Rental Income – Receipt of overdue rent after termination of the lease agreement – Issuance of receipts (PIV_25730)
(Rendimentos prediais – Recebimento de rendas em atraso após cessação do contrato de arrendamento – Emissão de recibos_PIV25730)
What is Informação Vinculativa (Binding Information)?
Binding Information, refers to an official response issued by tax authorities in Portugal, addressing specific queries from taxpayers regarding the interpretation or application of tax laws in particular situations. These rulings hold legal authority and must be followed by both the taxpayer and the tax authority, provided that the circumstances remain unchanged.
Importance of Binding Information:
Formality: They provide an official and authoritative interpretation of tax legislation.
Obligation: Both the tax authority and the taxpayer must adhere to the ruling, provided the facts presented remain unchanged.
Legal Certainty: Binding rulings offer taxpayers clarity and legal certainty regarding their tax obligations. By outlining how tax laws apply to their specific circumstances, taxpayers can plan and conduct their financial activities with confidence.
Procedure: Taxpayers must formally request binding information by detailing their specific circumstances for accurate analysis.
Facilitating Planning: Provides confidence for taxpayers in planning their financial activities.
Avoiding Disputes: Ensures compliance with tax laws, thereby reducing potential disputes with tax authorities.
Ensuring Fairness: Promotes fairness in tax treatment by providing consistent interpretations of tax laws.
Example Scenario:
Article/Item: Article 115 – Issuance of receipts and invoices
Subject: Rental Income – Receipt of overdue rent after termination of the lease agreement – Issuance of receipts
Content:
The applicant requests Binding Information regarding the declarative procedures to be followed concerning the issuance of receipts for instalment amounts agreed upon in court relating to overdue rent.
Facts:
The applicant is the owner of the autonomous unit designated by the letter “X” of the urban property under horizontal ownership located in the parish of XXX, registered in the urban property matrix under article XXX. In 2020, she entered into a lease agreement for non-residential purposes with the company “XXX, Lda.”
However, the tenant only paid the rent due up until mid-2021, which led the applicant to file an eviction lawsuit on xx-03-2023. The parties reached a settlement, which was judicially ratified, whereby the tenant agreed to pay the outstanding rent in the amount of xx,000.00€, to be paid in instalments.
Since the lease agreement was terminated as of xx-03-2023, the applicant requests clarification on which document should be issued for each instalment received and how these amounts should be declared. She notes that xx monthly instalments of xxx.00€ each are still outstanding.
Information:
1. The matter concerns rental income – Category F, falling under paragraphs 1 and 2 – item a) of article 8 of the Personal Income Tax Code (Código do IRS).
2. According to paragraph 5 of article 115 of the Personal Income Tax Code, holders of Category F income are required to:
a) Issue a receipt of payment, in an official model, for all amounts received from their tenants for rent payments referred to in items a) to e) and h) of paragraph 2 of article 8, even if as a deposit, advance, or reimbursement of expenses; or
b) Submit to the Tax and Customs Authority an official model declaration detailing the income referred to in the previous item by the end of January each year, referring to the previous year.
3. When there is an obligation to issue a receipt, as per item a) of paragraph 5 of article 115 of the Personal Income Tax Code, i.e., when no exemption from this obligation applies, IRS taxpayers holding Category F income are required to issue electronic rent receipts for rents received or made available, as referred to in items a) to e) of paragraph 2 of article 8 of the Personal Income Tax Code, even if as a deposit or advance, unless they opt for taxation under Category B. The completion and issuance of the electronic rent receipt must be done mandatorily through the Tax Portal, at www.portaldasfinancas.gov.pt, in accordance with articles 5 and 6 of Ordinance no. 98-A/2015, of March.
4. Since the outstanding amount is being paid in equal and successive instalments of xxx,00 per month, the applicant must continue to issue electronic rent receipts.
5. The fact that the lease contract has been terminated since xx-03-2023 does not prevent the issuance of electronic receipts for the overdue rents, i.e., for the agreed and paid instalments corresponding to the arrears during the contract’s effective period.
For this, the period to which the rent (in this case, the instalment) relates and the date of receipt must be mentioned.
6. Regarding how to declare these amounts, this income must be reported in Annex F of the Model 3 tax return for the year in which they are paid or made available.
Conclusion:
The applicant, as a holder of rental income (Category F), is required to issue electronic rent receipts for each installment of overdue rent paid by the tenant, even though the lease agreement was terminated. These receipts must be issued via the Portuguese Tax Authority’s online portal and must specify the period the rent relates to and the date of receipt. The outstanding rent being paid in installments does not exempt the applicant from this obligation. For tax declaration purposes, the received amounts must be included in Annex F of the annual Model 3 personal income tax return for the year in which the payments are received or made available.
To read the original Binding Information in Portuguese, click here: Ficha Doutrinária
For further assistance and to ensure full compliance with tax laws, please contact AFM at info@afm.tax