PROPERTY Local lodgings for newbies

Local lodging for newbies

With the holiday season extended due to the excellent weather and the relaxing of restrictions, the property rental market has been good. If you're thinking about renting out your property, there are tax implications to be aware of. By Robert Bijker, Happy Homes Algarve

PROPERTY MANAGEMENT HAPPY HOMES ALGARVE

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Happy Homes Algarve is currently looking for additional good quality rental Villas and Apartments to offer to our customers for next season. If you have a property to let, please contact us for more details'

Confused about the new rental law? Contact us for specialist advice.

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Rua Dr. Parreira 137 next to Barclays Bank 8800 - 346 Tavira Contact us today: 281 320 283 www.portugal-accommodation.com

REAL ESTATE LAND & HOUSES ALGARVE

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Covering the whole of the Algarve as independant real estate agents, we can provide you with unbiased advice when you decide to purchase a property and can introduce you to a wide choice of reputable mortgage banks, architects, lawyers, builders, chartered surveyors and interior designers. We have been in business for over 16 years, finding the right property for countless satisfied clients. We currently have over 900 properties available online and would be very pleased to help you find your ideal home.

If you are the owner of a good quality property and wish to sell, please contact us to arrange an appointment Contact us today: 281 320 281 www.landandhousesalgarve.com

TAVIRA VILAMOURA Those who visited the Algarve in September and October this year were pleasantly surprised by the more than exceptional good weather that they encountered. Simply Algarve promotion at its best! Most places were pleasantly busy during this period as people took advantage of the possibility to travel again. This in turn was also good for local businesses in general. The property market also remains active and prices were 7.6% higher in Q3-2021 versus a year ago, according to data from Imovirtual. It may well be that you are in the process of searching for a property to buy, or have just bought one. Like most second home-owners you will want some rental income from your property to cover costs, or in the case of an investment, you would want to maximise your return. Short term holiday rentals are governed by the Alojamento Local laws. As one of the oldest property management companies in the greater Tavira area, Happy Homes have assisted hundreds of clients getting up and running in a cost efficient manner. Happy Homes can obtain the rental license (licença de Alojamento Local) on your behalf and open the rental activity in compliance with the law. You can file your rental income under the simplified regime, which means that you are only taxed on 35% of your income. The remaining 65% is exempt. Under the simplified regime there are no individual deductible items allowed, however, you do benefit from the 65 percent exemption from income tax. Non-residents pay a flat rate of 25% over the 35% that is taxable. Residents add the rental income to their other income which is taxed at a progressive rate. The 1st year you benefit from a further 50% reduction in tax, which in the 2nd year drops to 25%. Only in the third year you will pay tax over the full 35%. This is effectively 8.75% of your total rental income, which makes it easier to remember. If your rental income is above Euro 27.000, you will need to prove that you had 15% or more expenses. If you cannot prove this with invoices, your effective tax rate goes up. Furthermore, you are automatically exempt from VAT for the first year of your rental activity.

If your first-year income exceeds € 12.500, you must then register with the tax department (or online) by the end of January the following year to be subject to the VAT regime. VAT on rental income is charged at 6%. This can be compensated with the VAT paid on expenses therefore you should keep your invoices (with your name and fiscal number) in order to claim back VAT, even though you cannot deduct expenses under the simplified regime. You pay the higher rate of 23 percent VAT on most expenses, therefore in our experience, you will not pay any VAT because it balances out. VAT needs to be reported to AT (tax department) on a quarterly basis. If you have high expenses in a given year, the VAT can be carried forward and used to offset future VAT liabilities. In addition you are responsible for the reporting of your guests to SEF (border and immigration control), issuing timely rental receipts for your guests, and reporting monthly income to AT the following month. Some councils require you to charge your visitors a tourist tax, which you must pay to the council on a monthly basis. Only VRSA in the East Algarve requires homeowners to collect a tourist tax at the moment. An accountant's annual tax filing of your rental income costs roughly Euro 90. (excl. 23 percent vat). There is a surcharge if you need to report VAT on a quarterly basis. If you are using a rental portal for your bookings, be aware that you must provide your guests with a rental receipt that includes the commission the portal charges you. The VAT on this commission can be used to offset other VAT liabilities, but under the simplified regime, the commission cannot be deducted as an expense. If you have a VAT credit it is possible to claim this back. However, you need to be aware that the tax department may scrutinise your rental activity. In case you have not been including the commission charge of a portal in the rental receipt for your guest and/or you are staying for a relatively long period in the property yourself, the VAT on expenses incurred during your own stay may not be allocated to your rental activity as it was for your own benefit. Lastly, homeowners from the United Kingdom need to be aware that due to Brexit they will need to appoint a fiscal representative. At Happy Homes we have many years of experience in dealing with all of these requirements on your behalf, making sure you are in compliance with the law and giving you peace of mind. Should you need property management and letting services contact us to schedule a meeting.

Robert Bijker, Director Happy Homes Algarve Rua Dr. José Pires Padinha 178 8800 - 354 Tavira Tel: 281 320 283 Fax: 281 321 901 www.portugal-accommodation.com

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