30% of guesthouse owners caught in tax evasion sting

Operation ‘Best Holidays’ is an all out assault on the accommodation sector at its busiest time of the year as tax inspectors across the country, most especially in tourism hotspots such as the Algarve, have been told to concentrate on un-invoiced income by tracing bookings made online.

The 'Best Holidays' operation was tested before national launch with 80 tourist accommodation establishments being tracked and where 30% were found to not to have put all income through the books, primarily from bookings made through third party websites.

In a statement today the Ministry of Finance confirmed the all out inspection now has the green light and reports of "serious offenses" are flooding in.

"In compliance with the strategic objective of combating the black economy, tax evasion and fraud, the tax office has in recent months undertaken a series of measures to monitor and evaluate operators in the tourist accommodation sector to combat the illegal trade of ‘parallel beds’ which is a severe form of tax evasion and leads to unfair competition among regular tour operators," said the Secretary of State for Fiscal Affairs.

A special force of 150 tax inspectors has been targetting businessed that take bookings from third party websites often used by tourists and have been monitoring occupancy levels since January 1, 2013 until now.

The taxman has been looking at websites which charge a commission for each booking so as to monitor occupancy rates. The establishments under surveillance were selected from those that paid fees to web-based booking companies in 2012.

The tax office now will find it easy to collect evidence for 2013 and 2014, and verify that reservations made through websites actually were invoiced and declared to the tax authorities.

The many paperless online bookings websites are used mostly by tourists from outside the country and are less likely to ask for or want proper receipts for their stays. It then is tempting for accommodation owners not to declare the income.

With the test period showing 30% are evading taxes, the fight is on with an empowered well staffed and smart tax department against accommodation providers.

What the market now can be sure of is that long-term monitoring of private villa rental is already being tracked using similar methods.

Comments  

12

+2 #12 Carol Nielsen 2014-09-21 14:27

We have bought a caravan on a farm in the Arao area and built on to it. We have spent a lot of money upgrading this place and am not not sure whether this is legal or not. The problem now being that we wish to leave. The owner of the farm has forbidden us to sell what we have here and is only prepARED to pay us less than half of what we have spent. We have also found a new tenant to make life easier for this unco-operative landlord. Please help!

+2 #11 Paul 2014-07-21 23:29

Quoting Daniel:

Quoting Karel:

Would somebody please be so kind to help me out with the question concerning "the mandatory information to SEF for incoming and outgoing tourists" under the Alojamento Local regime ? I questioned about 10 colleagues (all long-time villa owners) and 2 accountants but unfortunately nobody ever heard about such an "obligation" and of course could not deliver any "details" (like how to inform them, where to inform them, etc.). Thank you.

The Jan 2014 Decree Law for Alojamento Local is at
https://dre.pt/pdf1sdip/2014/01/01600/0048000505.pdf
I had a quick look through and could find no reference to SEF but will keep researching. Ed.

This might answer the question:
http://siba.sef.pt/Informacao/faqs_juridicas.html#6
Ed

+2 #10 Paul 2014-07-21 23:26

Quoting Karel:

Would somebody please be so kind to help me out with the question concerning "the mandatory information to SEF for incoming and outgoing tourists" under the Alojamento Local regime ? I questioned about 10 colleagues (all long-time villa owners) and 2 accountants but unfortunately nobody ever heard about such an "obligation" and of course could not deliver any "details" (like how to inform them, where to inform them, etc.). Thank you.

The Jan 2014 Decree Law for Alojamento Local is at
https://dre.pt/pdf1sdip/2014/01/01600/0048000505.pdf
I had a quick look through and could find no reference to SEF but will keep researching. Ed.

+4 #9 Karel 2014-07-21 13:12

Would somebody please be so kind to help me out with the question concerning "the mandatory information to SEF for incoming and outgoing tourists" under the Alojamento Local regime ? I questioned about 10 colleagues (all long-time villa owners) and 2 accountants but unfortunately nobody ever heard about such an "obligation" and of course could not deliver any "details" (like how to inform them, where to inform them, etc.). Thank you.

+3 #8 Stanley. 2014-07-20 19:40

Crikey .... and I thought you were really a Paulo !

Well done for sussing this one out (or your UK accountant) - but lets keep it between ourselves OK?

It wouldn't do for any fiscal types to be closing this one down.

Particularly as on the Expat Brit advice sites the pure blood natives masquerading as Brits are obsessed with us declaring everything to the PT Govt. - including ideally the 8 pints of blood God gave us back in the UK. Then leaving, if necessary, in a box or air ambulance ...

There is still the major hurdle getting Alojamento Local or even Turismo status. As Karel points out ... there is almost always a hidden agenda involved to stop or delay you.

How does your accountant explain away ... bungs ? Entertaining expenses ?

+3 #7 Paul B 2014-07-20 12:52

Its simple - your English business is renting out the villa to the guest and invoices the guest £500. Your English business then rents the villa for £200 which you legitimately invoice in Portugal £200 to your English business and declare the £200 as Income in Portugal. The contract with the guest is with your English Business and therefore for English Tax purposes you have invoiced £500 but paid £200 so made a profit of £300 which you can then off set your English Expenses like advertising / Bank interest and charges / computer etc. There is no argument from either side as the English business has done the leg work etc to get the booking and has made a profit with tax deductible expenses and the Portuguese side has received rent which is declared in full (and documented on Your Bank Statement) which can then use the limited expenses to reduce the tax in Portugal. This way all expenses from both countries are deducted from the gross profit which is exactly as it should be.

+4 #6 Karel 2014-07-20 11:19

As a long-term resident I experienced that in this country absolutely NOTHING is straightforward in the sense of "honesty - open minded - not tricky - clear - correct - simple - etc. etc." in one way or another there is always " a hidden agenda" involved ! As such in reality "the hunt after the illegal beds" apparently becomes nothing else than "a hunt after more tax payer's money !". It has to be said that it is absolutely not tolerable that more than 50 % of the villa and apartment renting out landlords do not comply with the law (omitting to pay VAT+soc.sec+IRS) but with the strategies used now by finanças 100% of "the good guys" have the risk to be (fiscally) persecuted whilst only a marginal part of "the illegals" might be "discovered". And what about the ALOJAMENTO LOCAL license? We better forget about, it handels here about "big tax money" and not about peanuts for an acrylic plate near the entrance door...

+4 #5 Stanley. 2014-07-20 11:05

Ref: Paul. B ....a lovely idea but I must be missing something.

What if you have a weeks booking to declare. Your web advert says you charged 500 that week? And your rental calendar shows you were booked that week presumably at or near that amount ?

OK this pre-supposes the taxmen investigate your case in detail .... again.

But both Financas and HMR&C - if they cross-reference - are then curious why you are admitting to a split of 200 to Portugal and 300 to the UK=500.

What answer to them works then ??

+6 #4 Paul B 2014-07-20 09:37

The most efficient way to deal with villa rental is to split the income between Portugal and the Uk. I have just been investigated in the UK by HMRC having received a letter informing me that "it is within the public domain that you are in receipt of rental from a foreign property" - HMRC are also monitoring web sites like owners direct etc. I passed with flying colours and here's how to do it.
Declare every letting in portugal but invoice yourself as say Johns Villa Rentals with your uk address details for the invoice for 40% of the rental which you then pass to your portugal accountant who can then deduct the limited expenses from the total for tax here and you may end up with no or little tax. Then in the UK declare the 60% income but there you can deduct advertising! office! computer expenses and importantly bank charges and mortgage interest from the profit and if like me that will wipe out your uk profit and you end up totally legal and no Tax.

+8 #3 mm 2014-07-20 07:44

I have found many times that lawyers here don't even know the laws

I am sure if you went to 2 different camaras they would give 2 completely versions of what is legal or not - so what hope for "advisers" getting it right

12

Refresh comments list

You must be a registered user to make comments.
Please register here to post your comments.