Apart from the increase in Tax on Local Lodging (from net 3,75% to net 8.75%) the State is planning indirect taxes and changes for 2017.
An added assessment, dubbed “Additional Municipal Property Tax (AIMI), will cover the entire ratable value (VPT) with an exemption on the first €600,000. For properties above this evaluation, the rate of 0.3% will apply. Property Owners with outstanding taxes will forfeit this exemption and will have to pay the new levy whatever the VPT.
On the other hand, owners of buildings with ratable values over one million euros should pay less overall tax in 2017 than last year, even with the proposed increase in Municipal Property Tax (IMI), due to the elimination of the 1% Stamp Duty on this type of luxury real estate.
In the 2017 Portuguese State Budget there will indeed be a change to the tax on Local Lodging. After heated discussions on Thursday evening, it seems that the Government is not going to increase the overall tax rate to 28%.
Instead, the taxable part of the income will increase from 15% to 35%. This means that the current tax rate of net 3.75% will go up to net 8,75% .
An example: A Local Lodging owner has an income of 100€.
Until 31.12.2016, a tax rate of 25% is applied to 15% of the 100€,
so 15€ are taxable. On this amount, the tax rate is 25%.
The result: of 100€ income: he pays 3.75€ to the state.
As of January 2017, a tax rate of 25% is applied to 35% of the 100€,
so 35€ are taxable. On this amount, the tax rate is 25%.
The result: of 100€ income: he pays 8.75€ to the state.
On the weekend, a notice appeared in the national media that the Government may plan to increase the taxation on the AL sector in the 2017 budget.
This information is probably a test balloon to gauge public opinion on this matter.
There has already been strong opposition by some industry members, and NALLE will be voicing its opposition any such move with the Authorities.
For the moment, any news in this regard should be taken with calm. Nothing is eaten as hot as it is cooked!
Property Owners as well as the Tax Office may request an additional “IMI” (Municipal Property Tax) evaluation if there is disagreement over the original set values. However, any such challenge does not suspend the payment of the first evaluation.
The Budget proposals for 2017 foresee that real estate owners with high-value properties (VPT of more than 500.000€) will face an additional tax next year. The new levy will be progressive, to be accumulated with the regular IMI. It is hoped that the tax will provide an additional €100-€200 million to the state coffers.
A year ago, the Funchal Investor Desk and the “City with Life” Programmes started in Funchal. So far, 236 requests have been registered regarding the rehabilitation of “Zona Velha” buildings to create Local Lodgings, with trade and services on the ground floor.
The Lagoa Town Hall has announced that property owners running Local Lodging establishments outside of their own fiscal address will have to pay commercial water rates. In order to avoid the non-domestic tariff, owners must present their Tax Number (NIF) with the address being the same as the AL License address within 15 days after receipt of the notification.
Algarve hotels have registered 7.4 million overnight stays in the first six months of the year, up 13.3% over the same period of 2015. Algarve Tourism stated that 2016 should be the best year ever. Through June, Faro airport recorded 3.1 million passengers, an increase of 18.6%
The City Halls may now request IMI re-evaluations for tax purposes. Until now, this procedure was only open to property owners. IMI is a municipal tax collected by the AT (Tax Authorities), based on 0.3% – .45% of the rateable value of real property.