I am not sure if this belongs to tourist or resident news, probably both. There will be A LOT of apartments on the long term rent market soon. This changes everything.

https://www.portugalresident.com/al-bombshell-apartments-in-residential-buildings-cannot-be-rented-to-tourists/" rel="nofollow - https://www.portugalresident.com/al-bombshell-apartments-in-residential-buildings-cannot-be-rented-to-tourists/

"AL bombshell: apartments in residential buildings cannot be rented to tourists

Supreme Court ruling affects apartments already within AL regime"

Sounds like a sledgehammer to crack a walnut. There are two AL apartments in my little block of six and not once has there been any disruption to the rest of us. However the exisiting block rules do state that any new AL proposals must be approved by a majority of the other residents. Tens of thousands have been spent rebuilding the one next door. So if all AL licences are to be revoked immediately, what prospect for the owners and to whom do they sell or rent?

Or will it all go underground again as it was before the AL régime came into force.

> what prospect for the owners and to whom do they sell or rent?

I am truly not happy about hammer of this size but I'll be watching prices closely, this may lead to more realistic long term rental and sales prices.

> Or will it all go underground again as it was before the AL régime came into force.

Very tricky, majority was registered as AL so taxman knows where to look.

My parents own a condo in Albufeira, currently they have no plans to rent it to tourists but, I've considered it as a possibility in the future.  Does this mean the condo can not be rented to tourists?

Are "AL" condos specific condos?  I read the news article but not sure if this ruling applies to all condos or if "AL" refers to specific condos.

And, if it does apply to all condos, would you anticipate a significant number of condos will be put on the market as they were originally purchased as a rental income vehicle?

Thanks for your help!  :D

I am not a lawyer so somebody feel free to correct me, however I was going trough this with my lawyers in details couple of months ago so speaking from memory:

> Are "AL" condos specific condos?  I read the news article but not sure if this ruling applies to all condos or if "AL" refers to specific condos.

Any apartment can be rented as short term/tourist accommodation/Alojamento Local (AL) or on long term lease contract (don't know acronym for that).

AL: Lease with single party can take up to 11 months at the time; Tax is very attractive 6%; Requires AL registration with local authorities so must fulfill different rules in different municipalities. Can be rented to tourists trough airbnb or various agencies.

Long term lease: can only be on 12+ months; Tax starts with 30% for single year contract and drops to 5% (I think) with 5+ year contract. Can't be rented to tourists.

Obviously AL registration has much more attractive tax and since that's the only apartment registration that can be used for tourists everybody went that way.

There is no third option as far as I know.

> And, if it does apply to all condos, would you anticipate a significant number of condos will be put on the market as they were originally purchased as a rental income vehicle?

Yes. Switching AL to long term lease is possible, I am renting on long term lease in Albufeira, however taxes are higher (usually, depends on length) and prices lower. Pool of potential customers is smaller too.

When you say tax, do you mean tax due on rental income earned?  I must be misunderstanding??  6 to 30% is a huge difference!  Plus, it would seem the government was very much encouraging short term rentals with 6% tax??  (Pretty sure I must not be understanding the tax issue)

> When you say tax, do you mean tax due on rental income earned?  I must be misunderstanding??  6 to 30% is a huge difference!  Plus, it would seem the government was very much encouraging short term rentals with 6% tax??  (Pretty sure I must not be understanding the tax issue)

I just checked couple of months old whatsapp talk with my lawyers since I was considering to rent and sublet something nearby. I didn't which seems good decision now.

6% for AL and 30% or less for long term rental is IVA (VAT). That's what you have to pay anyway to local taxman. Then on top of that there is muncipal tax and I am not sure how big it is. Then rest of the money is taxed either in your home country or in Portugal, depending on where your personal tax obligations fall. Personal tax in Portugal goes in brackets from 10% (or so) to 47%.

See this few links, idealista usually has good and useful information:

https://www.propertylisbon.com/rental-income-tax-portugal-taxes-portugal/" rel="nofollow - https://www.propertylisbon.com/rental-income-tax-portugal-taxes-portugal/

https://www.idealista.pt/en/news/tags/tax-portugal/" rel="nofollow - https://www.idealista.pt/en/news/tags/tax-portugal/

Had a quick read-through of the links; clearly, if/when we consider rentals, I'll need a lawyer to assist.  

Related question...  I will be travelling to portugal in June.  Will not be staying at parents' condo this visit so have booked a couple of AirBnbs.  Will these new regulations possibly create any problems with these bookings?  (The original link/article stated that the changes would be effective immediately.)

Lawyers are apparently having a field day with all this. I cannot see AL licences being revoked immediately, but it would be worth double checking in detail any existing bookings (by personal contact) in case owners are taking fright.

The process of obtaining an AL licence involves reams of bureaucratic paperwork, checks on building and property safety, rules and regulations by the yard which takes months and costs hundreds. There are many which are just one or two apartments in a single block. The obvious attraction is that €1,500 week rental to tourists is more lucrative than €700 a month to a resident long term let.

I do understand initial appeal of 1500/week vs 700/month but I simply couldn't make math work since at best case scenario there is 8 weeks of 1500/week, with much more expenses than a long term let (even with better taxes). My former landlord had two apartments side by side, one leased to me for a year, other working as AL. While I do not know exact amount he earned from AL apartment I know asking price per day and number of visits he had so I know he earned few thousands more from me than from tourists when we look at the entire year.

Related:

https://www.theportugalnews.com/news/2022-04-25/new-rental-ruling-hitting-algarve-hardest/66592" rel="nofollow - https://www.theportugalnews.com/news/2022-04-25/new-rental-ruling-hitting-algarve-hardest/66592

https://www.portugalresident.com/al-bombshell-under-government-evaluation/" rel="nofollow - https://www.portugalresident.com/al-bombshell-under-government-evaluation/

Fellow cynic concurs.

https://www.portugalresident.com/smooth-jazz-comes-to-pine-cliffs/" rel="nofollow - https://www.portugalresident.com/smooth-jazz-comes-to-pine-cliffs/

"..is the cost of rent vs. income a problem?"

For many, yes. According the Portugal National Statistics Office, the average monthly wage in Portugal is about €1,300 a month. In places like Albufeira, where tourist rentals dominate, a small 1 bedroom apartment long term can easily cost €800 - €900 a month. Doesn't leave a lot, does it,  especially when many people work in the tourist industry at minimum wage.

Yes, I expect houses/villas prices to go up, apartment prices to go down, since ruling only affects apartments.

I know several young-ish locals who are super happy to have permanent job for 1100 euros/month, all three of them having university degrees. None of them can afford to rent apartment in Albufeira with current prices. One lives with wife, child and parents sharing the apartment, others lease 15-20 km north where prices can be more affordable.

With long term lease contract all the utility bills come on top of lease amount, usually 60-180 euros per month for electricity/water/gas.

Re my trip...  I've sent a message to my airbnb owner..  hoping there won't be an issue with my booking!  One would've thought all the covid rules and regulations were enough to deal with!

You might work on 30 weeks a year Pete but you do well if you can sell June to September and 8 weeks at full whack seems right to me. July and August you can charge what you want but June and September are the shoulder seasons and you charge about 50-70% of the July/August prices. A quick look at AirBnB, VRBO or TA will back that up.

I'm curious what's the word on the street re latest developments? I am very much against too many regulation however having 6% tax on AL or 30% on lease didn't ever seem fair. Of course multi year lease contract brings tax to the proximity of AL but still didn't seem right to push owners into AL.

Business as usual with guests taking hit of 25% tax hike or converting to lease and having no tax until 2030?

Do you know if this means I need to change a setting?

Thanks