Algarve Property Management Services, Portugal
With such a large investment, one must be comfortable with leaving it for long periods of time in the hands of who effectively is a stranger! Sounds scary, but it really isn’t.
There have been people doing this for a long, long time, and again with so many other considerations whilst buying a property abroad, making sure you chose the right company is paramount. And it's for this exact reason that we decided to open a Property Management division to help our client's with the most important part of owning a property.
Thinking About Renting Your Property?
Since December of 2014 there have been some sweeping changes to the legislation and tax laws regarding rental properties and the income they generate. Although there has been some conflicting advise from the finance sector concerning how these changes are put into effect, generally speaking they are actually rather sensible and cost effective for most clients looking to make income from their property.
The major changes in the law requires that all properties that are being rented out on a nightly basis (i.e. rents of less than 30 days at a time) and advertised as such. Register the property as an Alojamento Local (local lodging). Comply with a number of simple health and safety regulations (which is included in our management pack) all of which are rather sensible. Installation of fire extinguishers, child's safety fence around swimming pools, first aid kit etc.
As well as obtaining this license, you are required to register with the financas (tax authority) via a Business Activity Registration, which your management company or fiscal representative can do with you, or on your behalf.
Rental Income for your Algarve Property
The most important part of many client's purchase, and something that is pivotal in making a property work for its owners. Many owner's are happy to rent out just during the peak summer months which is generally enough to cover the properties annual running costs, while leaving the other 10 months of the year free for owner's to enjoy at their convenience.
The rental season is the Algarve is concurrent with the large European school holidays, with July & August offering the peak rental incomes on a weekly basis. Easter, Half terms and Christmas (to a degree) also offer the chance for peak rental rates. All in all these periods can offer an owner up to 20 weeks rental potential. Of course the Algarve is popular for golf year round (except the summer) so there is potential to bolster these weeks with additional income at any time of the year.
Although it is unlikely you will rent the property out every week of the 20, a 10 - 15 week rental year would be common for most properties.
Tax on rental income
Under the newly reformed tax regime for income tax on rental properties the simplified tax payment (Category B) scheme is, for most owners, going to be the more beneficial.
Category B Tax (invoices issued by, or in the name of the owner(s))
• 85% of net income is automatically deducted as expenses whilst income tax is then paid on the remaining 15%only. This results in an approximate tax rate of 4% or below.
The alternative is Category F Tax (invoices issued by a management company or tour operator in their name) which is paid at a rate of 28%, which is the fixed % for rental income.
IVA / VAT is only applicable once rental income exceeds €10,000 at which point it is charged at 6% over the rental amount.
Social security / National Insurance: If you are already contributing in another country, or receiving benefits such as a pension, owners are eligible for a full exemption.
Otherwise the social security payments under Category B will be made after the threshold of €16,768.80 Gross income is exceeded. The rate is 29.6% for self employment income declared in the previous year.
IRG Property & Algarve Property Rentals
If you'd like more information about our property management division here in the Algarve please feel free to drop us a line with any questions you might have.
» Ask us about Property and Rental Management
Alternatively if you'd like to have a look through our brochure you can download it here