NALLE

Tourist Tax doubles in Lisbon

Staying in a hotel or local lodging accommodation in Lisbon became more expensive as of the first of the year due to the increase in the Municipal Tourist Tax from one to two Euros. The local municipality estimates additional revenues from the measure of ±_35 million in 2019.

Airbnb commissions tax deductible for Category F

Local Lodging operators who opt to be assessed under the tax rules of Category F (long-term rentals) may deduct commissions from this income paid to online reservation platforms. However, those carrying out their tourist business under Category B as Sole Traders do not deduct specific expenses but rather are automatically allotted 65% from their gross “AL” income to cover operating expenses.

Local Lodging increasingly under third-party management

An increasing number of accommodations under Local Lodging (“AL”) are in the hands of third-party administration. In Lisbon and Porto, only 4 out of every 10 units registered in this tourist activity are handled directly by the owner.

Tourists down, income up in Summer 2018

Portugal received 128,000 fewer foreign visitors this summer than in the same period last year, a drop largely due to fewer holidaymakers from the United Kingdom. Between June and September, 5.5 million travellers came to Portugal, down 2.2% when compared to the same period in 2017. However, revenues rose to 1.7 billion euros during the period, up 4.4%.

Proposed “AL” insurance in the 2019 Budget

The ink is barely dry on changes to the Local Lodging regime and the ruling Socialist Party is moving forward with proposed amendments in the next year’s State Budget. According to the contemplated update, Local Lodging units should have a minimum coverage of €75,000 a year per claim. The recently approved legislation is vague concerning the amount of liability insurance required.

Sole Traders to have new basis for Social Security contributions in 2019

The rules governing Social Security contributions for self-employed workers are changing in January. Graduated income tax brackets will no longer be the reference point. Payments will be based on 70% of declared earnings in the previous three months, rather than on the total of sole trader income from the previous year. The rate of contributions also drops from 29.6% to 21.4%. Freelancers will have to submit a quarterly statement to determine the relevant income, which will be the basis for Social Security assessment in the following trimester.

Earned income can be adjusted by up to 25% (up or down) so that workers can elect to pay a higher or lower amount that will eventually be reflected in benefits. The new rules also establish a minimum monthly Social Security payment of €20, including periods with no recorded income, as a way to ensure on-going social protection coverage, rather than the start-and-stop method that was used in the past.

Renting rooms may imply losing “IMT” discount

The Tax Authority can now claw back “IMT” tax breaks when owners engage in Local Lodging or letting rooms to students. If you bought your home as your “personal and principal residence”, you paid a lower property transfer tax (“IMT”) at the time of purchase. According to a recent “AT” ruling, if within the following 6 years you practice holiday or student letting, Finanças can rescind the tax break and retroactively reclaim any additional tax due.

Lisbon’s historic districts still have many degraded properties

Despite positive evolution in recent years, Lisbon still has many buildings that are either abandoned, poorly maintained or even in ruins. According to data from the Lisbon Chamber of Commerce in 2018, there are 2,626 buildings in the city declared totally or partially vacant and 7,230 in poor condition, concentrated in the city’s historic neighbourhoods. Experts speak of the need for €4 billion in urgent rehabilitation works in the capital and over €24 billion nationwide.

More than 80% of Local Lodging offerings are second homes

In Portugal, there are ±1.1 million second residences, according to National Statistics Institute data, comprising 80% of “AL” offerings. These dwellings have a low utilisation rate: less than 30 days a year. When engaged in Local Lodging, the average yield per owner is €11,000 euros. Lisbon and Porto tell a different story. In these two urban areas, “AL” is driven primarily by investment properties, not second residences, and foreign buyers.

New Local Lodging law requires insurance that “does not exist”

DECO warns that the new rules for Local Lodging require owners to have an insurance that is not currently available in Portugal. According to the Portuguese Consumer Protection Association, “there is no multi-risk liability insurance, which shows a serious ignorance on the part of lawmakers.” “In addition, the law is not clear about any damages to be covered.”

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