Allowable expenses against overseas rental income

Hi There

I recently bought an apartment in Portugal and I'm thinking of renting it out during high season in order to try and cover annual condominium fees, council taxes, property management fees, etc.

Does anyone know what's the tax position in relation to these expenses?

I guess I have two main questions:

1. What expenses are allowable? Apart from the charges mentioned above and utility bills, would redecoration costs, bank charges, fiscal representative fees, etc. be allowable?
2. Are the above expenses fully allowable or are they prorated to allow for personal use? If so, how is the proration calculated, e.g. if I use the place for 4 weeks and rent it for 8, can I claim 48/52 of the expenses, 8/52 or 8/12? Or is some other approach used?

I appreciate that the above questions are quite technical and that the Portuguese tax position may differ from the Irish tax position. If anyone can provide even a partial answer, I will be very grateful. If not, can anyone suggest how best to get this information? Should my Portuguese lawyer (who is acting as my fiscal representative) know, or will I need to employ a Portuguese accountant? If the latter, does anyone know someone they can recommend to me?

Thanks
Homer

As I become re-acquainted with AAM, I am coming to realise that long, complex questions are less likely to be answered than single issue posts.

Therefore, I would like to focus on what I see as the key issue from my earlier posting, namely the proportion of relevant expenses that can be offset against rental income.

I presume that if I have an overseas property that is available for rent throughout the year and that I never use personally, then all allowable expenses (whatever they might be) can be offset against rental income in determining my Irish taxable income. Can anyone confirm this?

I also presume that this applies even if the apartment is not fully rented throughout the year i.e. I am unable to find tenants for part of the year. Again, can anyone confirm or otherwise?

Thanks
Homer

For Irish property rental calculations, only certain expenses incurred during the rental are allowable against the rental income such as rates, rent, bank interest, repairs etc (and by concession accountants fees) which are not recovered from the tenant. If expenses are incurred outside of the rental, they CANNOT be offset. You may need to apportion bank interest, etc.

Items of a capital nature such as furniture - disallow and give capital allowances.

The same rules will apply to foreign property rental income in Ireland under Scedule D Case III or IV (depending on whether tax has already being paid in foreign country).

Regarding the calculation in Portugal, you will need an accountant probably to do this and ensure the correct returns are made.

Regards
Patrick

Paddy199 said:

If expenses are incurred outside of the rental, they CANNOT be offset.

Click to expand...

expenses between lettings can be offset, but if (as per the op) the landlord resides there then this is no longer the case.

in spain no allowances at all against rental income and tax calculated at 25% gross quarterly in arrears. Not sure on Portugal but ideally you should research this prior to purchase. Went to blevinsfranks for advise on this. have a good website and their books are cheap but informative. Agree with getting an accountant locally to property to do returns for you.

Revenue have issued a document on this. The link is: [broken link removed]. I think everyone that is investing in foreign property should read it before doing so.

Hopefully you find it useful.

Paddy 199, very helpful, may thanks !

Excellent document that answers alot of questions which accountants only seen to give vague answers to. Well done Paddy