IRS discount on rents? For new contracts and renewals only

The reduction in the IRS rate on property income from 28% to 25% will apply to contracts celebrated for up to 5 years.

01 May 2023 min de leitura

With the aim of increasing the offer of houses on the rental market, the Government of António Costa presented Mais Habitação and a set of measures. And one of them concerns tax incentives for all those who put up houses for rent. It is now known that the reduction in IRS rates on rents will only apply to new leases or contract renewals after the entry into force of the new law.

This is one of the novelties related to the bill presented by the Government to the Assembly of the Republic: “The provisions of paragraphs 2 to 5 of article 72 of the IRS Code [relating to special IRS rates for residential leases], in the wording introduced by this law, apply to new lease agreements and respective contractual renewals, as well as to renewals of lease agreements in force verified from the date of entry into force of this law", says the document.

It should be recalled that within the scope of tax policies aimed at improving the housing rental market, the Government proposes to make income taxation more flexible, which will initially involve a reduction in the IRS rate on property income from 28% to 25% to contracts celebrated for up to five years.

The IRS rate on property income decreases as the lease term increases:

A contract of 5 to 10 years drops from 23% to 15%;
Lease agreement between 10 to 20 years from 14% to 10%;
Contracts with more than 20 years fall from 10% to 5%.

Thus, the reduction of IRS on rents was also a way that the Government found to encourage long-term leases at a time when contracts are generally less than 5 years.

Source: Idealista