# Rentals



## paulie100 (Jul 27, 2015)

How is the rental market on the Algarve now, are there areas that are much better for rental returns than others? and do apartments tend to rent better than villas?


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## MrBife (Jul 26, 2009)

Rental Market is hard hit by the new AL Rental Licence obligations - many have refused to register the business activity and follow the new rulings and have taken their property off the rental market to avoid the possibility of a heavy fine.

I would guess the figures will be way down this year as everywhere seems very quiet but we won't know until numbers are released later in the year. Maybe the secretary of state for Tourism Adolfo Mesquita Nunes will have some answering to do, or more likely will be able to think of someone else to blame !

Algarve is really a family destination and the expectation is a private pool. Apartments appeal more to the Portuguese and Spanish holiday visitor market but are quite price sensitive. In my view, in terms of income, you are lucky to cover fixed costs these days.


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## ermaolu (Jul 21, 2015)

I remember I asked 2 Portuguese solicitors about it they all told me that if you want to use your apt in short rental market ,putting them in airbnb etc,you do not need any licence at all. You only need to register it but the registration is quite simple and even nobody from administration will pay a visit before they get you through.

So MrBife ,I googled the new AL Rental Licence but don't find what makes it so serious? which of the conditions do you think are unbearable for the property owner who wants rent income from short-term rental?

As for what kind of property are most welcomed by tourists I think you can find some data from Portugal tourism office. I remember that the data leased include the most popular location, time duration, rates of hotels most preferred etc. I think the market is quite diverse, location is most important factor for price. but you can always find customers, either for a apartment or a villa, depending on what price and service you could offer.


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## MrBife (Jul 26, 2009)

I think it's time for you to find a new lawyer !

.:Turismo de Portugal, I.P. :. Alojamento Local: novo regime jurídico

The business activity needs to be registered and you need to submit guest info to the SEF

Inspections are being done and fines are being issued.


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## travelling-man (Jun 17, 2011)

MrBife said:


> I think it's time for you to find a new lawyer !
> 
> .:Turismo de Portugal, I.P. :. Alojamento Local: novo regime jurídico
> 
> ...


I don't begin to understand this AL thing and everyone I talk to tells me something different but the biggest confusion to me is what one has to pay the Government. 

At one end of the scale, people have been told you only have to pay tax on the rental income and at the other, they've been told they have to pay tax AND something in the region of €140 per month, each and every month whether they rent or not....... Some have even been to the tourist board to ask for clarification and were told they don't know either. 

The link that MrBife posted says: "In this new regulatory framework, local accommodation establishments continue to be characterized as those that provide temporary accommodation services to tourists, for remuneration, and the qualifications set out therein, prohibiting now expressly for the operation of local accommodation establishments the qualifications to be considered as tourist enterprises, such as those that have a higher number of rooms 9"

Which to me suggests that if someone is renting fewer than 9 rooms, the licencing requirements don't apply. 

It really is way past high time the Government sorted this thing out properly!


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## ermaolu (Jul 21, 2015)

Yes that is what I conclude from what the solicitor said .If you run a hostel, for hosting over certain number of people then you need licence to do that.But if you only use airbnb for renting out a room , you need only registration and surely pay your tax.

So I think weather it is registration or licence you need, the only true change is , at before many people can have sneaky rental income without paying tax.But now under new regulation it will be hard to do so.

I also saw that in an accountant website you gave before that,
if you are letting out rooms to students,residential purpose,the income will be exempt from VAT.But if you are letting out rooms to tourists, income subject to VAT at the reduced rate.
when it comes to the whole property letting out , the tax law will differ too according to weather it is long-term or short-term, you are residents or not, your other incomes etc. a bit complicated. But if you are take it as a serious business that you had to bear the bureaucracy.


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## travelling-man (Jun 17, 2011)

Seems to me that many people, myself included are happy to pay the tax but if the €140 or so National Insurance/social Security monthly payment is also required then it wouldn't be worth doing. 

Other questions are what is long term and short term (everyone's definition is different) and what is and isn't a tourist? - For example, if someone is over here from the UK and renting a property for 3 or 4 months while they house hunt, are they a tourist or not and what set of rules apply?


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## RichardHenshall (Jul 26, 2009)

I'm still trying to understand the whole AL process but as far as I can tell the Social Security payment (due in the 2nd year onwards) is not payable by those who are already paying into a Social Security system (in Portugal or other EU) or are already of state retirement pension age. There may also be low earnings exemptions.

Tax rates depend on whether the taxpayer is PT resident or not. A PT resident pays tax at the appropriate marginal rate on 15% of rental income and a non-resident pays, in Portugal, tax at 25% on 15% of rental income (ie 3.75%) (and pays again in their own country on the actual nett profit based on that country's rules).

IVA, on annual rental income over 10.000€ per annum is due at the reduced rate of 6% but can at the same time be reclaimed on relevant expenditure.


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## Verinia (Apr 6, 2012)

I have rented a small cottage for the first time this year. You do need an Al licence for all paying guests who stay under a month. You have to put the licence number on your adverts. You can apply quite easily and begin renting once your application is stamped, but all the requirements need to be in place. They can and do inspect. You need a complaints book. All properties need to be registered for tax purposes under Category B. The tax is as Richard describes it. Social Security is a can of worms, but if you're state retired, you should be exempt. You also have to collect all your guests's passports and report to SEF within three days. You can do that online using the SIBA system. It's not hard once you've got it all set up. Again fines are heavy if you don't register anyone who isn't a Portuguese citizen. Our accountant also has told us we need to present invoices no less than five days after guests arrive at Financas. And that's it folks! It was a long and puzzling journey, but now it's all in place it's not so hard and the tax rate is quite good, about 6 euros on every 100 euros earned as long as we don't go over the VAT threshold.


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## ermaolu (Jul 21, 2015)

Verinia said:


> I have rented a small cottage for the first time this year. You do need an Al licence for all paying guests who stay under a month. You have to put the licence number on your adverts. You can apply quite easily and begin renting once your application is stamped, but all the requirements need to be in place. They can and do inspect. You need a complaints book. All properties need to be registered for tax purposes under Category B. The tax is as Richard describes it. Social Security is a can of worms, but if you're state retired, you should be exempt. You also have to collect all your guests's passports and report to SEF within three days. You can do that online using the SIBA system. It's not hard once you've got it all set up. Again fines are heavy if you don't register anyone who isn't a Portuguese citizen. Our accountant also has told us we need to present invoices no less than five days after guests arrive at Financas. And that's it folks! It was a long and puzzling journey, but now it's all in place it's not so hard and the tax rate is quite good, about 6 euros on every 100 euros earned as long as we don't go over the VAT threshold.


Hi Verinia, Thanks for sharing your experience here. I am interested to know how much is the VAT threshold.Is it 10,000 euros per year? I guess the 6% of tax depends on that you have no other income in Portugal?


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## Verinia (Apr 6, 2012)

Yes, the VAT threshold is 10,000 a year, on the aggregate of all your activities, which each have a different activity number ubder Category B. I do a little freelance work, have a small rental income and am taxed at source on a civil service Uk pension. I have different activity numbers for all of these and take care not to earn more than 10,000 as don't want to incur accountant's charges for VAT returns. The rental tax on AL is calculated only on 15 per cent of the income, which is added to your other income. The you get taxed according to the band that puts you in. This is just my own experience...I am not an accountant, please note. If anyone knows better, please correct me.


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## RichardHenshall (Jul 26, 2009)

RichardHenshall said:


> [...]
> IVA, on annual rental income over 10.000€ per annum is due at the reduced rate of 6% but can at the same time be reclaimed on relevant expenditure.


To edit my own post:

Once turnover exceeds the threshold for IVA registration (of 10.000€ per annum) then you must account for IVA on all your relevant turnover, not just that part over 10.000€.


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## ermaolu (Jul 21, 2015)

RichardHenshall said:


> To edit my own post:
> 
> Once turnover exceeds the threshold for IVA registration (of 10.000€ per annum) then you must account for IVA on all your relevant turnover, not just that part over 10.000€.


Really? that will make things complicated,because you must try hard to reclaim them.So accountant would charge much more on that,as Varinia suggested.

Now I become more clear.The tax on rental income differ much on wether it is long-term or short-term. If rental contract is more than 3 months, whether resident or not,you are taxed at 28% on the rental income (deducting some expenses like repairs ,insurance,maintenance) because the income falls into category F.

Short-term rental income (category B) will be taxed on 15% before it goes into your gross taxable income(which altogether will be taxed at 6%).and for non-resident,it will be 25% but later your gross income will be taxed at 3.75%.

Am I right?


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## RichardHenshall (Jul 26, 2009)

Yes, you appear to have understood it.

Accounting for IVA does not need to be that difficult. 6/106ths of your rental income would be declared and paid to the taxman, less the IVA paid on allowable expenditure (such as the 23% IVA charged on electricity, and most general services such as cleaning, gardening, maintenance etc).


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## TonyJ1 (May 20, 2014)

Richard has the story right.

Long term rental income - you have the choice whether to have it taxed independently, which is 28% for residents and non residents alike (for non residents - have to have a look at the relevant article in your country's double tax treaty with Portugal, but generally Portugal has the right to tax it, with taxes being set off / credited depending on home country's rules), or have it added to other income and being taxed under normal rules. 

The deduction rule on long term lets has been slightly altered in the current year in that expenses necessary in obtaining the income are now deductible except for financial expenses and depreciation - though the revenue's interpretation is likely to be more restrictive in what is necessary expenditure - but at least it goes beyond repairs and maintenance, property taxes and condominium fees.


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## RichardHenshall (Jul 26, 2009)

Tony, two questions if I may?

My activity was registered with an anticipated turnover of less than 10.000€ as recommended by the person at the Financas office who helped me complete the form. What happens if/when I exceed this level of turnover? Do I have to do something without being prompted or will I be told what I have to do?

If/when a return is made for IVA, is it necessary to apportion the IVA on expenses (incurred in offering AL rentals) between 'business' and 'private' use and if so is there a generally accepted formula?


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## TonyJ1 (May 20, 2014)

If, say in the current year your t/o goes above the threshold you have to alter your 'actividade' registration to being subject to tax in January next year.

As for the expenses - do you live in the property - in that case, I would say yes. If it is available for 'alojamento' for the whole year and say you let your children stay in the month of August without remuneration, I would say ignore it - but strictly speaking - not correct. Usually, you can take as a guide if the private use is less than 10% - ignore the apportionment - but if inspected and you come 'clean' than I would say that there is no minimis.


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