Let’s see how the measures brought by the Pacote Mais Habitação impact the regime of Short-Term Rentals in Portugal.

GSN aims to explain to you briefly the main changes introduced by Law No. 56/2023, dated October 6th.

As previously announced, the so-called Pacote Mais Habitação has significantly changed the rules in short-term rentals (aka Airbnb) and residential leases in Portugal. Also impacting taxation, it has altered the rules for the taxation of property transmission and alienation.

Let’s start by focusing on the changes to short-term rentals.

In a second article, GSN will provide you with more information on residential leasing and taxation in property purchase and sale changes.

 

So, regarding Short-Term Rentals:

A. Change in duration; renewal and new registrations

1. Duration and renewal of existing licenses:

The municipalities will renew short-term rental licenses for 5 (five) years, renewable for equal periods. The first renewal will count from the date of issuance of the public opening permit.

Municipality must now expressly approve the renewal, within a deadline defined in municipal regulations. In fact, with the Pacote Mais Habitação, the Municipality gains the power to oppose it based on the requirements provided for the operation of short-term rental establishments or in the Carta Municipal de Habitação.

The licenses issued until the date of publication of the law (07.10.2023) will be reviewed in 2030. However, Municipalities will not review the registrations of short-term rentals in properties serving as collateral for a mortgage contracted until 16.02.2023, provided that by 31.12.2029, the loan has not yet been fully repaid.

Regarding the obligation to prove maintenance of activity:

The implementation of the Pacote Mais Habitação required almost all short-term rental registration holders to submit proof of ongoing operational activity by December 13, 2023, using Balcão Único Eletrónico at RNAL platform – Registo Nacional de Alojamento Local.

Still, and according to information disclosed in the media, approximately 40% of properties licensed as short-term rentals did not submit the proof required by the Pacote Mais Habitação.

However, so far, Municipalities have not canceled any registrations.

Indeed, many doubts persist about the exact procedures to observe for the cancellation of licenses.

For instance, according to the established procedure, the municipality lacks the means to ascertain whether the failure to provide evidence of ongoing activity is due to legal exemption from this requirement.

It becomes, therefore, very important to ensure that owners have the opportunity to express their views in a prior hearing, which implies that the Municipality must ensure compliance with the administrative procedure.

There is still much to be clarified (if not changed altogether).

 

2. Regarding new short-term rental licenses, the Pacote Mais Habitação provides that:

When it comes to short-term rentals in apartments integrated into a building, the municipality suspends the issuance of new licenses.

However, this suspension only applies mainly in large urban centers such as Lisbon and Porto.

Municipalities will continue to issue short-term rental licenses for apartments:

• Located in inland territories (identified in the annex to Order No. 208/2017, of July 13);
• Integrated into the Revive Nature Fund (Decree-Law No. 161/2019, of October 25);
• Or located in the Autonomous Regions.

Therefore, it is not true that the Pacote Mais Habitação has ended short-term rental licenses.

However, the government, indeed, suspended new licences except in the cases mentioned above.

Notwithstanding, it is important to note that the Municipality may lift the suspension upon approval of the Municipal Housing Charter.

One expect the Municipality will do so when they are able to establish an adequate balance between the offer of housing and student accommodation, and to define the rules for the use of housing for short-term rentals.

B. Transfer of Properties operated under the Short-Term Rental Regime to Long Term rental. Amendment to the Statute of Tax Benefits (EBF)

The Pacote Mais Habitação also created a tax incentive for the owners who transfer a short-term rental properties to a residential lease.

According to the new measures, to take advantage of this benefit, it is necessary to comply with all the following conditions:

• The owners transfer the properties to a residential lease, ensuring that they are intended for the tenant’s domicile;
• The short-term rental establishment is registered and in operation by December 31, 2022;
• The lease agreement is concluded and registered on the Tax Authority Online Portal until December 31, 2024.

Once the beneficiaries meet these requirements, all the rental income they will obtain until December 31, 2029, will be exempt from IRS and IRC.

 

C. Extraordinary Contribution on Short-Term Rentals (CEAL).

All properties with residential purposes operating as short-term rentals with a valid license will be subject to the payment of an extraordinary contribution.

As such, by December 31 of each calendar year, municipalities identify residential properties used as short-term rentals and charge the CEAL to the operators.

How does one calculate CEAL after all?

One calculates CEAL based on two coefficients: an economic one, related to short-term rentals, and another related to urban pressure, considering the area of the residential properties affected.

In other words:

A presumed income is calculated based on the property value per square meter, and the average annual income per room in short-term rental nationwide. Then, a correction factor is applied to adjust the contribution according to the area urban pressure.

Notwithstanding this, it is important to note that short-term rentals in inland areas are exempt from CEAL.

Also excluded from paying the CEAL are the short-term rental operations on properties located in parishes that meet, cumulatively, the following criteria:

• They are covered by a Municipal Housing Charter that demonstrates the adequate balance of housing and student accommodation in the municipality;
• They are part of municipalities where the situation of housing shortage was not declared, and
• They do not have any part of their territory in an area considered to be under urban pressure.

By January 31 of each year, it is up to the municipalities to inform the Tax Authority of the parishes excluded from the CEAL.

 

Considering some of the questions we have received, we also want to note some additional references regarding the measures of the Pacote Mais Habitação:

1- I am going to sell my apartment with a Short-Term Rental license. Can I transfer the registration?

With the Pacote Mais Habitação, the short-term rental license is non-transferable in any of its modalities. In other words, the registration number is personal and associated with the owner and not with the property.

Therefore, when selling your licensed property, the new owner must obtain a license himself to continue the short-term rental activity.

However, the Pacote Mais Habitação went even further. They consider a”transfer”, any transaction, of any part, of the share capital of a company holding a short-term rental license.

That is, if you  sell or transfer any percentage of the company holding the short-term rental license, the license expires.

2- How can the Condominium affect your Short-Term Rental activity?

GSN explains:

With the Pacote Mais Habitação, it became clear the condominium has a say about short-term rental activity in the building.

In fact, the Courts had already pronounced themselves many times on this issue, and there were decisions for all tastes.

Some judges understood that the short-term rental license could operate in a property intended for housing, and that, as such, the condominium could not object. Other Judges understood that only if the property was specifically registered for short-term rental or lodging purposes the condominium could not object.

The Pacote Mais Habitação has now definitively established that:

To license a short-term rental in a fraction intended for housing purposes of a building organized under horizontal property, the owner must obtain prior authorization from the condominium. For the opposition decision to be effective, the condominium must decide unanimously (excluding the owner, of course).

Only then will it be effective and able to prevent the exercise of a short-term rental license.

For existing registrations, the condominium must oppose by a resolution of at least 2/3 of the building’s per mileage.

However, it is very important to note that the condominium cannot object to short-term rental activity in the building when: (1) the constitutive deed of horizontal property expressly provides for the use of the apartment for short-term rental purposes; (2) the condominium has previously authorized short-term rental activity in that apartment.

 

Summing it up – it is better to safeguard yourself in advance when you have decided to invest in short-term rental in an apartment.

 

GSN can help guide you on these issues.

 

Thank you for reading us!

 

Eva Garcia & David Santos Silva