New Local Lodging Regulations

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Local Lodging and another clampdown on illegal rentals

Local Lodging has finally come into its own. Known internationally as “self-catering accommodations”, new statutes regulating this business are solely dedicated to the activity in its own right, rather than being seen as an afterthought to general tourism as in the past. Simplification The initial legislative goal was to simplify, an end admirably achieved. In the past, a “licence” was required, issued by the local municipality. Although neither difficult nor demanding, there was still a substantial amount of paperwork to collect and submit. No more. Rather than presenting a raft of documents, the owner (or designated operator) presents a declaration (Terms of Responsibility), stating that all standards have been met and accepting full responsibility. In other words, if there is an electrical problem, it’s the fault of the owner, not the electrician. Registration Registration is no longer a licence but rather a simple notification (“mera comunicação prévia”) from the owner (or operator) addressed to the mayor of the local municipality, providing basic information, proof of business registration with the tax authorities (AT) and terms of responsibility. In turn, the local council communicates with the “one-stop internet clearinghouse” (Balcão Único Electrónico) that acts as the go-between, linking respective government entities such as the national tourism board, tax authorities (Finanças), etc. The internet clearinghouse is responsible for issuing the Local Lodging establishment’s identification number. With this ID number (within 30 days), the process is complete and the Local Lodging establishment can be opened for business. Keep in mind that, in the interim, the local council may inspect your property to verify the points presented in your notification. Enforcement Together with the ‘AL’ symbol, this identification number must be displayed in advertising to show that the offering is fully compliant. Failure to use the number and symbol can lead to a fine as high as €35,000. Accumulated with other offences, penalties can surpass €270,000. ASAE (authority for food and economic security) is the official body responsible for oversight and enforcement. Needless to say, an inquisitive inspector can spot a missing ‘AL + number’ on a web listing just as easily as perspective holidaymakers looking to reserve a leisure apartment or villa. Even the holiday websites could potentially face fines and legal action. Tax compliance In the past, many owners letting to holidaymakers failed to declare their income. With business registration to Finanças now compulsory from the start, tax fraud should be curbed. In addition, with favourable assessment for this tourist activity under the Simplified Regime, most owners will find themselves taxed at less than 4%. With tax rates so reasonable, it no longer pays to cheat. In addition, there are no charges for the entire registration process. Other requirements Nevertheless, some bad habits die hard. All bureaucracy has not disappeared. There are still some auxiliary requirements. Invoices must be issued by owner/operators to holidaymakers that must obey Finanças’ guidelines. In addition, when guests are foreigners, arrivals and departures to and from the Local Lodging establishment must also be reported to SEF (Immigration and Borders Service). Like other associated areas, those who fail to comply face steep fines. The carrot and the stick The message is clear. On the one hand, owners/operators find greatly simplified registration procedures, little tax to pay and no user fees for the set-up process. Most importantly, the business opportunity could not be better. The holiday season is rapidly expanding from a few, short summer months to 52 weeks per year. On the other hand, enforcement has also become more effective than ever before. Fines are staggering and, once the new legislation has taken effect, few tourists or local lodging websites will accept non-compliant offerings. With the new legislation coming into full force in January 2015, the coming months will provide the last chance to sort out any necessary actions to take full advantage of the promising opportunities and avoid the pitfalls of non-compliance.

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The government’s council of ministers approved new regulations last week ostensibly designed to “simplify” the process of registering properties for ‘alojamento local’ (holiday tourism). Secretary of State for Tourism Adolfo Mesquita Nunes confirmed that the rules should come into effect this year, and he has stressed that the objective is not to outlaw holiday rentals but to ensure that they compete with other alternatives on the market. Talking to Público newspaper, the minister said: “What we intend to do is liberalise access to this market and make the registration process swifter. “The easier it is to register a property, the more property owners will join the legal market, leaving no excuse to continue working in the ‘parallel market’,” he added. The plan however involves “stricter inspections” and a ‘take-no-prisoners’ attack on online rental sites.

Jornal de Negócios reported last month that sites registered in Portugal faced fines for advertising non-registered properties as do ‘intermediaries’ (cleaners/maintenance crew, etc) involved in the rentals. As many sites are not subject to Portuguese law, they will effectively get away carrying unregistered (illegal) properties – but the owners of the properties themselves may not. According to Diário Económico, fiscal authorities are setting their sights on the Algarve and areas in and around Lisbon – two of the country’s most popular tourism destinations. Jornal de Negócios explains that Turismo de Portugal has only 5,835 ‘alojamento local’ businesses on its books, whereas government internet searches have thrown up thousands more.

The popular rental site HomeAway shows more than 14,500 ‘offers’ on the market, and that may just be the tip of the iceberg. Elsewhere there are other sites, also now being monitored by fiscal authorities. National media reports reveal that anyone caught renting a property without the appropriate papers risks fines of up to €35,000, as well as up to two years ‘suspension’ from activity. So what is changing in the law?

  • The new ‘regime’ sees three property classes: apartments, houses and guest establishments, which now also include ‘hostels’.
  • It restricts the number of properties people are allowed to rent out to nine. Any more and they would fall into the ‘tourist complex’ classification. (Properties registered in the name of spouses or children will not escape this clause, writes Económico)
  • One of the law’s ‘greatest objectives’, Económico continues, is to create a form of mega database obliging local authorities to share all the information they have with Turismo de Portugal, which will in turn keep the AT tax department up-to-date with regular bulletins.
  • There will be “stricter inspections covering cross-referencing of tax information and declared activity”. ▪ Property owners are required to “declare the beginning of activity at their local tax office” through the use of a specific “CAE” form (Portuguese classification for economic activities).
  • ASAE will take over the checking of the new law and the application of any fines or sanctions.
  • Condominiums cannot veto the rental of any on-site property, unless the rules of the condominiums specifically prohibit residents from renting out.

Former RTA boss supports new law In a recent opinion article carried in our sister publication Barlavento, former tourism boss António Pina stressed the positive impact these new regulations could generate for the national and regional economy. “If the number of beds in the ‘parallel market’ is 150,000 (some have hinted at 300,000) and if they are occupied only 30 days a year at a price of €30 per night, the VAT revenue alone would be around €8.5 million, and that’s before one considers the IRC (corporate tax),” he said.

Pina also stressed that if these properties are registered officially and if the law that decides how much money is attributed to each regional tourism board is altered to include these new properties, the Algarve could see its funding increase significantly. Return to the “Epoch of Terror” Owners || Despite Secretary of State Adolfo Mesquita Nunes’ affirmations that the new regulations are designed to simplify the process of “alojamento local”, property owners are reacting with their feet.

Many are considering giving up the tourism rental business altogether, while others are putting their rental properties up for sale and pulling all internet publicity. Denouncing the government’s tactics as a “return to the epoch of terror”, an email doing the rounds of renters in the Lisbon area declares: “One day, we’ll need licences to own a lighter!” The mail went out to undisclosed recipients last week, affirming: “Anyone who wants to register their property is letting themselves in for a complete nightmare, and will be persecuted by the vultures of the state, the town halls and the tax authorities forever!”

A few calls to owners in the Sintra hills confirmed that foreigners too are overwhelmed by the new regulations and the threat of fines that runs rampant through the small print. “I’ve had enough,” a British architect told us. “Years ago, we were ‘invited’ to a meeting, to discuss the fact that we were renting out properties. I was about the only one who bothered to take any notice of what was said. I went away and tried to ‘get legal’, and I tell you I am now seriously considering suing the local council for the way it is behaving. It is persecuting people for trying to open the doors to local tourism. “I want nothing more to do with it. I honestly just want to sell my rental property, sell my home and leave Portugal once and for all. “This is a beautiful country that is being ruined by the greed and corruption of extraordinarily stupid politicians”. Elsewhere Portuguese property owners are seething, particularly as they say the new regulations hark back to the era of the PIDE secret police, where people were afraid even to tell their neighbours what they were doing. “This attempt to bring this kind of holiday rentals into line will lead to disaster,” affirmed an elderly engineer who told us he fought 13 years for his country and is horrified by the “dictatorship that masquerades as democracy”. As reported in the Resident in May (‘Illegal renters fight back’), property owners who rent out rooms and cottages rely on small battalions of helpers: gardeners, handymen, cleaners, etc. “These will all be out of a job as a result of these new regulations,” claimed one. “People are giving up left, right and centre.” Indeed, there is even the threat of fines for maintenance crew. According to Jornal de Negócios (May 22), “another target of the new law is the small intermediaries who work in various houses, receiving tourists, handing them the keys and cleaning up for a commission”. “The State is doing nothing to incentivise people to register their properties for ‘alojamento local’,” storms the email sent out last week. And one clause in the new regulations does, in effect, leave rental owners’ ‘agony’ up for ransom. It centres on the rule that, beyond the statutory requirements, “borough councils can demand installation and functioning requirements over and above those stipulated in the law”.

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