Audit suggests tax evasion in rentals market still going strong
For all the efforts in recent years to clamp down on illegal renting (particularly in the holiday sector), a new audit has thrown up what tabloid Correio da Manhã describes as a “dark picture of tax evasion within the market”.
It is a picture that equally suggests tax inspectors are not ‘performing as they should’: this is a sector in which it technically should be impossible to rent (either as a tenant or landlord) without paying tax. Yet 60% of rents appear to be ‘undeclared’.
The audit, carried out last year by the IGF (general tax inspectorate) concluded that 60% of tenants do not have their rental agreements registered with the AT tax authority, while 25% of landlords, with contracts for various properties, do not have their activity for such declared.
The bottom line of the exercise is clear: “the AT does not have a comprehensive plan to control undeclared rentals”.
IGF came up with its findings on the basis of analysis of what is known as Modelo 2 do IMI (Imposto Municipal sobre Imóveis/ rates). This is a picture showing the supply of services, like water and electricity. Service companies are obliged by law to furnish this information, and by extrapolating it from other data, authorities can easily flag instances of tax evasion. Thus, in IGF’s opinion, “why aren’t AT tax inspectors doing this?”
ANP, the association of Portuguese landlords, is not convinced. In fact, it doesn’t even believe IGF’s figures: “No public organisation has the right to launch suspicion on a class that struggled and saved to have its assets”, the association’s president António Frias Marques has told CM.
For this reason, ANP is now ‘demanding’ that the ministry of finance fully explain IGF’s conclusions.
Frias Marques adds that the members of ANP are all “compliant” with rental laws. But he admits that what COULD be happening is that tenants sub-let on their own initiative (and pocket the cash). This reality, he told CM, “has a very large dimension”.
The only way of clamping down on the illegal sub-letting market is through the tenants themselves, who need to request a copy of the ‘caderneta’ of the property, to check whether the person they are renting from is the true owner.
According to Frias Marques, sub-letting is practised in various areas of Lisbon. He explained that the most common scenarios are protected tenants (people with low rentals, dating back to pre-1990). What tends to happen is that these people have a monthly rental of €100 or so, and sub-let the property to someone else for four times that value, opting to live elsewhere.
Student rentals (where landlords rent out a single room in a property) are also “areas where there is a great risk of tax evasion”, says CM. “As a rule, this kind of rental is not communicated to the tax authority”. ND
Source material: Correio da Manhã
