Having a property that is used both as local accommodation and as own residence in Portugal has several tax implications. Here are the main aspects to consider:
Tax Implications
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IRS (Personal Income Tax):
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Local Accommodation Income (Category B):
Income is mandatorily taxed in Category B. Under the simplified regime, the taxation coefficient (the portion of income that is taxed) is 35%, with the remaining 65% considered costs. It is essential that the taxpayer proves expenses of at least 15% of total gross income (in addition to the 35% presumed) to maintain the benefit of the 65% presumed costs rate (Art. 31, no. 13, of CIRS).
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Impact on Capital Gains Exemption (Reinvestment):
The More Housing Law changed the reinvestment exemption rules. If part of the property is used as Local Accommodation, the capital gain corresponding to that fraction cannot be reinvested to obtain IRS exemption if the operation exceeds 240 days per year (Art. 10, no. 5, a, of CIRS). The capital gains exemption is thus partially lost.
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Extraordinary Contribution on Local Accommodation (CEAL):
CEAL is a tax applied to properties registered as local accommodation. However, this contribution does not apply to properties that are also permanent own residence if the local accommodation operation does not exceed 120 days per year. Although CEAL was revoked in 2024 (by the More Housing Law), previously, it was applied to properties registered as local accommodation, especially in areas of high tourist density.
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IMI (Municipal Property Tax) and Aggravation:
IMI is paid on the VPT. However, in Urban Pressure Zones, the portion of the property used as Local Accommodation may be subject to IMI aggravation (Surtax), and the rate may be increased by up to 100% of the normal municipal rate value (Art. 112, no. 18, of CIMI), even in the case of mixed use.
Additional Considerations
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Tax Planning:
It is important to do proper tax planning to optimize taxation and ensure compliance with tax obligations. Consulting an accountant or tax specialist can be beneficial to understand all implications and available options.
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Local Regulation:
In addition to tax implications, it is important to check local regulations, as some areas may have restrictions on the use of properties as local accommodation.
In summary, mixed use of a property requires rigorous accounting and tax planning, especially due to the new rules of the More Housing Law. The central implications are the partial loss of capital gains exemption on reinvestment (if the operation exceeds 240 days) and the potential aggravation of IMI in urban pressure zones.