AFPOP is not an accounting firm and is not qualified to give tax advice, but we do advise our Members always to contact the appropriate advisors in Portugal for either financial or legal issues. Portugal has every right to collect taxes on income generated from renting out a piece of Portugal, which is exactly what your reader is doing, wherever that income is received and in whatever denomination it is paid. The UK has exactly the same rights for income created in the UK and there is a long standing tax treaty between the two countries. Portugal is allowed what it is due and the UK should not tax a Portuguese property owner for income arising in Portugal, providing that the tax that is due has been paid.
Finanças do look at water consumption and make an assessment based on their own rules about what the likely rental income would be and then issue a tax bill and also a fine if the bill is not settled. They do this mainly to stop people from not declaring their taxes and your reader is quite right to challenge it, by contacting Finanças and explaining their poor advice from the UK and asking for a reassessment of their tax liability. Sadly it seems that they have been poorly advised by someone who will not be liable for compensating them for their loss.
Your reader should also be aware that he has to appoint a Fiscal Representative in Portugal as the UK is no longer in the EU, but the deadline for appointing a Fiscal Representative has just been put back to June 2022 for people who are already registered at Finanças with a UK address.
It would be in your reader’s best interests to start this dialogue with the Finanças in Albufeira as soon as possible.
Michael R Reeve
Chief Executive Officer/afpop - Portugal’s largest Foreign Residents’ Association - ‘Making Life Better for our members for 30 years’