . This is completely normal. It is . This is completely normal. It is . This is completely normal. It is traditional to require a traditional to require a traditional to require a deposit to protect deposit to protect deposit to protect the owner. So, now the the owner. So, now the the owner. So, now the deposit has a limit of deposit has a limit of deposit has a limit of two two two rents. In rents. In rents. In the future, there will the future, there will the future, there will be no limits at all. be no limits at all. be no limits at all. The landlord can The landlord can The landlord can set an amount, which set an amount, which set an amount, which of course must be of course must be of course must be reasonable, but who reasonable, but who reasonable, but who decides what is decides what is decides what is reasonable and what is not—it is reasonable and what is not—it is reasonable and what is not—it is the landlord. But he the landlord. But he the landlord. But he can set an amount he can set an amount he can set an amount he considers reasonable. considers reasonable. considers reasonable. So, no restrictions So, no restrictions . Today, . Today, . Today, there is also a limit on the amount of there is also a limit on the amount of advance rent you advance rent you can demand. can demand. can demand. Currently, you can Currently, you can Currently, you can only request two only request two only request two months in advance. months in advance. months in advance. The intention now is that The intention now is that The intention now is that instead of two instead of two instead of two rents, rents, rents, three can be demanded.

three can be demanded. three can be demanded. So, you will be able So, you will be able So, you will be able to demand three rent to demand three rent to demand three rent payments in advance, which payments in advance, which payments in advance, which is also a good is also a good is also a good protection. Another protection. Another protection. Another protection for protection for protection for landlords landlords landlords concerns penalties concerns penalties concerns penalties when terminating when terminating when terminating a contract due to a contract due to a contract due to the tenant not the tenant not the tenant not paying you. In the past, paying you. In the past, paying you. In the past, we could we could we could only initiate legal proceedings only initiate legal proceedings only initiate legal proceedings after three months after three months after three months of non-payment. Now that of non-payment. Now that of non-payment. Now that will change. This will change. This will change. This will be reduced to two will be reduced to two will be reduced to two months. So, all months. So, all months. So, all procedures procedures procedures will be faster will be faster . Also a big . Also a big . Also a big change is that change is that change is that the tenant only has to be the tenant only has to be the tenant only has to be late with payments late with payments late with payments twice a year by a twice a year by a twice a year by a specified date—the 8th specified date—the 8th specified date—the 8th or any or any or any other date other date other date specified in the specified in the specified in the agreement—to be agreement—to be agreement—to be considered in considered in considered in breach of the terms of the breach of the terms of the breach of the terms of the agreement. All of these agreement. All of these agreement. All of these changes will protect changes will protect changes will protect the landlord. And the government the landlord. And the government the landlord. And the government did this to did this to did this to understand whether understand whether understand whether these changes these changes these changes protecting protecting protecting landlords would help landlords would help landlords would help bring bring bring more housing onto the market. So, more housing onto the market. So, more housing onto the market. So, big changes regarding big changes regarding big changes regarding contracts. Another thing contracts. Another thing contracts. Another thing concerns the time in concerns the time in concerns the time in which we live.

which we live. Until recently, it was very Until recently, it was very traditional that traditional that traditional that notifications could notifications could notifications could only be sent only be sent only be sent by letter. The law now by letter. The law now by letter. The law now states that states that states that notifications can be notifications can be notifications can be made online by made online by made online by email. email. email. Perfectly. Perfectly. This will greatly simplify This will greatly simplify many things. Of course, many things. Of course, many things. Of course, this depends on this depends on this depends on the agreement of both the agreement of both the agreement of both parties, but it is parties, but it is parties, but it is the landlord who decides the landlord who decides whether he wants this. whether he wants this. So, this will significantly So, this will significantly simplify the procedures. simplify the procedures. These are the main advantages These are the main advantages and changes and changes and changes regarding contracts regarding contracts , their type and , their type and , their type and method of execution. method of execution. Is Is Parliament expected to pass Parliament expected to pass Parliament expected to pass this? this? this? Yes, it is expected to be Yes, it is expected to be Yes, it is expected to be adopted by adopted by adopted by the end of the year. the end of the year. the end of the year. This will likely become available This will likely become available This will likely become available to landlords and to landlords and to landlords and tenants from January. tenants from January. tenants from January. But you know how it But you know how it But you know how it happens, right? We cannot happens, right? We cannot happens, right? We cannot guarantee this. As for guarantee this. As for guarantee this. As for rent, these are, in fact, rent, these are, in fact, rent, these are, in fact, major changes. There were major changes. There were major changes. There were also some changes also some changes also some changes regarding tax regarding tax regarding tax returns. Now, returns. Now, returns. Now, as a tenant, you can as a tenant, you can deduct 900 euros this year. It used to be deduct 900 euros this year. It used to be less, less, less, next year it next year it next year it will be 1,000 euros. Things of will be 1,000 euros. Things of will be 1,000 euros. Things of that nature. But these are that nature. But these are that nature. But these are minor changes minor changes minor changes compared to the compared to the compared to the tax changes that tax changes that tax changes that everyone keeps everyone keeps everyone keeps asking about and the asking about and the asking about and the contractual changes, contractual changes, contractual changes, because they are also because they are also because they are also very, very important.

very, very important. As for the rental market, it is As for the rental market, it is currently currently currently growing rapidly. With these growing rapidly. With these growing rapidly. With these changes, I notice that an changes, I notice that an changes, I notice that an investor who has an investor who has an investor who has an asset and wants to put asset and wants to put asset and wants to put it on the market, or an it on the market, or an it on the market, or an investor who simply investor who simply investor who simply wants to buy wants to buy wants to buy a property in a property in a property in Portugal without Portugal without Portugal without living here but living here but living here but only to earn money, only to earn money, only to earn money, are looking at are looking at are looking at long-term rentals long-term rentals long-term rentals differently. Why? Also differently. Why? Also differently. Why? Also because the European because the European because the European Union is exerting great Union is exerting great Union is exerting great pressure. Not only for pressure. Not only for pressure. Not only for Portugal, but for all Portugal, but for all Portugal, but for all countries regarding countries regarding local accommodation legislation (AL ). ). ). Of course. What are they Of course. What are they Of course. What are they doing? doing? doing? This is not a new thing, if This is not a new thing, if This is not a new thing, if I may say so, because I may say so, because I may say so, because it started in 2024. it started in 2024. With all the compliance restrictions that platforms like Airbnb, platforms like Airbnb, Booking have to comply with regarding Booking have to comply with regarding Booking have to comply with regarding owners. Also with owners. Also with owners. Also with all the descriptions that you all the descriptions that you all the descriptions that you must have in your must have in your must have in your AL regarding the number, with all the AL regarding the number, with all the AL regarding the number, with all the tax tax tax compliance, compliance, compliance, since you must since you must since you must provide provide invoices. This is invoices. This is invoices. This is mandatory. You mandatory. You mandatory. You must notify must notify must notify SEF of anyone SEF of anyone SEF of anyone staying in your staying in your short-term short-term rental accommodation. This started in rental accommodation. This started in rental accommodation. This started in 2024. By December 31, 2024. By December 31, 2024. By December 31, all municipalities all municipalities all municipalities with at least with at least with at least 1,000 registered 1,000 registered short-term short-term rental properties will be required to rental properties will be required to rental properties will be required to have have have appropriate regulations in place.

appropriate regulations in place. appropriate regulations in place. This will be mandatory. This will be mandatory. This will be mandatory. And this is the pressure coming And this is the pressure coming And this is the pressure coming from the European from the European from the European Union. The European Union. The European Union. The European Union also said in Union also said in Union also said in August—this is very recent August—this is very recent August—this is very recent information that is information that is information that is still being studied—that in still being studied—that in still being studied—that in the future they the future they the future they need to do something need to do something need to do something about market about market about market housing prices. And the idea is housing prices. And the idea is housing prices. And the idea is that you can't that you can't that you can't have a zone and have a zone and have a zone and license license license a property to a property to a property to provide provide provide short-term short-term short-term rental services if the cost of rental services if the cost of rental services if the cost of housing for a person housing for a person housing for a person living in that area living in that area living in that area exceeds eight times the exceeds eight times the exceeds eight times the average salary for average salary for average salary for that area. So that area. So , if someone , if someone , if someone living in Lisbon living in Lisbon living in Lisbon needs nine needs nine needs nine salaries to salaries to salaries to rent a home, it rent a home, it rent a home, it will be impossible to will be impossible to will be impossible to issue issue issue AL (short-term AL (short-term AL (short-term rental) licenses. And I'm talking about rental) licenses. And I'm talking about rental) licenses. And I'm talking about Lisbon, but it Lisbon, but it Lisbon, but it applies to all of applies to all of applies to all of Europe, because it's an Europe, because it's an Europe, because it's an initiative of the initiative of the initiative of the European Union. European Union. This is a big change that the European Union wants to implement to the European Union wants to implement to stop the growth stop the growth stop the growth and uncontrolled and uncontrolled and uncontrolled number of new number of new number of new AL licenses. Of course, AL licenses. Of course, AL licenses. Of course, there are other criteria, there are other criteria, there are other criteria, for example, for example, for example, housing prices in such areas housing prices in such areas housing prices in such areas should have been constantly should have been constantly should have been constantly increasing over the increasing over the increasing over the past 10 years, and the past 10 years, and the past 10 years, and the like. But like. But like. But overall, it will be overall, it will be overall, it will be tied to the incomes of tied to the incomes of tied to the incomes of people living in people living in people living in these areas to these areas to these areas to protect the protect the protect the city center and the population city center and the population city center and the population that has been left without that has been left without that has been left without housing due to its

housing due to its housing due to its inaccessibility. inaccessibility. All this news about All this news about rentals, rentals, rentals, short- short- short- term leases, the stricter term leases, the stricter term leases, the stricter criteria that criteria that criteria that the European Union wants to achieve, the European Union wants to achieve, the European Union wants to achieve, combined with new combined with new combined with new taxation and taxation and taxation and new new new contract rules, gives contract rules, gives contract rules, gives me confidence that the me confidence that the me confidence that the real estate and real estate and real estate and rental market is in for a big rental market is in for a big rental market is in for a big boom. boom. OK. Do OK. Do you think there will be you think there will be you think there will be more of a boom in the more of a boom in the more of a boom in the long-term long-term long-term market compared to the market compared to the market compared to the short-term, or will short-term, or will short-term, or will we see a we see a we see a rise in both? rise in both? rise in both? Look, this Look, this Look, this will apply to both will apply to both . And when I talk about . And when I talk about . And when I talk about short-term short-term short-term rentals, I forgot rentals, I forgot rentals, I forgot to mention to mention to mention medium-term rentals, medium-term rentals, medium-term rentals, because they are very because they are very because they are very important. Very important important. Very important because it is an because it is an because it is an extremely strong extremely strong extremely strong market. If you market. If you market. If you ask me, well ask me, well , let's break , let's break , let's break this down into three areas. this down into three areas. this down into three areas. Long-term—in the Long-term—in the Long-term—in the long long long term, there term, there term, there will definitely be a boom. Regarding AL, I've will definitely be a boom. Regarding AL, I've will definitely be a boom. Regarding AL, I've noticed that the market has noticed that the market has noticed that the market has slowed down now, slowed down now, slowed down now, as owners as owners as owners are starting to think about are starting to think about are starting to think about other areas— other areas— long-term and long-term and long-term and medium-term medium-term medium-term rentals. So I don't think rentals. So I don't think short-term short-term short-term rentals will boom in the rentals will boom in the rentals will boom in the coming years. It will coming years. It will coming years. It will survive. It survive. It survive. It will always be a great will always be a great will always be a great way way way to invest, but there to invest, but there to invest, but there will be no boom. Perhaps will be no boom. Perhaps will be no boom. Perhaps it will continue to it will continue to it will continue to grow or grow or grow or stabilize.

stabilize. Medium-term Medium-term rentals are a very rentals are a very rentals are a very good market. Why? good market. Why? good market. Why? Because the same Because the same Because the same rules as for rules as for rules as for long-term long-term long-term rentals rentals rentals will apply will apply will apply to medium-term rentals to medium-term rentals . And you ask me, . And you ask me, . And you ask me, what is a what is a what is a medium-term medium-term medium-term lease? lease? lease? Medium-term Medium-term Medium-term rental is, for example rental is, for example , for students. , for students. , for students. OK. OK. OK. Students who Students who Students who need to live in need to live in need to live in Lisbon, Coimbra, Lisbon, Coimbra, Lisbon, Coimbra, Porto or any other Porto or any other Porto or any other European capital, European capital, European capital, but now we are talking but now we are talking but now we are talking about Portugal. The about Portugal. The about Portugal. The same tax rules same tax rules will apply will apply to students. So, to students. So, to students. So, it is considered a it is considered a it is considered a medium-term medium-term medium-term lease, not lease, not lease, not long-term, but with the long-term, but with the long-term, but with the same tax same tax same tax benefits. Also for benefits. Also for benefits. Also for those employees who those employees who those employees who need to go to need to go to need to go to work in work in work in another city for 6 months. The same taxation rules will apply to such another city for 6 months. The same taxation rules will apply to such another city for 6 months. The same taxation rules will apply to such contracts contracts . So . So overall there will be overall there will be overall there will be growth, not growth, not growth, not specifically in specifically in specifically in short-term short-term short-term rentals, but in other rentals, but in other rentals, but in other areas yes. areas yes. areas yes. Medium and Medium and Medium and long term. long term. long term. Medium and Medium and Medium and long term.

long term. long term. Can you clarify Can you clarify what is considered a what is considered a what is considered a short-term, short-term, short-term, medium-term, and medium-term, and medium-term, and long-term long-term long-term lease? What is the time lease? What is the time lease? What is the time frame? frame? frame? Of course. A Of course. A Of course. A short-term short-term short-term rental is any rental is any rental is any rental for a period of up to 30 rental for a period of up to 30 rental for a period of up to 30 days. days. days. Medium-term— Medium-term— from 30 days to 1 year. from 30 days to 1 year. from 30 days to 1 year. Good. After 1 year, it Good. After 1 year, it Good. After 1 year, it is considered a is considered a is considered a long-term long-term long-term lease, but don't lease, but don't lease, but don't forget that for it to forget that for it to forget that for it to be long-term be long-term be long-term and for you to have access to and for you to have access to and for you to have access to tax benefits, the tax benefits, the tax benefits, the contract must be contract must be contract must be concluded for at least concluded for at least concluded for at least 3 years. 3 years. 3 years. Good. It is also very important Good. It is also very important Good. It is also very important to clarify this. to clarify this. to clarify this. So, all of this looks So, all of this looks So, all of this looks like very positive like very positive like very positive changes, do you think it's a changes, do you think it's a changes, do you think it's a good change? good change? good change? Yes, good changes. I Yes, good changes. I Yes, good changes. I think the market think the market think the market will develop. We are will develop. We are will develop. We are already seeing already seeing already seeing many investors many investors many investors and companies and companies and companies interested in interested in interested in investing, investing, investing, as as as corporate corporate corporate structures have not been very structures have not been very structures have not been very fond of the rental market, fond of the rental market, fond of the rental market, at least in at least in at least in Portugal, since Portugal, since Portugal, since these measures also these measures also these measures also apply to apply to apply to corporate corporate corporate structures with the same structures with the same structures with the same tax benefits tax benefits tax benefits or even better, I or even better, I or even better, I expect growth. expect growth. expect growth. I see good I see good I see good prospects in this prospects in this prospects in this field.

field. field. Okay, good news. Okay, good news. Okay, good news. Thank you, Daniel. And for Thank you, Daniel. And for Thank you, Daniel. And for information, information, information, see the description see the description see the description below.