Portugal Rental Yield

What a rental property in Portugal actually returns: gross yield, net yield after costs, and net yield after IRS. Then add expected capital growth to compare the total return against the stock market. 2026 Category F rates, resident or non-resident.

How this works

Rental yield turns a property price and a monthly rent into an annual return in percent. Gross yield ignores everything but the rent; net yield subtracts the running costs; after-tax yield also subtracts the IRS due on the rental income. The calculator on the right shows all three, then adds expected capital growth so you can hold the total return up against a stock index.

1. Gross, net, and the costs in between

Gross yield is annual rent ÷ price × 100. It's the headline number, and it always flatters the property because it ignores the cost of owning it. Net yield subtracts the yearly running costs - IMI, condominium, insurance, management, maintenance, and an allowance for empty months. On a typical flat the gap between gross and net is one to two percentage points.

2. IRS on rental income (Category F)

Rental income is taxed under Categoria F. Residential leases carry a 25% autonomous rate, reduced with the length of the contract: 15% for 5-10 years, 10% for 10-20 years, 5% for 20+ years. Non-residential and rural leases are taxed at 28%. A non-resident landlord pays a flat 28% on Portugal-source rent. The tax is charged on the net income, so the same deductible costs you entered above shrink the tax base - except mortgage interest, which is not deductible under Category F.

The 2026 State Budget proposes a further reduced 10% rate for residential leases with moderate rents (up to €2,300/month). It is a pending proposal, not confirmed law, and its interaction with the duration reductions is unclear, so the calculator does not apply it automatically - it only flags when your rent would qualify. There is also an englobamento option to be taxed at the regular progressive IRS rates instead of the autonomous rate; it only helps if your overall marginal rate is below 25%, which is why it stays off here.

3. Total return vs the stock market

Yield is only half the return. Add your expected annual capital growth - how much the property's value rises each year - to the after-tax net yield, and you get the total return. That's the number to compare against a stock index: global equities have averaged roughly 7% a year over the long run, so a property at 3% after-tax net yield needs about 4% appreciation just to keep pace. It's an approximation - it ignores leverage, transaction costs, and the capital-gains tax you'll pay on the growth when you sell - but it's the right first comparison.

4. What happens when you sell

Capital growth is only taxed when you sell it, so this tool leaves it pre-tax and taxes the rental income only. For the record: on a sale, residents add 50% of the gain to their income and pay progressive rates, with an inflation coefficient applied once the property has been held over 24 months, and acquisition costs, transaction costs, and documented improvements deducted. Non-residents pay 28% on the full gain, or may elect the 50% aggregation. A reinvested primary home can be exempt.

What this calculator skips

• Englobamento math. The regular-IRS option needs your other income to compute; the tool uses the autonomous Category F rate, which is the right choice for most investors.
• Capital-gains tax on sale. Capital growth is shown pre-tax. Mais-valias is a separate calculation done at the moment of sale.
• Leverage and financing. Yield is on the full price. A mortgage changes your cash-on-cash return, a different figure, and its interest is not deductible under Category F anyway.

Sources

Common questions