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Tax on Rental Income in Portugal

How Portugal taxes rental income from property: rates, deductions, category F, withholding and non-resident obligations.

Rental income taxation

All rental income from Portuguese property is taxable in Portugal, whether you are a resident or non-resident.

Short-term rental (AL licence holders)

Short-term rental income through an AL licence is taxed under Category B (business income):

  • Simplified regime: 35% of gross income is taxable (65% automatic deduction)
  • Effective tax rate for non-residents: approximately 8.75% of gross rental income (35% x 25% flat rate)
  • You must register for AL, issue invoices and submit annual tax returns

    • Long-term rental (Category F)

    Traditional long-term leases are taxed under Category F:

  • Non-residents: flat 25% withholding tax on gross rent (tenant withholds and pays to tax office)
  • Residents: taxed at progressive IRS rates, or can opt for the 25% autonomous rate
  • Allowable deductions: IMI, condominium fees, insurance, maintenance, real estate agent fees

    • Tax treaties

    If you are tax resident in a country with a double taxation treaty with Portugal (including the UK, Germany, France, Netherlands), you can credit Portuguese tax paid against your home country liability. This avoids being taxed twice.

    Practical considerations

  • All rental income must be declared on an annual Portuguese tax return (Modelo 3)
  • Non-residents need a fiscal representative in Portugal
  • AL hosts must issue electronic receipts via the Portal das Financas
  • Municipal surcharges (derrama) may apply in some municipalities
  • Social security contributions may apply if AL income exceeds certain thresholds

    • Always consult a Portuguese tax advisor (TOC or fiscal consultant) for advice specific to your situation.

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