Recently there have been many press articles on the subject of Letting Licences and many members affected by the issue are in a panic. Because of the lack of coordination between Inspectors, Tourist Office and Câmaras, many owners rightfully fear a Catch 22. Members have asked what to do in their particular area; what the law actually says and how it affects their particular circumstances. Obviously individual situations must be judged on their circumstances, but basically if you earn income from renting out property in
Taxation issues
We asked Dennis Swing Greene of euroFinesco for an assessment of the financial implications of the licensing issue. Dennis told us, “Despite the shortcomings regarding implementation, the vast majority of people are not faced with disaster but rather an opportunity to put things right. In fact, most will eventually be better off than before. For example after a one-off expense for licensing, annual tax savings could be thousands of Euros each year. If you wish a mixed usage of your property, local regulations can offer a relatively simple and workable solution. Those people with relatively modest rental income can still be free from bureaucracy by remaining non-commercial and non-residents should have a “nil-cost” solution, recovering all Portuguese taxes and overheads in their home jurisdictions via deductions and tax credits.”
Are Câmaras ready?
One of the main complaints seems to be that members have been unable to obtain licences upon application, as their Câmara did not have any procedure in place to deal with enquiries and issue licences, or even apparently anyone who knew what they were talking about when they were applying for one. This though has not stopped the inspectors from Inspecção Geral das Actividades Económicas (IGAE) from levying fines for non-compliance, who appear to have adopted a ‘Zero Tolerance’ approach. It is our understanding that Câmaras are in the process of gearing themselves up to deal with applications for licences, with many of them apparently using the Albufeira Câmara model, which has been available for some time. If your Câmara does not have a system in place at the moment, they are certain to be working on one for implementation in the very near future. In Câmaras where few options exist today, new solutions are under study and soon should leapfrog into place.
What are the options?
Basically activities are classed under the following headings: Rental Properties – normally long-term rentals (i.e. more than five years). Tourist Apartments - which are generally a group or block let out to holiday makers. Tourist Houses – which are single family dwellings made available to holiday makers. Guest Houses – which are classed as a) Hospedaria (traditional guest house or Bed & Breakfast type property) b) Casa de Hóspedes (the 3-6 bedroom villa rented in toto) and c) Quartos Particulares (renting out individual rooms rather than the whole house). The Guest House classification is intended for mainly seasonal usage and the licence allows both private use by the owner and letting out to tourists. Regulations are far more basic than for Tourist Houses, but still require the submission of plans and an inspection by an authorised architect.
What to do now?
Compliance is the order of the day. In the end, only one option disappears and that is the option to do nothing. If you obtain income from renting out your property you must take action if you do not already have a licence. Our advice is to go to your local Câmara and begin the process. If they are unable to help you when you go to their office, we suggest that you ask for proof that you have been and enquired about a licence, which you will be able to show to an inspector to prove that you have tried to comply with the law and that the fault lies with your Câmara. We suggest that you take a document with you, in Portuguese, which simply states that you attended your Câmara to begin the process and that they were not able to provide you with the necessary documents. Date it and ask that the supervisor signs and stamps it, simply to prove that you were there for that purpose. The IGAE Inspector may ignore it, but at least you will have the document if you contest any fine imposed. We have prepared a short document for members and this is available from either the AFPOP office or the ‘e-store’ section of the AFPOP web site.
There are certain things that you will need to complete the process. These include copies of technical drawings from an architect and a safety plan prepared by a qualified engineer, certifying that your property complies with the law. These projects are at the core of your application. If your property is relatively new and the drawings lodged with your Câmara are still current, these should be a good start, but if alterations have been made to the property over the years, a new set of drawings will probably be required. There are a number of choices that can prove to be viable solutions. However, if you fail to choose and take action, it may well be an Inspector who makes the choice for you. You can be sure that it is unlikely to be an alternative that will please you.
Acknowledgement
We are grateful to euroFinesco for making available to us the information that they obtained from their enquiries into this issue. They are available to help members to determine which option might be best as well as obtain any necessary permits.
As we have informed members in the past, we are trying to obtain information form AMAL, the Association of Algarve Câmaras about the progress that they are making.
This article is written and provided with permission by Robert M.L. Snapper, fully licensed real estate agent in Portugal.