The legal institution of local housing was established by Decree-Law no. 39/2008, of March 7th, as amended by Decree-Law no. 228/2009 and Decree-Law No. 15/2014.
This regime was implemented to allow for the provision of temporary accommodation services in establishments which do not gather the legally required conditions for touristic developments. Increased demand and supply of housing in our market contributed to the creation of a new regulation. Thus, Decree-Law No. 128/2014 was created, turning the regime of local housing from a residual category to an autonomous category, accepting its touristic relevance and inaugurating a special legal treatment.
Decree-Law no. 128/2014 was amended by Decree-Law No. 63/2015, April 23rd, which densified the implemented system, especially the rules for hostels. We enumerate some clarifications on the local housing system, in a simplified form, that does not exclude reading the law:
1) Concept of local accommodation establishments
The local accommodation establishments provide temporary accommodation services to tourists and may be villas (autonomous buildings designed for one family), apartments (autonomous fractions of a building or part of an urban building capable of independent use) or place of lodging (accommodation units are made up of rooms).
2) Local accommodation establishment registration
The registration of housing establishment is a mandatory and necessary condition for the exercise of local housing activity.
Registration is carried out by mere prior notification addressed to the Mayor of the territorially competent Municipality. This notification is made online through “Balcão Único Electrónico”, which generates the registration number of the local accommodation establishments and automatically sends the communication to the public body responsible for tourism: Turismo de Portugal, IP. The mere prior notification is mandatory and must contain the information set out in paragraph 1 of article 6 of the aforementioned decree-law, namely: authorization to use the building or valid property use title, identification of the operator of the establishment, address of the operator of the establishment, the name adopted by the establishment and its address, capacity (rooms, beds and users) of the institution and the date of opening to the public.
Furthermore, the prior notification shall be accompanied by the following documents, as referred to in paragraph 2 of article 6 of the said decree-law, which include:
- Copy of the identity document of the operator of the establishment;
- Liability waiver signed by the operator of the establishment;
- Copy of the building’s tax booklet (“Caderneta predial urbana”) regarding the property at issue, should the applicant be the owner of the property;
- Copy of the lease or another title that legitimates the operating holder to the activity;
- Copy of the beginning of statement or amendment of establishment of holding the holder of the activity to the activity of providing accommodation services.
The update of the data referred to above is mandatory within 10 days after the occurrence of any change.
3) End of exploitation
The cessation of operation of the local accommodation establishment must be communicated by any means legally admissible to the Mayor within 60 days of its occurrence.
4) Title of opening to the public
The document issued by “Balcão Único Electrónico” services containing the local accommodation establishment registration number is the only valid title of opening to the public.
The territorially competent town hall will, within 30 days after submission of the mere prior notification, inspect the establishment to confirm compliance with legal requirements. If they have any disagreement with the information in the mere prior notification, registration should be cancelled.
Maximum capacity: 9 rooms and 30 users (exception: those that are classified as hostels). Limits of operation by the owner: the owner may only let, for each building, the maximum of 9 local accommodation establishments in the form of apartments if the apartments represent more than 75% of all existing fractions in the building ; Requirements of the establishments: article 12 of the decree-law at issue sets out the requirements that the units must comply with. We underline the following: having appropriate maintenance and working conditions, having water supply, public sewage system, hot and cold running water, windows, ventilation, furniture, equipment and appropriate tools, system that allows blocking the entrance of outside light, security system that ensures the privacy of its users, hygiene and cleaning conditions.
7) Exploitation and operation
Each local accommodation establishment must have a (natural or legal) person in charge of its exploitation. Establishments must be properly identified according to their classification. Establishment may not exist without it; The identification plate on the outside, next to the main entrance, is mandatory. As for their operating period, establishments may freely determine it. The lodging establishments must advertise the periods of operation, unless they are open all year. The complaints book is mandatory.
8) Tax framework
The distinction between the exercise of the local housing activity and the mere activity of lease is of utmost importance for tax framework. As for income from leasing of property (rents), it will normally be framed within as rental income, i.e. category F.
With the entry into force of Law no. 82-E / 2014 of December 31st, which introduced the Portuguese Personal Income Tax Reform, the leasing activity was added to the list of activities generating business or professional income, in accordance with Article 4, paragraph 1, alinea n) of the Personal Income Tax Code (CIRS) and thus taxpayers may opt for taxation of rental income in accordance with the rules of category B, which corresponds to the income of the business and commercial activity. This option must be exercised in the declaration of commencement of activity or in the declaration of alteration of activity, as per Article 4, paragraph 5, of the CIRS.
When taxpayers are classified as belonging to the simplified regime, the determination of taxable income is obtained by applying the coefficient of 0.95 to the positive outcome of the rental income. The applicable rate, in the case of category F being chosen, is the flat rate of 28%. Should category B be chosen, the applicable rate is the general progressive rate.
On the other hand, the local accommodation activity is considered a provision of services similar to those of hospitality. Accordingly, the income obtained on a personal basis consider will be business and professional income, i.e., category B.
There are 2 kinds of situations in the domain of this activity:
i) The owner of the establishment is also in charge of its exploitation as local accommodation. Income earned through the exploitation of local accommodation is taxed in accordance with the rules for category B of the CIRS. The taxpayer may opt between the simplified regime and the accountancy regime, should the activity not generate an annual income greater than EUR 200,000.00. Choosing the simplified regime, the taxable income is determined by applying the coefficient of 0.15 at a rate of 25%. In the accountancy regime, the rules for corporate taxation apply, with the necessary changes, to the taxation of individuals, in accordance with article 32 of the CIRS.
ii) The owner of the establishment of local accommodation is different from the person in charge of its exploitation. The owner of the property obtains rental income – category F – but may, however, as was mentioned along this article, opt for taxation as category B. Income earned by the person in charge of the exploration are of a commercial nature – category B.
iii) The owner of the establishment of local accommodation is initially in charge of its exploitation but leases it to another person. Income earned by the person in charge of exploitation of the local accommodation establishment qualify as category B income, as well as the income earned by the owner of the establishment. Attending to the aforementioned, we may easily conclude that there is a relevant difference between the fiscal circumstances applicable to local accommodation and to long duration lease. Taking into account that with this tax regime in force the taxable income is obtained through the application of a 0.15 coefficient in local accommodation and a 0.95 coefficient in normal leasing and renting, the local accommodation regime stands out as a more favourable tax regime. Those who opt for the local accommodation regime should comply with the established in Decree-Law 128/2014, of August 28th, and should seek the necessary legal and tax advice in order to abide to all the legal demands.