Buying Property in Portugal: Personally or Through a Company?
When considering the acquisition of a property in Portugal, one of the first questions that may arise is whether the property should be acquired personally or through a company. The question may appear simple. In reality, however, it normally raises several others.
Before deciding how the property should be acquired, it is necessary to understand what the purchaser intends to do with it.
For example:
Will the property be used as the purchaser’s own and permanent residence in Portugal?
Is the acquisition mainly a long-term investment, with the expectation that the property may appreciate and eventually be sold, while being used occasionally as a secondary residence?
Will rental income be used personally or reinvested in improvements or additional properties?
Will the property be rented under a stable long-term residential lease, or is the intention to develop a more active short-term rental or local accommodation business (AL)?
These questions, together with the purchaser’s tax residence, family situation and wider investment objectives, may influence whether acquiring the property personally or through a company is the more appropriate structure.
When can personal ownership make sense?
If the objective is simply to acquire one property, rent it under a stable residential lease and receive monthly income, keeping the structure simple may make sense.
Personal ownership may be more appropriate where the property is a home or a single long-term rental generating income for personal use.
This has become particularly relevant following the new Portuguese housing measures applicable from 2026 until 31 December 2029. For qualifying residential leases with monthly rent within the applicable limits - €2,300 in 2026 - rental income obtained by individuals may be subject to a 10% autonomous IRS rate, unless a more favourable rate applies. Certain expenses incurred in obtaining the rental income may also be deductible under the Category F rules.
Therefore, where the investor intends to own one property, receive the income personally and does not have a broader reinvestment strategy, introducing a company does not automatically create a better tax result.
When can a company become more relevant?
The analysis can be different where the purchaser intends to build a property investment activityrather than simply receive rental income personally.
If the rental income is not needed for personal expenditure and the intention is to retain and reinvest those funds in improvements, new properties or the expansion of a portfolio, it may make sense to analyse a corporate structure.
Corporate ownership may be relevant where rental profits are retained and reinvested rather than distributed for the shareholder’s personal use.
The 2026 housing measures are also relevant here. Until 31 December 2029, qualifying residential rental income obtained by corporate taxpayers is considered only in 50% for IRC purposes. For tax periods beginning in 2026, the general IRC rate is 19%, while qualifying SMEs and Small Mid Caps may benefit from a 15% rate on the first €50,000 of taxable income.
However, these rates should not be analysed in isolation. If profits are later distributed to the shareholder, a second layer of taxation may arise. The question is therefore not simply whether the IRC rate is lower than the IRS rate, but what happens to the income after it is generated.
Portuguese-source capital income paid to individuals is generally subject to a 28% withholding rate, subject to the applicable rules and specific exceptions.
What happens when the property is sold personally?
The exit should be considered from the beginning.
Where an individual sells Portuguese real estate, as a general rule only 50% of the the resulting net capital gain is taken into account for IRS purposes and is aggregated with the taxpayer’s other income, being subject to the applicable progressive IRS rates.
There are, however, important reinvestment mechanisms. The sale of a principal residence may benefit from an exclusion where the relevant proceeds are reinvested in another primary residence, subject to the statutory requirements and time limits.
In addition, since 2026, the law allows an exclusion where gains from the sale of residential property are reinvested in another property in Portugal intended for residential rental within the applicable rent limits. The reinvestment must generally occur between the 24 months before and 36 months after the sale, and the new property must comply with the statutory rental conditions.
These mechanisms can materially affect the comparison between personal ownership and a corporate structure.
What happens when the property is held by a company?
Where the property is held through a company, other factors come into the analysis.
Depending on the accounting classification and applicable tax rules, the depreciable component of the building may generate annual depreciation deductions.
This may reduce taxable profits during the holding period. However, depreciation accepted for tax purposes also reduces the tax basis used to calculate the gain when the property is eventually sold. The annual deduction therefore cannot be analysed without considering its effect on the future exit.
The gain realised by the company will generally form part of its taxable result and be subject to the applicable IRC rate. If the sale proceeds remain inside the company and are reinvested, this can be different from a situation in which the shareholder intends to extract the funds personally.
Liquidating the company or transferring the property to the shareholders instead of selling it may not be a tax-free shortcut either. It can trigger taxation at more than one level. IMT (Property Transfer Tax) may be due when the property passes to the shareholder. The company may also be taxed by reference to the property’s market value, even though no cash has changed hands. The shareholder may, in turn, also face taxation depending on the circumstances of the transaction.
Conclusion
There is no general rule under which acquiring Portuguese property personally is always preferable, nor one under which using a company is automatically more tax efficient.
The exit strategy can materially change the final tax result and should therefore be considered before the ownership structure is implemented.
The correct structure depends on the purpose of the property, how the rental income will be used, whether additional investments are planned, the purchaser’s tax residence and how the investor expects to exit the investment.
A person acquiring a home for personal use or one property for stable rental income is in a different position from an investor intending to retain profits, reinvest them and build a wider property portfolio.
For this reason, the tax analysis should ideally be carried out before the property is acquired and before the ownership structure is implemented.
Infinite Solutions’s legal team assists international clients with tax analysis tailored to their circumstances. Reach out to us with your contact details, and we will be happy to connect you with them to discuss your specific case.
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