The rental market in Portugal has undergone several changes in recent years, with tax incentives for long-term contracts. For landlords, understanding these rules can make the difference between paying a high rate of IRS or securing a more favourable tax regime.
If you have a lease of more than five years, it's essential to be aware of the tax benefits available and the mandatory reporting deadlines.
In this article, we explain how to correctly declare a rental contract on the Tax Portal and ensure that the reduced IRS rates apply.
What does the law say? IRS Rates for Housing and Non-Housing Rentals
The IRS Code (CIRS) provides for differentiated rates for residential rental contracts, encouraging landlords to opt for longer contracts. Currently, the applicable rates are:
🔹 Non-housing lease → 28%
🔹 Rental housing:
Up to 5 years → 25%
Between 5 and 10 years → 15%
Between 10 and 20 years → 10%
Over 20 years old → 5%
This means that when you sign a 10-year lease, for example, you will only pay 10% of IRS on rents, instead of the usual 25%.
In order to benefit from these reduced rates, it is essential that the contract is correctly declared on the Finance Portal within the stipulated timeframe.
How to Declare the Lease Contract to Benefit from the Reduced Rate?
To take advantage of the most favourable IRS rates, you need to ensure that the contract is duly registered and classified as a long-term rental. Follow the steps below:
1️⃣ Check if the contract is declared on the Finance Portal
Go to the Finance Portal and enter the Lease Contracts area. Here you can check that your contract has already been correctly declared.
2️⃣ Confirm Contract Duration
To guarantee application of the reduced rate, the contract must have a minimum duration of 5 years. Otherwise, the standard rate of 25% will apply.
3️⃣ Meeting the Communication Deadline (14th February)
Landlords must communicate the duration of the contract by 14 February of the year following the start of the lease. If the contract has already been duly declared, this information will automatically be taken into account in Table 4.2 of Annex F of the IRS.
Please note! If you haven't communicated the duration of the contract by the deadline, you can still benefit from the reduced rate, but you will need to fill in Box 4.2 of Annex F manually in your tax return.
What are the advantages of a long-term contract?
Opting for long-term contracts isn't just advantageous for tenants - landlords also benefit in a number of ways:
✔ Less tax → The longer the contract term, the lower the rate of IRS payable.
Financial stability → Reduction in the time the property is unoccupied, guaranteeing continuous income.
Less bureaucracy → Long contracts reduce the need to manage constant renewals and new tenants.
Greater predictability → More stable revenues and greater security for both parties.
This tax regime is particularly attractive to property investors and landlords who want to maximise the return on their assets.
Conclusion: How to Pay Less IRS when Renting?
If you are a landlord and have a lease of more than 5 years, you must ensure that it is correctly declared on the Tax Portal by 14 February. This simple action can significantly reduce your IRS on property income, increasing the profitability of your investment.
Extra Tip: If you don't already have a long-term contract, consider renegotiating it with your tenant to benefit from a reduced IRS rate in the future.
If you need guidance to manage your property investment in the most efficient way, talk to us! At Invest351, we help investors and landlords optimise their assets and make strategic decisions in the property market.
