Buying property to put on the rental market is a viable investment option, but does it pay off in Portugal? Calculations by the Portuguese Landlords Association (APROP) regarding the taxes that need to be paid on the purchase and ownership of a home and applied to rental income reveal that a large part goes to the State.
João Caiado Guerreiro, president of APROP, said in an interview with the newspaper Público that the tax burden on housing and legislative instability are driving investors away from the country. "There are currently Portuguese people buying property in Spain and other European countries to put on the rental market, precisely because property taxes, starting right at the construction stage, are much lower," he said.
According to APROP's calculations, a house bought for 150,000 euros will start paying 1,859 euros in Municipal Tax on Transactions (IMT), 1,200 euros in stamp duty and 725 euros for the public deed. In addition to these charges, there are the annual costs of 450 euros with the Municipal Property Tax (IMI) and 116.20 euros of municipal taxes on the water bill. In practice, in 10 years, the tax and para fiscal charges add up to 9,446 euros.
If that house is rented for 450 per month, it will generate, in that same period (10 years), a revenue of 54 thousand euros. Then, the 9,446 euros must be subtracted. But there are more expenses to consider, as the publication states. The rental income still has to be taxed in IRS. In this case, and if the owner pays the 28% rate on the 54 thousand euros, the revenue falls to 29,434 euros. In other words, instead of 9,446 euros, the State will collect 24,566 euros.
It is also important to remember that if the owner has other real estate assets, including own and permanent residences, with a total Taxable Asset Value (VPT) above one million or two million euros, then they will also have to pay the Additional IMI (AIMI). The amount received in rents will shrink and tax revenue, on the contrary, will rise.
In short, according to APROP, and considering only the final rate, the owner's income will be 29,434 euros and the State's 24,566 euros. If you pay a 1% rate of AIMI, the revenue falls to 14,434 euros and the State receives 39,566 euros. In case the maximum rate of AIMI is applied, the owner is left with 6,934 euros (without other expenses) and pays 47,066 euros in taxes.
Article seen on Comprar casa para pôr a arrendar pode dar prejuízo em Portugal (Público)
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