Deductible expenses on Portuguese rental income for landlords

Portuguese tax on long-term rent is charged on the net amount: the rent you received in the year minus the expenses you actually paid to earn it. Deductible costs include IMI, condominium charges, repairs and maintenance, rent-default insurance, stamp duty on the lease, the energy certificate and letting agency fees. You cannot deduct mortgage interest, depreciation, furniture, appliances, decoration or AIMI. The rules are the same for owners living in Portugal and abroad, and they apply under both the 10% and the 25% rate.

The basic rule

Rental income is rendimentos prediais (property income, "Category F"). Article 41 of the IRS Code (CIRS) lets you deduct, for each property, "all expenses actually borne and paid" to obtain or secure the rent. Four conditions apply:

• You paid it. A cost that the tenant or the condominium paid does not count, and nor does one you have been invoiced for but not yet paid.
• It relates to that property. Expenses are worked out property by property, and for each separate unit (fração).
• It falls in the right year. You deduct a cost in the year you pay it, for the period the property is let.
• You can prove it. Article 41(9) requires documentary proof, normally an invoice (fatura) issued to your tax number (NIF).

Two exclusions are written into the law. First, financing costs, depreciation, and furniture, appliances and items of comfort or decoration. Second, AIMI (adicional ao IMI, the extra property tax on large portfolios).

What you can deduct

Some notes on these items:

• IMI. In ruling 1115/2017 the Autoridade Tributária (tax authority, AT) accepted the full year's IMI and condominium charges for a flat let from October. It did not cut them down to the months the flat was let. IMI paid in a year when the property produced no taxable rent cannot be deducted.
• Condominium charges. Where you own several flats in the same building, shared charges are split according to the permilagem (ownership share) in the condominium deed.
• Insurance. The building insurance that the law makes compulsory counts. For flats this is fire insurance. Rent-default insurance counts too. In ruling 1115/2017 the AT refused a voluntary multi-risk home policy, because it is optional. Expect a premium for that kind of cover to be challenged.
• Repairs and maintenance. The AT counts as conservation any work that keeps the building in its existing condition: restoration, repair and cleaning. Maintenance includes lifts, caretaker, cleaning, lighting and central heating in shared parts, and building insurance premiums. In ruling 4074/2017 the AT accepted replacing a toilet and a gas safety inspection of the hob and boiler. In ruling 1115/2017 it accepted repairing or replacing interior doors, windows, built-in cupboards and kitchen worktops.

What you cannot deduct

• Mortgage interest and bank charges. These are financing costs, excluded by name. This surprises many owners from countries where interest is the largest deduction.
• Furniture, appliances and decoration. These are excluded even if the home is let furnished. The AT has refused a new gas hob, a built-in oven, LED bulbs and the repair of an existing water heater, because a water heater counts as an appliance.
• Depreciation of the building or its contents.
• AIMI. It cannot be deducted from the rent. You can, however, set it against the tax itself (see below).
• Improvements. Work that adds value or upgrades the property is not a repair. In ruling 23775 (December 2023), the AT treated solar panels as an improvement, not maintenance. Such costs may instead reduce capital gains tax when you sell, if they were made in the 12 years before the sale (CIRS art. 51).
• Connecting utilities before the tenant moves in. The AT refused these costs in ruling 4074/2017.
• Expenses on sublet property. A sublandlord cannot deduct anything (art. 41(6)).

Some costs have no clear AT position that we could find. These include water, electricity or internet you pay under the contract, accountancy fees, the fees of a tax representative, and legal costs to recover rent. Some advisers accept utilities when the contract puts them on the landlord and the recharge is declared as rent. Keep the invoice and confirm with your accountant before you claim them.

Timing: before the first rent and after the lease ends

• The 24-month rule. You can also deduct repair and maintenance works paid in the 24 months before a lease starts, as long as the property was not used for anything other than letting in between (art. 41(7)). This rule covers only conservation and maintenance works. It does not cover pre-letting IMI or condominium charges. You claim these costs in the year the lease starts, in separate columns of Anexo F that ask for the start month and the month of the first payment. Only costs paid after 1 January 2015 qualify.
• While the property is let. The Anexo F instructions limit deductions to costs paid "for the period in which the property was let".
• Between tenants and after the lease ends. No separate rule covers works done after a tenant leaves. If you re-let, works in the gap fall within the 24 months before the new lease. If you stop letting for good, to sell or to move in, later costs are no longer Category F expenses.
• Living elsewhere. Since September 2024 (Decree-Law 57/2024) you can, in some cases, deduct the rent you pay for your own home. This applies when the property you now let was your permanent home for at least 12 months, you moved more than 100 km away, and both leases are registered with the AT (art. 41(8)).

Invoices with your NIF and e-Fatura

Every expense needs a valid invoice or receipt. Ask suppliers to put your Portuguese NIF on every invoice. Ask them also to name the property's address, or the property itself. In ruling 1115/2017 the AT refused a painting invoice because it showed only the owner's home address and did not identify the flat that was painted. For property held by an undivided estate (herança indivisa), invoices should be issued to the estate at the property's address, and the cost is then split between the heirs (ruling 661/2018).

Invoices issued to your NIF appear in the e-Fatura area of the Portal das Finanças. Use it to check that each invoice is there and correct. Anexo F does not fill these costs in for you, so you add up and enter the totals yourself. Keep the documents for as long as the AT can review the return, and for longer while you are carrying a loss forward.

Entering expenses in Anexo F

You declare rent and expenses each year in the Modelo 3 IRS return, Anexo F, between 1 April and 30 June of the following year. Each property and lease has its own line. In the form in use since January 2025, the expense columns are:

1. Conservation and maintenance (conservação e manutenção)
2. Condominium (condomínio)
3. IMI, as paid in the year
4. Stamp duty (imposto do selo)
5. Municipal charges (taxas autárquicas)
6. Other (outros), for other expenses allowed by art. 41, such as rent insurance, agency fees and the energy certificate
7. Pre-letting works, under the 24-month rule: the lease start month, the month of the first payment, and the total

If you paid AIMI on let properties, enter it separately in Quadro 9. The AT will credit it against your tax (CIMI art. 135-I), up to the part of the tax that relates to your rental income. This applies whether you are taxed at a flat rate or opt for englobamento (taxation at progressive rates).

The 2026 return (filed in 2027) will be the first to include the new 10% rate. The form may change, so check the instructions when they are published.

Flat rates, englobamento and non-residents

The 10% rate under article 45-C of the Estatuto dos Benefícios Fiscais (Tax Benefits Statute) applies from 2026 to 2029. It changes only the rate. It does not change how the taxable amount is worked out. The same is true of the 25% rate, the lower rates for long leases, and englobamento. In every case the rate is applied to rent minus art. 41 expenses. At 10%, each €100 of deductible cost saves you €10 of tax; at 25% it saves €25.

Non-residents can deduct exactly the same expenses. Article 41 makes no distinction by residence, and non-residents file the same Anexo F. Claims that non-residents get "no deductions" mix up two things. Personal tax credits (for health, education and similar costs) are generally for residents. The property expenses in this guide are not personal tax credits.

Losses and carrying them forward

If your expenses are higher than your rent in a year, for example because of large repairs or a year spent between tenants, Category F shows a negative result. Under CIRS art. 55 you can carry that loss forward for the next six years. It can be set only against future Category F income, and you do not need to opt for englobamento to do this. You lose the right if the properties concerned do not produce rental income for at least 36 months, consecutive or not, in the five years after the year of the expense.

A worked example

You live abroad and let a flat in Porto for €1,200 a month on a housing-only lease. That is €14,400 for 2026, taxed at 10%.

Net taxable rent is €14,400 − €3,467 = €10,933. Tax at 10% is €1,093, against €1,440 if you claimed nothing. If the rent were taxed at 25%, the same expenses would cut the tax from €3,600 to €2,733.

Checklist

• Ask every supplier for an invoice with your NIF and the property's address.
• Keep invoices for each property and each year. Check them in e-Fatura.
• Keep repairs separate from improvements and appliances.
• Note the date of any work done before a lease starts, for the 24-month rule.
• Keep your IMI, stamp duty and AIMI payment proofs.
• File Modelo 3 with Anexo F between 1 April and 30 June. Carry any loss forward and track the six-year limit.