Portugal’s tax department is €20 million a year out of pocket due to illegal property lettings to tourists.
If those property owners who rent their homes to tourists were to pay taxes, Portugal’s Inland Revenue would collect about €20 million a year according to early reports and projections using data collected by undercover inspectors who already are on the prowl.
For last year, the estimate is that four million illegal overnights took place. This is the figure being touted around by the Hospitality Association of Portugal.
Simplistic projections refer to an unreported income figure of €80 million taking an average of €20 per night per person.
If the income from these short term rentals, usually lettings to tourists in the summer months, were reported on the owners’ tax returns and taxes levied as corporation or income tax, the authorities would have raised €20 million.
These figures are now being used by the Secretary of State for Fiscal Affairs, Paulo Nuncio, who "would not be surprised" if the current tax loss was not even higher than the figure suggested.
The President of the Hospitality Association of Portugal, Luís Veiga, said illegal overnights represented in 2013 about 10% of the total number of legal overnight stays.
Starting this March in an effort to identify landlords who do not declare their income from rentals, the tax department has been dispatching staff posing as tourists.
The Secretary of State expects results from the tourist areas being targetted, especially from the Algarve.
What Nuncio does not take into account are the thousands of landlords that simply have stopped lettings and hence all the associated commmercial activity that goes with a rental business, much of which carries VAT at 23% and keeps people employed.
