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bigduckontax
bigduckontax, Accountant
Category: Tax
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Property Rental Income Taxation Question.Property is owned

Customer Question

Property Rental Income Taxation Question.

Property is owned by a UK non profit company based in the UK limited by guarantee. Property is in Portugal.

There are membership rights of the company granted, that enables members to certain periods of occupancy.

If a member rents to a third party, via an Internet holiday letting company, where is the transaction taking place? I get paid in GBP and the advertised currency is GBP

If the member lives in UK - or EIRE - and accounts for the income tax on the rentals on their respective tax returns, should any withholding tax be retained in Portugal?

Regards,
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Payments between resident companies are generally subject to withholding tax. The rate is between 16.5% and 35%, but if there are Double Taxation Treaties in force these with holding tax rates are substantially reduced.

The income for letting in Portugal is subject to Portuguese taxation and your agent appears perfectly correct in his retaining with holding tax. You should ensure that this is indeed paid to the Portuguese authorities. However, if you are letting within the parameters of an UK based contract there would be no with holding tax although the profits woud be subject to Portuguese taxation.

As there is a comprehensive Double Taxation Treaty between the UK, and Ireland also, and Portugal then any tax deducted by Portugal would be allowed as a tax credit against home taxation and vice versa. I would suggest that the contracts you make are made in the UK and would advise that your correspondence with customers makes that clear. Disputes would then be settled in UK courts, much more convenient.

I do hope I have thrown some light on the situation.
Customer: replied 3 years ago.
That's great! Thank you.

Can I just clarify that the holding company is non trading. The company does not take part in the rental.

The rental is between the member and customer, and accounted for in members personal tax returns.

Thanks again.
Expert:  bigduckontax replied 3 years ago.
Right, in that case with holding tax does not apply as there is no trading involved.

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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.