In the past six months, almost 2,000 “AL” enrolments have been wound up. Many owners have stopped letting but failed to cancel their registrations due to capital gains tax liabilities. In the first quarter of 2019, new “AL” sign-ups fell nationally by 40% and by 60% in Lisbon. These numbers are likely to be understated. In total, the capital currently counts with 18,000 Local Lodging Establishments. Nationwide, there are approximately 83,000. 2020 could prove to be a year of mass exodus.
After the lack of petrol stemming from the striking lorry drivers, it’s now the lack of service stations! Like any space that remains idle for a few hours, service areas in major urban centres around Portugal have already been converted into Local Lodging Establishments to meet the growing demand of stranded motorists.
There are more than 80,000 Local Lodging Establishments in Portugal and only eight inspectors from “ASAE” (Autoridade de Segurança Alimentar e Económica) to oversee them. Lack of safety and health conditions are the most common problems. But the capacity to intervene is “very limited”.
The Vila Nova de Gaia Municipal Council has passed regulations to limit Local Lodging establishments and prevent the dislocation of long-term residents from historic neighbourhoods. The city centre and the entrance to the bridge D. Luís I are two of the target areas for the new restrictions. These measures follow on the heels of similar actions taken in Lisbon and other municipalities around the country.
The government has reviewed the criteria for properties being considered “vacant”, which may imply an increase in IMI (Municipal Property Tax) by three to six-fold. The increase will occur when an abode is located in a “pressure zone” and has remained empty for more than two years. Lack of consumption of utilities such as water and electricity will be the prime indicators. Exempt from the concept of “vacant” are dwellings integrated in tourist developments or registered as Local Lodging as well as second homes not located in the same municipality where the owner is resident.
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.
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.
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.
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.