Al registration tax query

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Al registration tax query

Postby steveh » Fri Jun 02, 2017 9:12 am

For part of the year we let our property as a holiday rental - legal, licensed, income declared & taxes paid. In 2015 we complied with Decree Law 128/2014 and registered a "business activity." Our accountant told us this week that in doing that, our property immediately became allocated to the AL business and for tax purposes, the property was 'sold' from personal into business ownership. As a result, there's a CGT implication in Category G, calculated on the difference between the price paid for the property when it was bought and the fiscal value when the business was registered. Does anyone know if this is correct or where the legislation is that explains this scenario? (We are not resident in Portugal)
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Re: Al registration tax query

Postby widge » Sat Jun 03, 2017 6:41 am

Sounds a bit far fetched to me. No capital gain has arisen as no sale transaction has occurred. The deeds are still in your name & not the business & the business has no registered assets or a balance sheet.

I did the same 3 years ago and no such claims were made by my accountant. The only consequence of registering as a business were to do with income tax and IVA and both were beneficial to me not punitive.
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Re: Al registration tax query

Postby widge » Sat Jun 03, 2017 7:26 am

This guide is fairly comprehensive.......http://www.villasalbufeira.com/Images/al4%20010615.pdf
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Re: Al registration tax query

Postby steveh » Sun Jun 04, 2017 12:18 pm

Thanks - exactly what we understood and exactly what we said to the accountant. They're seriously suggesting people should pay CGT on a 'transaction' that they concede is completely imaginary. Maybe this fictitious CGT liability can be dealt with in their imaginations too!
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Re: Al registration tax query

Postby djprescott » Tue Jun 06, 2017 12:46 pm

steveh wrote:Thanks - exactly what we understood and exactly what we said to the accountant. They're seriously suggesting people should pay CGT on a 'transaction' that they concede is completely imaginary. Maybe this fictitious CGT liability can be dealt with in their imaginations too!


Sounds like their advice is imaginary too so you won't have to pay them!!!
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Re: Al registration tax query

Postby Polli62 » Sun Jun 25, 2017 11:09 pm

This was posted in the Algarve daily news 2 weeks ago re the AL & CGT
Two news items relating to the Alojamento Local (AL) registration system for those property owners involved in short-term lettings to tourists
further have reduced the chances of anyone registering without being forced to.

Owners who have their AL licence and who later remove their property from the scheme, for whatever reason, then are liable to pay capital gains
tax, whether they are selling their property or not.

The current percentage of properties covered by AL registration is a parlous 20% of the estimated total private rental market – a figure the
government does not dispute while taking little action to ensure or force compliance.


To collapse the illegal rental market would hit tourism revenue - tourism being the economic sector showing the highest growth and the one that is allowing Portugal to adopt more of a swagger along the corridors of Brussels. The government needs tourists and needs them to spend money and to date has not acted to close the illegal rental market despite claims to the contrary.


For many property owners, the thought of being charged capital gains tax on top of the annoyance and cost of AL compliance is the final straw
but those already registered are locked into a CGT charge should they withdraw from the rental market, so have decided to bear the costs of
compliance, Social Security payments et al, whether they actually rent out their property or not.

This ludicrous situation, which everyone consider an absurd fiscal mess apart from the government, deters those applying for an AL licence
to legitimise their property rental income while forcing owners wishing to return their property to private use to carry on.

"This issue of capital gains is one of the biggest obstacles to the legalisation of local accommodation," said Eduardo Miranda,
president of the Association of Local Accommodation in Portugal (ALEP), adding that some owners "keep the registration and do not cancel
the activity," just to avoid triggering a CGT charge which does not qualify for the usual 50% reduction, but is levied at 95% of the gain.
The little-known way around this is to register at Finanças under the category F tax regime where at flat rate 28% is charged but this may
not be cost effective for many. A degree of specialist financial knowledge seems to be necessary in a market sector that should have clear rules and simple benefits for those who comply.

On the plus side, the recent amendments to the Alojamento Local registration system, that made it compulsory to gain the approval of other
property owners if the property comes under ‘condominium rules’, are likely to be suspended until after the October 1st local elections -
or may not be enacted at all.

The government has admitted that it did not bother to talk to everyone that could be affected by the law change and now is well aware that
the proposed changes will not help its support at council level.

The revelation on June 2nd that Hortense Martins, a Socialist Party MP with shares in a hotel group, played a key role in developing
AL amendments that disadvantage owners of properties under condominium rules, feasibly advantaging the hotel sector, does nothing to
present a government that is on top of the Alojamento Local system.

The Secretary of State for Tourism, Ana Mendes Godinho, is riding on a wave of anyway increasing tourist numbers but has failed to respond
to the private rental market’s needs in which the avarice of the tax department has been allowed the upper hand.

The AL system remains an embarrassing muddle with 80% of property owners deciding to ignore the rules while pocketing the untaxed cash.

Also here is another website with info: https://nalle.pt/
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Re: Al registration tax query

Postby Algarve Eagle » Mon Jun 26, 2017 1:37 pm

Very confusing, especially since following the link at the foot of the previous post leads to an article suggesting that, although CGT is calculated differently for the period during which the property is registered as a rental business (category B vs category F), there is no CGT actually payable until the property is finally sold.
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