The Alojamento Local system is a failure by any measurement with only around 30% of property owners bothering to register on the scheme launched in 2008.
One reader challenged Dear Ed to come up with a ‘five minute solution,’ so here it is. These thoughts on the failed Alojamento Local system and how to fix it, in fact took 15 minutes to write down in draft form. Please add your constructive comments at the end in the Comments section.
1. Property owners register their accommodation for free on a new Turismo do Portugal Lettings website, tasked with becoming the largest lettings site in the country where tourists can book and pay for their holiday breaks.
As Portugal now prides itself on being tech-savvy - one of the bright young website design companies can take on this project with ease. It is not complicated.
This bookings website is similar to Airbnb - but free to list properties - and heavily advertised and promoted as the huge majority of holidaymakers now book their flights and their holiday accommodation online.
Holidaymakers are issued with an arrival checklist ‘what to look for/expect’ and satisfaction feedback form to fill in online later with the chance to win a holiday or similar.
The site is self-regulating as this customer feedback weeds out poor accommodation, similar to TripAdvisor. Seriously poor feedback means no further bookings.
As people are paying for their holidays online, a percentage is deducted when they pay. This covers income tax at, say 10% or 15%. Finanças therefore is not involved at any stage of the process and simply receives money each month from the Turismo de Portugal website.
The commission from the booking total is sufficient to run the rental scheme and cover income tax.
Properties need to be insured against accidents. When registering the property, owners tick a box for 'insured?' If the property is not, a link through to an online insurer will enable insurance to be purchased there and then - with a percentage reverting as annual commission.
Renters fill in their own passport number(s) when booking, this can be filtered off to the SEF which can store the data.
2. Scrap the CGT treatment of rental space if within a primary residence. The current rules deter tens of thousands of people from registering as GCT is applicable on sale.
More money will be collected from the commission on each booking than fiddling round with taxing the square metres that were used for rentals.
3. Scrap the necessity for owners to register as self-employed. The letting of property should be an exempt category. This will encourage tens of thousands of owners to join the free to register scheme.
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There are many things I will not have thought about. What I have thought about is taking the AL scheme away from Social Security, Finanças, ASAE, local councils and the SEF and making it self-regulating and cash positive.
Please add your thoughts in the Comments box below