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Mandatory Insurance for Local Lodging

Insurance providing civil liability coverage guaranteeing the property against damages caused by guests and third parties is required of all operators responsible for “AL” services. The minimum capital per claim is €75,000. Entities operating “AL” units that are part of a condominium must also have coverage guaranteeing property damage caused by fire in or from the “AL” unit. These insurances are mandatory for all Local Lodging establishments registered after 21 October 2018. Their absence is grounds for cancellation of “AL” registrations. Units registered before this date have up to two years to meet the requirements.

“AL” booking commissions may be tax deductible

If you are a  Local Lodging operator, you can deduct online platform commissions from your  “AL” income. Keep in mind that this deduction is only applicable if you opt for the taxation rules of Category F (rent), not under Category B (sole trader).

Theft increase in Lisbon “AL” Establishments

The distraction of holidaymakers and the lack of security at some “AL” flats have led to a rise in thefts at Local Lodging establishments, mainly those located in the  “Baixa” district of downtown  Lisbon. In response, law enforcement (“PSP”) has started a prevention program with the owners called “Blue Lock”.

“AL” pays commercial rates for water in several municipalities

The water regulator advocates that establishments used for local housing should pay for water as “non-household” users. The increase is already in place in several councils. However, there are other centres, such as Lisbon, where the municipality has reimbursed the extra charge.

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.

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.

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.

Algarve councils reject quotas

Local Lodging “has not been a problem for the Algarve. It’s being very positive for the economy and urban regeneration,” according to Faro mayor, Rogério Bacalhau. The Algarve’s municipalities have no plans to create quotas or “containment zones” for Local Lodging, a possibility opened by recent legislative reforms. The Algarve concentrates the majority of “AL” accommodations in Portugal, far outweighing Lisbon and Porto combined.

New “AL” registrations double in Lisbon

Since the approval of the legislation amending the rules for Local Lodging, 836 new units have been opened in Lisbon and 297 in Porto. President Marcelo Rebelo de Sousa has already signed the bill which should be published soon, coming into force 60 days after.

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