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The Government is studying a new requirement for Local Lodging that would mandate higher condominium levies for owners who engage in holiday lets. If adopted, it would collide with another bill where the condominiums would be given the power to authorise, on a case-by-case basis, the possibility of owners renting short-term to tourists. The latter proposal was made in absentia and without the governmental consent.
Local Lodging accounted for 480,161 overnight stays in Madeira in 2016. The Regional Statistics Bureau (DREM) study confirms a growth of 53.3% in this parameter as compared with 2015. 93,067 guests accounted for these visits with stays averaging over five nights. Germans m made up 24.7% of “AL” overnights and were the largest national group.
The aggregate tourism turnover rose 17% last year to 3,075 million euros. The number of holiday makers jumped to 19 million, an increase of 10%. By geographical distribution, the greatest concentration of tourist beds continues to be the Algarve, with one-third of the total. Lisbon accounted for almost 20%.
The average cost of Local Lodging increased 4.6% in the centre of Lisbon and 0.3% in the historical neighbourhoods of Oporto in the first half of 2017 as compared to the previous six months period according to a recent study.
Based on the number of overnight stays last year (6.8 million) to be charged at 2 euros per night per person, the total anticipated revenue for the municipality is expected to reach 13 million euros. The city is preparing the process of applying the new tourist tax and anticipates implementing the new levy in January next year.
Guests in tourist accommodations increased to the highest level in 10 years during the first quarter of 2017. Madeira’s hotels recorded the strongest occupancy rate (75%), followed by Lisbon (67%) and Porto (63%). Nationwide, foreign visitors are up 10% over a 12 month period. By nationality, the largest rise came from Brazilians (68%), Polish (40%) and Americans (34%). Urban tourism is one of the major trends in demand. The country’s security is perceived as one of the main criteria, followed by climate, culture and cuisine.
The Rates Supplement (AIMI) will be aggravated to 7.5% for properties registered in offshore companies. The measure is integrated with other changes to the State Budget for 2017. This alteration, together with other modifications to AIMI as well as lower than expected inflation, is intended to help pay for an extra €6 increase in basis pensions, as demanded by the coalition of left-wing parties.
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.
In the first 2 months of 2016, the number of visitors to Portugal increased by 11.4% when compared to the beginning of last year. Over the same period, income from tourism has also increased by over €1,175,000,000.