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Question: I have a local lodging unit that I have only been able to let during the high season. Now I have a potential tenant who wishes to rent the apartment for this eight-month period, from October to May. Can I do this by concluding a contract for the period and then move forward with weekly and biweekly lets in the summer?
Yes, such a hybrid solution is possible. You will need to make a rental contract, defining the duration of the agreement as well as delimit other conditions. In essence, this arrangement is compatible with your proposed summer “AL” activity. However, you will not be able to deduct expenses as you would with a conventional long-term lease.
In the first six months of 2019, new lease agreements were 9.2% more expensive as compared to the same period last year. The price per square metre went from €4.80 to €5.00 in the first semester. At the same time, fewer families were able to find long-term rental accommodation. Data published by the National Institute of Statistics (INE) reveal that the number of new contracts fell by 10.5%.
Since the Local Lodging boom began in 2008, small property owners are returning in increasing numbers to traditional long-term rentals. Numerous factors are pushing this trend. “AL” offerings have reached glut conditions in some central urban areas. Excessive offerings and limited demand push down prices. Over the last ten years, Local Lodging enrolments in Lisbon have soared from less than 3,000 to almost 50,000. In addition, Local Lodging can prove to be demanding work. Outsourcing tasks such as cleaning, marketing and maintenance can eat into profits. In contrast, long-term rentals require only a minimum involvement on the part of landlords.
The withdrawal of a property from a Local Lodging tourist activity was already potentially subject to capital gains assessment under previous legislation. However, the way the law was drafted left room for doubt as to the exact point that the tax would be due. In the 2018 State Budget, this doubt was clarified, making it unambiguous that there is deferred payment of capital gains tax when the property is further assigned on an ongoing basis to income from category F (long-term rental). Without this abeyance, a Capital Gain may be attained in the year of cessation of the business assignment. Regardless, reporting is done in your annual “IRS” return.
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.
After the hubbub of the summer, many Local Lodging owners wish to book long-term rentals to assure low-season occupancy over the quieter winter months. As always, there are pros and cons, particularly when distinguishing between long and short term lets is not always easy. (more…)
Owners who remove their properties from Local Lodging and make them available for long-term letting can be spared mandatory CGT assessment. This push to long-term letting integrates the government’s package of proposals in the 2018 State Budget. Once confirmed, this measure will be the only Capital Gains Tax refuge once an owner stops an “AL” activity.
Prime Minister António Costa declared: “We do not have an excess of Local Lodging. We have a lack of affordable housing.” The Government presented its “New Generation of Housing Policies” (NGPH), which includes various measures to stimulate urban rental and rehabilitation. Beyond contributions from the state, the goal is to create incentives for private individuals to place their properties with an affordable lease.”
Vancouver, CA has passed new regulations banning homeowners from renting out certain kinds of property on short-term rental platforms like Airbnb as part of an attempt to cope with a shortage of long-term rentals. Owners may still rent out room individually or let their principle residence on a temporary basis when on holiday. The city will charge an annual licensing fee of C$49 (€32.80).
Living in Lisbon is increasingly expensive. The tourist boom in recent years has triggered rental price hikes in the country’s capital. The latest study reveals that apartment leases rose 23% in 2016, to an average of €830 per month. In the Chiado district, purchase costs average €6,700 per square metre.