By: DENNIS SWING-GREENE
International Fiscal Consultant for euroFINESCO
Short term lets to holiday makers: Misinterpreted legislation – Part one
This is the first in a four part series examining issues concerning short term lets to holiday makers.
Part one – Misinterpreted legislation
Part two – When renting becomes a business
Part three – Commercial vs. residential lets
Part four – Rental agent vs. villa manager
Two sets of legislation co-exist to regulate different types of rental activity.
On the one hand, holiday lets in Empreendimentos turísticos (tourist developments) such as hotels, holiday complexes and camping facilities are defined and regulated under Decree Law nº 167/97. This has been altered and republished under Decree Law nº55/2002, which decentralises many responsibilities from the central tourism bureau (Direcção Geral de Turismo) to local town councils (câmaras).
On the other hand, general letting of residential property is governed by the Novo Regime de Arrendamento Urbano (General Renting Law), recently overhauled in 2006.
These statutes fully recognise temporary short term letting, such as occurs with tourists, students, teachers and certain other professions. This particular form of rental merits special consideration in the statutes to the degree. It is seen as an “exceptional” activity in that the law stipulates no minimum rental period (as normally would be the case in conventional residential lets) nor are contracts required when occupancy is below six months.
If your letting is more commercial in nature rather than residential, a third option may be more appropriate, which is the Hospedagem (guest house) classification. In this case, you may need this property licence, which permits both private use as well as commercial tourist lets. The type of property licence is defined in câmara legislation and will vary from township to township.
None of these three options addresses fully the actual activity practised by most owners, which is letting of self catering villas and apartments. Given this basic inadequacy in the legislation, it should not come as a surprise that ASAE inspectors have their own narrow reading of legislation that often disregards not only the fundamental aspects of the law but also confuses central license issues of the economic activity that they allegedly are trying to regulate. Hence the controversy.
However, if owners are guilty of other flagrant compliance violations, such as no Portuguese income tax declaration, threatened agents and owners may have difficulty mounting a proper defence and refuting the possible misinterpretation of the statutes.
In the following series of articles, we will analyse various aspects of the holiday let activity to help distinguish between residential offerings and more commercial tourist-related business.
As is to be expected, there is no one-size-fits-all solution. Clear advantages and drawbacks exist to each option. It is only by understanding your own particular situation as well as the legislation involved that you will achieve a viable and lawful solution.
Next: When does renting become a business?
Dennis Swing Greene is an International Fiscal Consultant and Senior Partner at euroFINESCOsa, with offices in the Algarve and in Lisbon. Appointments may be scheduled in Guia (Albufeira) at 289 561 333 or in Lisbon (Chiado) at 21 3424210.