In the vast majority of tenancy agreements signed in Portugal, whether short, medium or long term, the infamous rental deposit appears. Since it is an amount received by the landlord, must it be declared for personal income tax (IRS) purposes? That is the question we answer here.
A rental deposit is an additional sum of money, borne by the tenant(s), intended to secure the landlord against non performance of the contract, or of another contractual or legal obligation (for example, keeping the property in a good state of repair).
As a rule, no. The deposit is a guarantee and is usually returned to the party who paid it, so it does not constitute genuine taxable income. The Personal Income Tax Code applies the tax only to income falling within the categories set out in law, defining property income as the rents of rural, urban and mixed properties paid or made available to their holders (Article 8(2)). Although the landlord must issue a receipt of discharge for the deposit (Article 115, as amended by Law No. 82-E/2014, of 31 December), the deposit, as a guarantee, is returned to whoever paid it and is not income.
This was already the view of the Order of Certified Accountants (Technical Opinion PT27650, July 2023) and of the CAAD, reinforced by the recent decision of 9 April 2026 (Case No. 868/2025-T), contradicting the position taken so far by the Tax Authority, which held that the deposit was an increase in the assets of whoever receives it (Circular Letter No. 20256, of 7 June 2023).
Although this arbitration ruling brings greater certainty, care must be taken and proper clarification sought, to ensure the deposit is genuinely a guarantee, intended to be returned to the tenant where the contract is performed, and not an arrangement that could raise concerns of abusive tax planning, tax evasion or simulation. The VPA Team is available to help you plan and carry out your tenancy agreement, answer your questions and advise on favourable frameworks for your tax burden. Get in touch.
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