In recent years, the rise of short-term rentals through platforms like Airbnb and Booking.com has transformed the way travelers experience cities and regions around the world. Portugal, known for its picturesque landscapes and vibrant cities, has not been exempt from this phenomenon. However, the Portuguese Parliament’s recent approval of new measures for Alojamento Local (AL) or short-term rentals initially proposed July 19th, 2023 will go into effect October 7, 2023 and has ushered in a wave of significant changes that are set to impact property owners, businesses, and tourists alike.
The legislation was approved by the Assembly on July 19th, then forwarded to the President on August 9th. After being vetoed, it was reaffirmed by the Assembly on September 22nd. Subsequently, the President officially enacted the law on September 29th. It was made public earlier today and is scheduled to become effective tomorrow.
One of the most notable changes is the suspension of new AL registrations in the Apartamento and Estabelecimento de Hospedagem categories within condominium buildings, except in low-density areas defined in the ordinance. Furthermore, new AL registrations within condominium buildings now require unanimous approval from the condominium, emphasizing the importance of community consent in such ventures. Existing AL properties within condominiums can be closed with a 2/3rds majority vote, giving residents a say in the character of their neighborhood.
Additionally, existing AL registrations have now become temporary, mandating renewal every five years starting in 2030. This requirement adds a layer of administrative responsibility for property owners, ensuring compliance with regulations and standards over time.
To encourage long-term rentals, property owners who transition from AL to the long-term rental market before the end of 2024 will enjoy a tax exemption on their rental income until the end of 2029. This incentive aims to alleviate the pressure on long-term housing availability, striking a balance between the needs of tourists and residents.
However, perhaps one of the most significant changes is the introduction of the CEAL tax at 15%, applicable only to autonomous residential units and not detached houses or complete buildings. Exemptions exist for AL properties in the permanent residence of the owner, provided they are not active for more than 120 days per year. This tax underscores the government’s efforts to regulate the short-term rental market and ensure that it aligns with broader fiscal policies.
Another aspect that property owners need to consider is the potential impact on their Property Tax (IMI). The IMI is a fixed tax set by the municipality, calculated based on the VPT value of the property. While the age of the property traditionally influenced the IMI calculation, AL properties—regardless of whether they constitute a single room or an entire property—will now have a standardized vetustez coefficient set to 1. This means that the IMI could significantly increase for properties more than 60 years old that are utilized for short-term rentals.
The regulatory landscape via the More Housing initiative for short-term rentals in Portugal has significantly changed and will impact property owners and renters. As the government strives to strike a balance between promoting tourism and ensuring the welfare of local communities, these rash decisions will undoubtedly shape the future of the country’s vibrant tourism industry. It remains to be seen how these regulations will impact the country but they have already redefined the future of short-term rentals in Portugal.