Legal and tax analysis for Portuguese market

• Legal obligations
• Landlord's Obligations
• Lease of urban buildings
• Tax obligations

Legal obligations

Landlord's Obligations

First of all, it is important to mention that the legal system considers, in chapter IV of the Civil Code, that the contract under which one of the parties is obliged to provide the other with the temporary enjoyment of property, by means of retribution, is called lease (article 1022.º and 1023º CC).

The general rules of the landlord's obligations are provided in chapter IV of the Civil Code, of which the most relevant are the following ones:

• Handover the property to the tenant;
• Ensure that the tenant enjoys the leased property for the intended purposes;
• Bear the charges for the leased property, unless otherwise stipulated by the parties or foreseen in the law;
• It is essential, at the time of delivery of the leased property, that it does not present any defects that prevent its use, under penalty of entering into non-compliance with the contract;
• In the case of a lease with a term of less than one year, the contract must state that it is a contract for non-permanent housing or for special transitional purposes, namely for professional, education and training or tourist reasons;
• Carry out the necessary repairs on the leased property;
• Do not perform acts that prevent or diminish the enjoyment of the leased property.

Lease of urban buildings

In addition to the general lease rules referred to in the previous point, the Civil Code also kept a specific section for urban leases, foreseen in its Section VII.

Here, despite the obligations provided for in the previous point, it is also mandatory for the Landlord to comply with the obligations contained in this section, namely:

• Do not discriminate tenants on grounds related to sex, ancestry or ethnic origin, language, territory of origin, nationality, religion, belief, political or ideological beliefs, gender, sexual orientation, age or disability;
• Please note that the advertisement for the offer of the lease and other forms of advertising linked to the availability of the lease cannot contain any restriction, specification or preference based on the discriminatory categories referred to in the previous point;
• Perform all conservation works, ordinary or extraordinary, required by current laws or by the end of the contract;
• Inform, in writing and at least 30 days in advance, the update of the monthly rent amount, whenever this occurs;
• In the case of an apartment lease, unless otherwise stipulated in writing, bear the charges and expenses relating to the administration, conservation and enjoyment of common parts of the building, as well as the payment for services of common interest;
• Proceed to the tenant's indemnities, upon the end of the lease and the vacancy of the property, for the improvements made by him;
• When the landlord intends to sell a property that has been leased for at least three years, he must give preference to the tenant;
• In case of opposition to the automatic renewal of the lease, inform the tenant with the following minimum notice:
  • 240 days, if the initial term of the contract or its renewal is six years or more;
  • 120 days if the initial term of the contract or its renewal is equal to or higher than one year and less than six years;
  • 60 days, if the initial term of the contract or its renewal is six months or more and less than one year;
  • One third of the initial term of the contract or its renewal, in the case of less than six months.
  • Contrary to what happens in the “Alojamento Local” regime, properties will not have to be registered with the competent authorities. However, this registration cannot be confused with the communications referred to in the section “Tax Obligations”.
• Analyzing the “Alojamento Local” regime, we highlight the main burdens and responsibilities to the landlord that, on the other hand, do not apply to normal rentals such as the ones provided in Flatio:
  1. The registration of “Alojamento Local” establishments is mandatorily carried out by means of a prior communication addressed to the Mayor of the Territorially Competent Municipality, and the following information must be included:
     1. The authorization for use or valid use of the property;
     2. The identification of the owner of the establishment's operation, with mention of the name or business name and the tax identification number;
     3. The address of the establishment's manager;
     4. Name adopted by the establishment and its address;
     5. Number (rooms, beds and users) of the establishment
     6. The intended date of opening to the public;
     7. Name, address and telephone number of person to contact in case of emergency.
  2. To carry out the prior communication, the following documents must be used:
     1. Simple copy of the identification document of the establishment's owner of the establishment, in case it is a natural person, or indication of the access code to the permanent certificate of the commercial register, in case it is a legal person;
     2. Term of responsibility, signed by the owner of the establishment's operation, ensuring the suitability of the building or its autonomous fraction for the provision of accommodation services;
     3. A simple copy of the urban land registry for the property
     4. Simple copy of the lease agreement;
     5. Simple copy of the declaration of commencement or change of activity of the holder of the establishment for the provision of accommodation services;
  3. If there is any change in the information referred to in points a) and b) it will have to be changed within 10 days;
  4. After prior notification, the properties are subject to an inspection within 30 days;
  5. “Alojamento Local” accommodation must comply with fire safety rules;
  6. “Alojamento Local” accommodation must have a complaints book;
  7. Compliance with all the points mentioned above is monitored by ASAE;
• Failure to comply with the rules provided for in the “Alojamento Local” regime may lead to fines of up to € 35,000.00.

Tax obligations

In addition to the legal obligations, the landlord may find in the Portuguese legal system some obligations from a tax perspective, namely:

• Submit to the Tax and Customs Authority (AT), every new lease agreement through “Model 2”. Through it, the landlord will be communicating to the AT the signature of the aforementioned lease or sublease contract, as well as the information of the parties, the property and the rent amount, as it is the obligation of the landlord (in short, it will indicate the purpose of the contract, the respective duration, the identification of the property, the identification of the tenant). Communication to AT must be made until the end of the month following the start of the lease;
• If you want income to be considered business income, you must notify the AT;
• Communicate to AT the amendment and termination of a lease;
• According to article 9 nº 29 of the Value Added Tax Code (CIVA), the lease of real estate is exempt from VAT. However, the exemption does not cover:
  1. The provision of accommodation services, carried out within the scope of the hotel business or others with similar functions, including campsites;
  2. The lease of areas for the collection or collective parking of vehicles;
  3. The lease of machinery and other fixed installation equipment, as well as any other lease of immovable property resulting in the onerous transfer of the operation of a commercial or industrial establishment;
  4. Leasing of vaults;
  5. Lease of spaces for exhibitions or advertising.
• However, according to article 12 nº 4 CIVA Taxable persons who lease urban buildings or independent units of these to other taxable persons, who use them, wholly or predominantly, in activities that grant the right to deduct, may waive the exemption referred to in the previous point.
• Proceed to the settlement of Stamp Duty payable due to the signing of the lease. The Stamp Duty corresponds to 10% of the monthly rent, as shown by the amount 2 in the General Stamp Duty Table;
• Issuance of an electronic rent receipt showing the rent and all the amounts received from its tenants. However, landlords are exempted from issuing the electronic income receipt if, cumulatively:
  • They do not have, nor are obliged to have, an electronic mailbox; and
  • In the previous year, they have not received income in category F (Real Estate Earnings) higher than € 838.44 or not having received in that particular year any income in this category.
• In the cases referred to in the previous point, the landlords will have to deliver to AT the declaration “Modelo 44” referring to the annual communication of rents.