In 2023, landlords will be able to increase the rent of homes and shops above the maximum cap of 2%, which has been announced by the government to mitigate the effects of rising inflation. But the increase can be up to 2.43% at most, provided that the increase of 0.43% set for this year is not applied. The tax benefits are the same for those who adhere to the rent brake. But the contracts must in any case run from December 2021.
The president of the National Homeowners Association (ANP), António Frias Marques, revealed to DN/Dinheiro Vivo that “there has been a big movement to update rents by 2.43% as paragraph d) of article 1077 of the Civil Code permits the application, provided that the coefficients of the last three years have not been used”. For 2023, the maximum increase will be 2%, in 2022 it was 0.43% and in 2021, given the absence of inflation, the coefficient was negative, “so that it was not legally possible to make any kind of update of the value of income” , the same official explained.
In Portugal, there are 922,810 rental contracts, according to the 2021 census. If we exclude the 151,620 relating to old long-term rents dating from before 1990 and which are still frozen, this gives approximately 772 thousand contracts representing an increase of 2, 43%, higher than the 2%. However, it is not possible to determine how many will actually receive this update. According to Frias Marques, “it is likely that many landowners will use this mechanism” to limit the loss of income they will have in 2023.
The ceiling of 2% imposed by the government represents a reduction of 3.43 points compared to the expected update of 5.43%, a coefficient calculated on the basis of this year’s inflation, which should reach 8%. In addition, “the number of updated rents was remaining this year due to the low value of the coefficient of 0.43%,” indicates Frias Marques. That is, many owners may add the 2022 increase to next year’s update.
Contracts must be in effect from at least December 2021. IHRU and the tax authorities will monitor compliance with the law, the Ministry of Finance proposes.
Landlords on contracts since 2021 who have this margin can still benefit from a discount of up to 30% on IRS and 13% on IRC on property income earned in 2023. Deco Proteste’s lawyer, Sofia Lima, explained to DN/Dinheiro Vivo that “the additional 0.43% update relates to 2022 and not to 2023”, so “in principle the law is complied with and the landlords are entitled to tax benefits”. , he underlined. These owners, as far as we have verified, will effectively be entitled to the same IRS and IRC rebate, provided the contracts are closed by December 2021.
Except in these situations where it is possible to add this year’s 0.43% increase to the 2% for 2023, updates above that cap are prohibited. To Dinheiro Vivo, an official source of the Ministry of Infrastructure and Housing, he was compelling: “Any update above this value is not legal”. Therefore, “when tenants are faced with higher updates, they should immediately write a letter to the landlord disputing the amount,” Deco Proteste’s lawyer advised. The Treasury Department also clarified to the DV that “tenants who feel aggrieved in the right to see the evolution of their rent protected up to a limit of 2% can file a complaint or complaint with the Institute of Housing and Urban Rehabilitation ( IRHU)”.
As for the monitoring of compliance with the 2% ceiling, it will be carried out by “IRHU, namely through the Tenancy Inspection Bureau, which promotes inspection actions when it becomes aware of signs of irregular or illegal situations in the area of rental properties,” Fernando Medina’s office revealed. In addition, “the Tax and Customs Administration will, in a general sense and in particular in the field of tax audits of taxpayers, carry out the audit of the tax component,” according to the guardianship.
The brake imposed by the government has led to landlords canceling contracts. The leader of the ANP acknowledges that “there was legal opposition to its renewal at the end of the term of the contract”. But, he says, this does not prevent “the signing of a new contract with an income that is normally 10% higher than the previous value”. The president of the Lisbon Tenants’ Association, Romão Lavadinho, also notes “an increase in the number of cases where the owner wants to terminate the contract in order to apply rent increases of more than 2%”. To avoid these situations, parliament passed a PS proposal to amend the state budget for 2023, removing the tax bonus for landlords who break contracts.
Source: DN
