Portugal’s new affordable rental scheme is an inventive initiative intended to make life easier for tenants in the country. New details have now emerged that seem to suggest landlords could benefit from it too.
Over the past couple of months, Portuguese newspapers have been talking about a newly proposed “affordable rental” scheme for the country. It’s intended to make property rental cheaper and more secure for tenants, especially in areas where prices are shooting upwards, such as Lisbon.
Until now, what’s not been clear is how the scheme will work in practice. However, now a closer analysis reveals that there could be some unanticipated benefits for landlords too. This completes the jigsaw with the most important piece – the one that explains why landlords would decide to make their properties available for to tenants at a lower rate than they might be able to achieve on the open market.
Landlords who sign up to the new affordable rental scheme will be granted some enticing tax benefits.
Landlords who sign up to the new affordable rental scheme will be granted some enticing tax benefits. Their rental income could be exempt from income tax (IRS), and they could also only pay half of the usual IMI tax (Portugal’s closest equivalent to UK council tax).
In locations where affordable rental property is in particular demand, local councils could choose to further enhance the tax benefits. For example, they could make the reduction on IMI even greater than 50%.
For some landlords the tax benefits could mean that they were better off, even after letting a property at a reduced rate. The proposal states that this reduced rent would need to be 20% lower than the normal market value.
However, taxpayers generally pay a flat rate of 28% income tax on their rental income. It’s quite possible that an exemption from this might mean that landlords are better off being part of the scheme.
An exemption (from IRS on rental income) might mean that landlords are better off being part of the scheme.
The details of the scheme need to be approved by Portugal’s Council of Ministers before it goes ahead. If it does, landlords who wish to get involved will have to register for it.
The scheme also offers some further benefits for both landlords and their tenants. There are plans for a “guarantee fund” to protect registered landlords in the event of non-payment of rent. On the tenant’s side, there is talk of protection for them in the event of a “sudden break” in income.
On the face of it, this scheme looks well thought out and beneficial for all concerned. It could also make the prospect of becoming a landlord for long-term rentals in Portugal more attractive. Other countries could learn a lot from the inventiveness of this scheme.
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