Do I have to declare rental deposit in IRS?
Court rules against Tax Authority and explains why. Find out more.
Need to balance your budget, and have credits and/or insurance? Contact the credit intermediaries and insurance mediators from Poupança no Minuto and find solutions to lower your installments! But read, first, the question at hand.
Rent deposit: Do I need to declare it in IRS?
The Tax Authority (AT) fined a taxpayer for not declaring the rental deposit in IRS, but the arbitration court overturned the decision.
The Administrative Arbitration Center (CAAD) ruled in favor of the taxpayer stating that the security deposit for rents should not be declared in IRS, contrary to what the Tax Authority has been advocating.
"The security deposit is not truly an income, neither from a civil law perspective nor from an economic perspective, as it does not truly integrate into the assets of its beneficiary," is the justification shared by the entity, according to Notícias ao Minuto.
The taxpayer in question did not declare the IRS for a deposit, as it would be returned to the owner in case of no default by the tenant.
In this sense, the Tax Authority demanded that the taxpayer pay 160 thousand euros in fines, plus 21 thousand euros in interest. Through the court decision in favor of the taxpayer, the amount of 180 thousand euros ended up being returned to the tenant.
As a result, legally, you are exempt from declaring any rent deposit in IRS, and cannot be fined by the Tax Administration. This is one less expense subject to tax.
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