Tourist rentals: get tax deductions on the fee you pay to booking websites

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16 January 2019, Redaction

Portugal’s tourist accommodation business is booming, with short-term tourist lets becoming ever more profitable and popular. This sector is known in Portugal as Alojamento Local (AL) and the fees property owners pay to booking websites are now exempt from taxes.

If you have one or more properties that you operate under the AL scheme, you may be able to get a tax deduction from your personal income tax expenses for the commissions you pay to the booking platforms. This is the case if you opt for the rules of taxation of Category F (rents) according to the Portuguese Tax and Customs Authority, Autoridade Tributária e Aduaneira.

Until 2017, the income from AL was taxed at 15% according to the rules of Category B, since the remaining portion was assumed as expenditure.

Now the Tax Authority considers that "obtaining the income to be taxed depends on the use of the booking platform" and that the commission that is paid to this company "meets the requirements to be considered as an inseparable expense to obtain the income" and is, therefore, tax deductible.

"The amount paid for the use of online reservation platforms [like Booking and Rentalia] must, for purposes of deduction, be entered in Appendix B or C, as the case may be," says the taxman, adding that, "in this case, and if the taxpayer is covered by the simplified taxation regime, table 15.2 of Appendix B" of the annual tax return must be completed.

The changing face of Portuguese property taxation

The tourist rental tax scheme underwent several changes in 2017: the amount of income subject to tax was increased from 15% to 35% and, at the same time, it was made possible to pay Income Tax in Portugal for it in accordance with the rules applied to housing leases (category F), subject to a special rate of 28%.

It’s possible to deduct from the total Category F income a series of expenses such as the Municipal Tax on Real Estate (Imposto Municipal sobre os Imóveis), the shared expenses for the common areas of the apartment block, conservation and maintenance works on the property or even "the expenses actually paid and borne by the taxpayer to obtain such income".

From this list, only expenses of a financial nature (such as monthly fees and interest on loans taken out for the purchase of the property in question), as well as household appliances and furniture, are excluded.

It is within this context that the ruling has now come down that fees paid to online booking platforms, often used by those providing short-term rentals for tourist accommodation services, are also deductible as long as, according to the tax authorities, the expenditure is "documented".

There are currently 80,387 registered ‘Local Accommodations’ in Portugal and many owners operating under this scheme say they pay 15% of the value of each reservation. This latest step by the Portuguese Tax Agency could provide an excellent opportunity for property investors in Portugal, and a real boost for the whole economy.

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