By: DENNIS SWING GREENE
International Fiscal Consultant for euroFINESCO
eurofinesco@portugalresident.com
How to organise under RAU
This is the second in a four part series examining different alternatives to Holiday Let Licensing:
1) Keeping your Habitation Licence
2) Organising under “RAU”
3) Hospedagem – the Hybrid Solution
4) Compliance – Getting it Right
ASSUMING you are not part of a Tourist Development (Empreendimento Turístico), let us examine some of the key elements that will assure that your holiday lets will be seen under the rules of the Novo Regime de Arrendamento Urbano.
1) Clarity
Stating your purpose and intentions to potential clients allows you to define what you are doing rather leaving it to others to interpret your activity. In a statement of agreed Terms and Conditions for any lets, it is essential to be explicit regarding which legislation should apply. Likewise, direct reference to statutes should be made on all invoices. Finally, on internet listings, you should have a disclaimer in Portuguese as well as in English to clarify the intended statutory purpose of the listings.
2) Compliance
From a tax point of view, it is essential that the activity fulfills all fiscal requirements, both for property owners as well as any agents involved with the activity. For agents, this means having their business organised on a fully compliant basis. The non-resident owner must have proper fiscal representation as well as file annually an IRS Income Tax Declaration, Modelo 3 and Annex F. Resident owners may report either as a “rental activity” (Category F) or as a “business” (Category B) as a sole trader under the Simplified Regime. The latter has surprisingly favourable tax treatment.
Non-residents need to have a fiscal representative. While easy and painless, it could easily turn into a high risk area if left neglected. Here are three sound reasons why fiscal representation is a must.
a) Legislation
Portuguese Law requires a fiscal representative to meet all accessory tax compliance obligations for the non-resident taxpayer owning property or with income arising in Portugal. Do you have a good reason why not to obey the Law?
b) Nil cost
All taxes paid in Portugal as well as necessary expenses for fiscal representation will serve as either tax credits or deductions in your home jurisdiction. As a result, these fees and costs should be a nil expense at the end of the day.
c) Access to information
Portugal is a difficult country to find sources of reliable, accurate information. Your fiscal representative should be your link to sound information, not only about tax and legal matters but also about how things work in a strange country, putting things across to you in plain English.
Without a qualified fiscal representative, you may be placing your valuable investment in jeopardy and, at the same time, miss out on an invaluable ally to make the most of your life in Portugal.
3) Common Sense
One of the legitimate concerns behind the holiday let controversy is the need to assure the safety and quality of offerings to holidaymakers. The table is a summary of the basic criteria required for guesthouses (Hospedagem) in the Council of Albufeira and is similar in nature to standards in other councils throughout Portugal. Common sense dictates that any offering should at least meet this very basic benchmark.
By customising these three “C’s” to your individual situation, we can help protect you with enhanced Double Shield Representation. Working in conjunction with Portuguese lawyers experienced in this field, our enhanced plan offers you both fiscal representation to meet all of your tax compliance requirements and access to capable legal counsel to assure a protective shield around your rental activity via correct contracts, proper forms, comprehensive Terms and Conditions and Disclaimers.
In the event of an inspection, we can orchestrate a proper defence to avoid fines and avert the inappropriate application of legislation by over-eager inspectors.
Next – Part 3: “Hospedagem – a Hybrid Solution”
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