Even the president of the Association of Accommodation in Portugal (ALEP) now agrees that the Local Lettings law introduced a year ago is adding so many new and unexpected costs and obligations, that many property owners have returned to operating illegally.
Eduardo Miranda said today at a meeting in Faro that the alleged success of new Alojamento Local laws can be put in question as the state has created new burdens for those in the holiday lettings business, citing 'commercial water rates' as case in point.
"Of all the obstacles that could hinder the legalisation of properties in terms of cost, the application of commercial water rates is the big one; this can put off a substantial portion of those letting their accommodation," said the president of ALEP.
An information session in Faro today marked the end of the first year of the new Alojamento Local law that an estimated 90% of those involved in the business have chosen not to comply with.
The president of the Algarve Tourism Board, Desidério Silva tried to put a positive spin on the law, saying that he 'had information' that the authorities are receiving an increasing number of registrations under the new law, both from those new to the business and from those deciding to ‘go legal’.
Miranda said that "there have been many Alojamento Local registration cancellations. There are lots of new people coming in to the market, but after a year, when they see the cost of compliance, many people rethink."
The 'commercial water rates' obligation in the Alojamento Local law obliges any property not served by mains water to have expensive water treatment equipment installed and dosed with chlorine, anathema to many rural tourism businesses whose marketing emphasis is on the fresh air and natural water of an unspoiled rural Algarve.
Bookings for short-term rental made through the HomeAway website have grown an impressive 39.5% in a year with most of the accommodation on offer operating outside of Alojamento Local compliance.
Despite fines that could reach €3,700 in the case of an individual and €35,000 for a business, the majority of property owners continue to rent out their houses, apartments and rooms quite illegally.
The ‘local lettings’ legislation was explained in April, 2015 by the Secretary of State for Tourism, Adolfo Mesquita Nunes on a visit to Faro.
The audience remained unconvinced, as the complexity of the new scheme and the involvement of multiple government departments seemed designed to make life harder, not easier.
There was a follow-up seminar in May, 2015 opened by Rui Almeida of Moneris, who said there "appeared to be a number of issues regarding the fiscal framework provided in this new law, including issues about various taxes, including corporation tax, income tax, VAT and social security obligations which for many owners makes letting out their property an uneconomic proposition."
With such a low registration rate after the first year of operation, the law needs radical change to encourage compliance.
Adolfo Mesquita Nunes no longer is in charge of this sector and his over-complicated, badly thought out Alojamento Local law deserves to be consigned to the scrapheap and a new one designed with input from those engaged in the industry, not by men in suits.
For compliance information, property owners are encouraged to contact :
NALLE http://nalle.pt/ and afpop http://www.afpop.com/uk/index.php
Comments
Jane - thank you.
It's really pleasing to see a voice of sanity on this comment strand. Such voices are few and far between in the world of Algarve Daily News commenters.
So we buy drinking water in plastic disposable jugs, wishing we had a bore well like our neighbor.
Ask any Portuguese business owner what his /her biggest difficulty is; Taxes? The recession?
No, red tape. Compliance with the layers of obstructive bureaucracy is driving the country to ruin.
With the involvement of 5 government departments and 90% of the target audience failing to comply, the law is not fit for purpose.
The classification of renting out rooms as a full time economic activity for many is simply daft with social security payable for each month of the year and not linked to income.
For those who run a rental business, fair enough, there need be laws to tax and protect but the law impacts everyone equally, even those who rent a property for a month in the summer, whose income is 1,000 with social security demands exceeding this figure. the law is inflexible, multi-departmental, ignored by the vast majority, poorly thought out with zero reference to those who have to use it.
How many other pieces of legislation create and industry of advisors to help people through the complexity of compliance?
My property is owned by an offshore company in Malta with Maltese administration and tax compliance, again administered by a 'specialist' company in Portugal, let through an agency based in Holland, VAT liable somewhere (noone can advise), with any capital expenditure sourced from the UK and I am based in the US - tell me this is easy!
Not even those in charge of running the scheme including the Portuguese SEF, tax office (VAT, Income tax, Capital Gains tax), local council, ASAE and national tourist board can unravel these circumstances and advise on compliance. In fact two of the above suggested reverting to 'illegally renting out, noone else is signing up!'
I also have a tubewell water supply, tested monthly by the pool company, which is crystal clear and free of Aguas do Algarve chemicals.
Now I am being told I need chlorine dosing equipment - you couldn't make it up, could you?
Hence, one lovely rental property 20 years in business is off the market and up for sale to the next mug.
WRONG no one is doing anything illegal, it's the brain dead bureaucrat who dreams up these ridiculous laws and the government agree it's a great way to increase revenue and apply the brakes to the economy but how about asking these public servants to take a pay cut or resign,, no this won't happen, lets invent more taxes so the economy grinds to a halt, great idea.
As J.Bull has pointed out before - prior checks should be made that the Handcart is fully taxed - including sales and import tax (as its likely to Chinese built); correctly licensed for the carriage of 10 million people and recently serviced. The driver properly trained and tested - not with a bought licence.
And arrangements made for the handcarts re-use as there are bound to be stragglers - the less educated or just dozy Portuguese who had no idea what was going on so did not get on the first Handcart to Hell. So must catch the next.