Portugal Property News

Rent cap at 2% in Portugal

Rent cap at 2% in Portugal

Rents in 2023 may be updated by landlords up to a maximum of 2 percent instead of 5.43 percent. This was announced as part of the plan to combat inflation and respond to price increases.

To compensate landlords for the cap in updating the rents of houses and shops for next year, the Council of Ministers decided to grant tax benefits, with reductions in income or corporate tax, which will be applied automatically.

"It was this balance that we sought, we set a growth that has a criteria, a long-term goal," said Pedro Nuno Santos in a press conference that took place on Tuesday, 6 September.

Without this intervention measure in the rental market by the Government, the application of the usual annual coefficient provided by the law would lead to an increase in rents of 5.43 percent for tenants from January, as a result of the average inflation recorded in August.

This decision by the Portuguese Government followed the examples of other countries such as Spain (2% cap) or France (3.5%) that decided to apply this cap on rents, which falls short of the amount demanded by tenants (1%), according to Idealista/News.

"The measure will be compensated with reductions in the IRS and IRC of landlords," revealed the Prime Minister. "What tenants will save is the difference, in which landlords will be compensated," António Costa explained.

Compensation to landlords for the cap on rents in 2023 will be made automatically, taking into account the annual tax return they submit, according to statements.

"When landlords submit the declaration they identify the rents, the system will automatically generate the appropriate taxation according to this rule," the minister, Fernando Medina, said during a press conference.

Landlords against Government's decision

The Government's decision does not please everyone, especially landlords, who consider this measure "populist" and say it "crushes small landlords".

For the National Association of Property Owners, chaired by António Frias Marques, the Government's measure "ignores the law that established the annual rent updating coefficient, applied for 40 years, sometimes with values much higher than the legal 5.43 percent in relation to inflation until 31 August this year".

Source: The Portugal News

Published: September 8, 2022