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- Tax, Live in Portugal
How Rental Income Is Taxed in Portugal: Rates, Options and Incentives for Landlords
🧮 Step 1: Calculate the Taxable Income
Taxable income = rents received – deductible expenses
Deductible expenses include maintenance and repair works, condominium fees, IMI, Stamp Duty on the lease and other expenses paid to obtain the income (with invoices in your NIF). Mortgage interest, furniture and depreciation are not deductible.
📊 Step 2: The Rate
The special flat rate: 25%
For residents and non-residents, net rental income is taxed at a special rate of 25% (it was 28% until 2023).
Reductions for long leases (residential):
- Contracts of 5 years or more (and less than 10): 15%
- Contracts of 10 years or more (and less than 20): 10%
- Contracts of 20 years or more: 5%
Renewals: each renewal of a residential lease for the same duration reduces the rate by a further 2 percentage points, up to 10 points in total. An extra 5-point reduction applies to new leases with a rent at least 5% lower than the previous lease on the same property. Leases signed from 2024 with rents more than 50% above the legal limits don’t benefit from the reductions, and ending a lease early for a reason attributable to the landlord cancels them retroactively.
Moderate rents: 10% (2026–2029)
Since 1 January 2026, net income from residential leases with a moderate rent (up to €2,300 per month in 2026) is taxed at 10%, unless a lower rate already applies (for example, 5% for leases of 20 years or more). The rate applies to rents received until 31 December 2029, including under existing leases within the limit, and withholding by tenants who must withhold is also 10% (Article 45-C of the Tax Benefits Statute, added by Decree-Law 97/2026).
Affordable rents: 0%
Under the Simplified Affordable Rental Regime (RSAA), in force since 1 September 2026, rents up to 80% of the municipal median rent per m² can be exempt from IRS, with a minimum lease term and other conditions.
⚖️ Option: Aggregate at Progressive Rates
You can choose to aggregate (englobar) rental income with your other income and pay at progressive rates. It may be worth it if:
- Your total income is low (marginal rate below 25%)
- You have other deductions to use
If you opt in, it applies to all your rental income of that year (and has consequences for other categories that must also be aggregated). The tax return simulation shows which option is better.
🏢 Category B: When Rent Is Business Income
Rental income is category B when the property is part of a business activity — for example, if you opt to include the properties in a self-employed activity with organised accounting. In that case, the income follows business rules (with depreciation and financial costs deductible, but with accounting obligations).
Local accommodation is always category B (see our article on rental vs local accommodation).
🌍 Non-Resident Landlords
- Taxed in Portugal at 25% on net rental income from Portuguese properties (with the same reductions and incentives, in general)
- EU/EEA residents can opt to be taxed at progressive rates as if resident, under conditions
- Must file an IRS return in Portugal and may need a fiscal representative
✅ Other Obligations
- Register the lease with the tax authority and pay Stamp Duty
- Issue electronic rent receipts every month (some exceptions apply)
- Declare in Annex F of the IRS return
➖ Losses: Carrying Them Forward (Article 55)
If your deductible expenses exceed your rents in a year (for example, because of major repairs), the negative result isn’t lost:
- It can be carried forward for six years and deducted from future rental income (category F only)
- The right is lost if the property doesn’t generate rental income for at least 36 months within the five years after the expenses were incurred
- Losses from rentals can’t be deducted from salary, pensions or other categories
- Rental income taxed under category B follows the business rules, with losses carried forward for 12 years
💡 Practical Tips
- Longer contracts = lower rates. A 5-year lease can cut the rate from 25% to 15%.
- Rent up to €2,300 a month? Make sure the 10% rate is applied. It also covers existing leases.
- Keep every invoice for works and fees.
- Simulate both options (flat rate vs aggregation) every year.
🚀 Final Considerations
Rental income in Portugal no longer has to cost 25% in tax. Long leases, moderate rents and affordable rental programmes can bring the rate down to 15%, 10%, 5% or even 0%. Choosing the right contract structure is the most effective tax planning a landlord can do.
📢 Expert Advice: Before signing a new lease, think about its duration and rent level. Small changes can move you into a much lower tax bracket.
Renting out a property in Portugal? Step Inside Portugal’s tax team can calculate your tax and find the best option for you — find out more about our tax services here. ✨
This article is for general information only and doesn’t constitute tax advice. The housing incentives are recent and have specific conditions; confirm the rules for your contract.
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