Tax updates introduced in late 2023 established new rules to give property owners greater long-term stability in the rental market. Dealing with landlord's taxes (IRS senhorios) does not need to feel like an endless maze of paperwork, as calculations depend directly on your monthly rent, lease duration, and property type.
New landlord's taxes rates and rent limits
The baseline rule for landlord's taxes on primary residential contracts is straightforward and uses the monthly rent amount as a threshold:
Rent > 2300€
IRS 25%
Rent < 2300€
IRS 10%
For commercial leases or non-residential properties, the flat rate is set at 28%.
In any case, you can opt for aggregation (englobamento), adding rental income to your personal earnings. This choice only makes sense if your personal tax bracket is lower than the flat rate applied to your rental income.
How contract length alters landlord's taxes for rents over 2,300€
For rents equal to or below 2,300 euros, the tax rate remains locked at 10%. However, if you charge more than 2,300 euros per month, longer contract terms reduce the standard 25% base rate:
Leases up to 5 years: Pay the standard rate of 25%
Leases between 5 and 10 years: The tax rate drops to 15%
Leases between 10 and 20 years: The tax rate drops to 10%
Leases over 20 years: Pay the minimum tax rate of 5%
Contract renewals: For leases over 5 years, every renewal reduces the tax rate by an extra 2%, down to a minimum limit of 5%.
If you complete building repairs or painting in the 24 months before a new lease begins, you can deduct the full cost from your gross rental income once the property is rented out. To keep your property in good shape before welcoming tenants, read our guide to preventing damp and mould.
Short-term holiday lets versus standard renting
If you run a short-term holiday let (alojamento local), the tax structure and operational rules are completely different. Holiday lets do not pay landlord's taxes under Category F (rendimentos prediais, or property income), as they fall under Category B (rendimentos empresariais, or business income).
Tax rules for short-term lets:
Simplified regime (regime simplificado): Tax authorities apply a 0.35 coefficient to your gross earnings, meaning only 35% of total revenue counts as taxable income
Containment zones (áreas de contenção): If the property sits inside a municipal containment zone, the coefficient rises to 0.50, meaning 50% of gross earnings is taxed
Final tax calculation: Taxable earnings (the 35% or 50% share) are added to your personal earnings and taxed at standard progressive income rates ranging from 13% to 48%
Organised accounting (contabilidade organizada): If annual turnover goes over 200,000 euros or you choose this setup, you deduct actual operational expenses and pay tax on net profit
Value Added Tax (Imposto sobre o Valor Acrescentado, or IVA): If annual revenue exceeds 14,500 euros, charging 6% VAT on accommodation services is mandatory.
Deductible expenses to lower your landlord's taxes
To lower your final bill legally, you must claim all eligible property expenses on your annual tax return. Landlord's taxes apply only to net income.
Costs you can write off
04
Energy Performance Certificate (Certificado Energético) and legal requirements
03
Property repairs, painting, and any small maintenance works
02
Monthly condo and building maintenance fees paid by the landlord only
01
Municipal Property Tax (Imposto Municipal sobre Imóveis, or IMI)
In terms of legal costs, the gas and electricity inspections for rentals (when covered by you) are also eligible as deductible expenses. Nonetheless, mortgage interest and loan repayments are not allowable tax deductions for landlord's taxes under Category F (unlike the UK typically).
In a nutshell
Rents up to 2,300 euros per month for primary residential housing always pay a 10% rate for landlord's taxes
Rents over 2,300 euros per month start at 25%, but longer leases can lower the tax rate down to 5%
IMI property tax, condo charges, repairs, and mandatory inspection costs directly lower your taxable income.
FAQ
Can mortgage interest be deducted from my landlord's taxes?
No, current Portuguese tax law does not allow mortgage interest or capital repayments to be deducted under Category F. You can only deduct direct expenses related to property upkeep, IMI, condo fees, and mandatory certificates.
Do I have to issue digital rent receipts on the Portal das Finanças?
Yes, issuing digital rent receipts (recibos de renda eletrónicos) on the tax portal is mandatory for all property owners in Portugal, except for those aged over 65 or earning very low annual rental amounts who opted for manual annual statements.