Taxation of local accommodation in Portugal can be done under IRS (Personal Income Tax) or IRC (Corporate Income Tax), depending on how the activity is structured. Here are the main differences between these two regimes:
IRS (Personal Income Tax)
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Category B (Mandatory Classification):
Local Accommodation (AL) is legally considered a service provision (temporary accommodation) and must be mandatorily classified in Category B.
- Simplified Regime (Coefficients): The taxation coefficient (the portion of income that is taxed) is, as a rule, 35%.
- Aggravation in Pressure Areas: For AL in areas of high urban pressure, the taxation coefficient (for new licenses or licenses active for more than 120 days) increased to 50% (Art. 31, no. 9, b, of CIRS).
- Surtax: The More Housing Law added a 15% surtax to the 35% rate in areas of high urban pressure (Art. 31, no. 10, CIRS).
- Organized Accounting: It is mandatory if annual income exceeds 200,000 euros, allowing deduction of all actual costs (net profit).
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Category F is Inapplicable:
Classification in Category F (Property Income) is not a legal option for Local Accommodation, since AL is classified as a service provision activity, with Category B being the only admissible one for individual activity.
IRC (Corporate Income Tax)
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Application:
IRC applies when the local accommodation activity is exercised by a company. In this case, income is taxed as corporate income.
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Rules and Costs:
Taxation under IRC involves more complex rules and may result in higher administrative costs, such as the need for organized accounting and hiring a certified accountant.
General Considerations
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Regime Choice:
The decision between IRS and IRC depends on the structure of the activity (individual or corporate) and the volume of income. Each regime has its advantages and disadvantages in terms of deductions and applicable rates.
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VAT:
AL is subject to VAT (reduced rate of 6% or 23% for additional services). Exemption applies only if the turnover is below the legal limit, which is currently 15,000 euros (Art. 53 of CIVA).
In summary, taxation of AL under IRS is mandatorily done in Category B, where the rules and taxation coefficients were significantly aggravated by the More Housing Law, especially in areas of high urban pressure. The decision between IRS (individual) and IRC (corporate) should be based on the volume of income and the structure of the activity, and it is essential to consult a certified accountant to analyze the most advantageous regime.