Investment funds criticise rent freezes

 In Funds, News, Rental market

The Portuguese Association of Pension and Patrimony Investment Funds says it is against rent freezes in 2023.

To compensate the freeze, the Government says it will provide some tax benefits to property owners who rent out properties. However, investment funds which make their money by renting out apartments, will not be included in the tax rebates.
According to the association (APFIPP) the government’s policy will result in a “reduction on returns” for fund holders.
Next year rents can only go up by 2% and not 5.43% in accordance with the coefficient that determines their update.
To compensate landlords, the government will give tax benefits on property rental by reducing the amount of taxes which taxpaying landlords have to pay.
However, the APFIPP says this “ignores the reality of real estate investment entities like funds”
In a letter sent to the Commission of the Budget and Finance the association, which is headed by João Pratas, explains that investment funds “are subject to the same limitation in terms of the amount that rents can raised in 2023”, but will not be eligible for compensation for this loss of revenue since these revenues from buildings are not considered taxable profit”.
According to the government’s proposal, instead of changing the amount landlords have to pay in IRC and IRS, the government will alter the taxable percentage within the tax bracket: instead of 100%, only 91% of this building revenue will be taxable and will be liable to the application of a 28% tax rate.
According to the APFIPP “this apparent exemption is, in fact, nothing of the sort since these revenues will be taxed when made available, whether in the form of a distributed revenue, or a refund, or redeemed on shares in the future”.