New rules for AL rentals in Portugal
Recently, there were several articles in the Portuguese press regarding legislative changes to local accommodation laws in Portugal, some claiming that a Supreme Court ruling prohibited AL ("Alojamento Local") lettings in residential buildings.
This has led to a great deal of uncertainty and misinformation among current holiday homeowners and potential investors in this sector. However, the truth is far from what was published.
The legal bill that has generated so much alarm was approved in 2018. The only recent change was an "acórdão" of the Portuguese Supreme Court of Justice, on an issue that, up until now, generated confusion regarding the compatibility of AL rentals in condominiums (i.e., in an autonomous fraction allocated for habitation in a building subject to horizontal property).
In practical terms, this Supreme Court decision has provided jurisprudence in a matter that, in the past, resulted in contradictory court decisions. However, this ruling does not have the mandatory force of law and will not revoke current AL licences or how they will be issued in the future.
For an AL licence to be revoked in a condominium, it is mandatory that this be ordered by a court, and only after the condominium opens legal proceedings to request there are no AL rentals in the building.
This request can only be made by a condominium — which requires the majority of co-owners to favourably vote this decision — and cannot be sent to court by an individual owner.
Currently, the impact of this ruling on the Local Accommodation sector in Portugal has been practically non-existent, with no more cases expected in court than those that existed prior to this ruling. One of the reasons is the importance of this sector as a strong driving force in our economy and in revitalising housing infrastructures from North to South. Also, Portuguese laws and regulations already protect residents against possible abusive situations by tourism guests through noise laws, condominium regulations, etc. It is the responsibility of the rental owners or rental management companies to ensure that these rules are complied with and that guests are aware of them.
At SCH Holiday Homes, we believe there is always room to find alternative solutions in the event of a conflict. In other words, safeguarding the condominium tenants' right to tranquillity and, simultaneously, the property owner's right to make their unit profitable. By adopting the best practices in the relationship with the condominium and owners, it is possible to provide all parties involved with a positive experience.
AL Licenses - What to expect in the future
Regardless of these changes, in new residential developments it is possible to legally secure the property can be used for holiday rentals indefinitely. For example, the developments currently sold by Immo Portugal and Portugal Realty already have this condition safeguarded.
How to apply for an AL licence in Portugal
If you are thinking of renting your holiday home in Portugal, know that the process today is not only greatly simplified, but there are numerous companies that can help you with this task.
To make the best decisions for your lifestyle and financial security, there are however bureaucratic issues that you should know to avoid unpleasant surprises.
Many foreign clients who arrive at our offices for the first time are unaware of how holiday home rentals are regulated in Portugal. This is expected, considering that in their countries, not everything works in the same way.
However, being unfamiliar with Portuguese tourism rentals laws is no excuse for not ensuring your holiday home takes full advantage of its potential! To achieve this, it is important to know what you can count on so that your best interests are always protected.
Renting a holiday home in Portugal
The first thing you should know is that only legal property can function as a holiday home to rent in Portugal.
For both apartments and villas, it is mandatory under Portuguese law that the accommodation has a habitation licence (or "licença de utilização", in Portuguese). This document, issued by the Câmara Municipal (city council) of the area where the property is located, basically defines the type of use permitted for a given building or fraction: habitation or non-habitation purposes (commerce, services or industry).
If the property is legal, and with a habitation licence issued, the next step is to request a specific licence from the Câmara Municipal to rent your property as a holiday home.
Applying for an AL Licence
A local accommodation licence ("Licença de Alojamento Local") — also known as AL Licence — allows you to legally rent residential accommodation for short-term tourism.
Each licence has a unique number and is specific to an accommodation. This means that if a homeowner has several properties intended for tourist accommodation, each property must have its own licence.
In Portugal, obtaining an AL licence is mandatory. The main websites promoting holiday homes, such as Booking or Airbnb, also require an AL licence number to advertise the accommodation online.
Requirements to obtain an AL Licence
To have access to an AL licence — and pass the prior inspection carried out by the local Câmara Municipal — the accommodation must meet several requirements stipulated by Portuguese law, namely safety and regulatory obligations. This includes:
Providing a safety pack in the accommodation for the use of guests;
Having civil liability insurance;
Equipping the accommodation with a "Livro de Reclamações" (complaints book) and an information book (which must be translated into 4 languages).
The biggest advantage of hiring a professional rental management company is that the property owner does not have to worry about anything. They will take care of:
Applying for AL licensing;
Accompanying municipal inspections and verifications by regulatory bodies such as ASAE;
Setting up safety equipment (which has very specific installation and maintenance rules!);
Updating the property efficiently and within legal deadlines, if there are any future changes to AL laws.
Ignorance of the law will not exempt you from receiving fines in case of non-compliance, so make sure that whoever is managing your holiday home rental is well acquainted with regulations and legal updates.
On the other hand, a professional holiday rental company in Portugal will also take care of the promotional side of things. From ensuring staging for professional photographs to creating media content such as text and uploading it to various promotional platforms, it's easier (and safer!) to let the experts do it all for you!
With the Internet as your holiday home "shop window", make sure it is appealing and professional to get the customers and bookings you need to guarantee the success of your holiday rentals.
When you apply for an AL license it is also mandatory to register the start of this business activity with the Portuguese tax authorities. An accounting team such as Portugal Accounting, with years of experience in assisting foreign holiday homeowners, can help you with this.
Tax consultancy for your holiday home in Portugal
Always keep in mind that renting a holiday home in Portugal is first and foremost a business. As such, you should view this activity as any other commercial activity, including in tax terms.
Counting on tax advice from a specialised team, such as Portugal Accounting, will save you not only time, but also money. For example, there are situations in which opening a company in Portugal may be more advantageous for tax purposes than renting on an individual basis... only an accountant can help you make this and other decisions that will directly impact your holiday home rental income.
Also keep in mind that all income earned in Portugal is subject to the obligation of issuing invoices for each payment received, as well as paying tax on that income. This includes, of course, income on holiday home rentals.
The support of an experienced accountant will ensure that you comply fully, on time and without hassle with all your tax obligations in Portugal.
If you don't want to be the person issuing invoices for each rental, a rental management company such as SCH Solutions can also take care of that for you.
If you have a holiday home to rent on the Silver Coast or are considering investing in the tourism rental market, contact SCH Solutions. We're happy to assist you in this process!
Article by Sandra Filipe - Reservations Specialist at SCH Solutions / SCH Holiday Homes