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Holiday rentals tax “could skyrocket”

The 5% tax levied on ‘alojamento local’ holiday rental properties “could skyrocket to 28%”, reports Expresso today (Saturday).

In an issue that suggests the PS Socialist government has “ceded to the radical left”, the national weekly presents a full-page text on plans being considered by finance minister Mário Centeno for next year’s State Budget.

It explains that long-term rentals are already subject to 28% tax, while holiday rental businesses enjoy a much lower rate.

“The Ministry of the Economy as well as the ministry of the environment, which oversees habitation policies”, both “defend” what Expresso calls “the fiscal harmonisation” of both sectors.

Alojamento local, or AL as it is better known, has “taken off” in recent years, “particularly in large cities”, says the paper.

In Lisbon alone, AL is generating €42.8 million a year, and rising – and threatens to change the face of the city’s rental market.

Indeed, this is another aspect that some see as a good reason for increasing AL’s tax rate.

Lisbon council boss Fernando Medina told Expresso that “something has to be done to combat the distortion in the market”.

Left wing allies Bloco de Esquerda are also all for the tax change, saying there is a “very large fiscal discrepancy” between AL and traditional lettings that “requires fiscal convergence”.

Thousands of rural tourism businesses which have signed up to the scheme may well see things differently. For now, there have been no reactions to Expresso’s news.

The paper explains that the measure could help the government rake in much-needed funds “in a budgetary exercise that is proving difficult. The elimination of the IRS surcharge in 2017 signifies the devolution of €400 million that Centeno will have to find somewhere else”.

The new IMI property tax – which now seems likely to affect only properties with a rateable value in excess of €1 million – will not bring in enough, Expresso adds, suggesting total receipts here of only €50-€60 million.

natasha.donn@algarveresident.com