How to create a Local Accommodation in 3 steps (2022)

How to create a Local Accommodation in 3 steps

Are you looking to monetize your property, but don't know where to start? Correctly registering your Local Accommodation and defining a strategy according to the type of property you have are fundamental elements.

With this approach we were able to successively increase the income in a consecutive and personalized way to the more than 90 properties that work with us from the entire Algarve region, every year in a region with the attenuator of extreme seasonality and keep the hosts of our clients extremely satisfied with an average rating of 4,72 on the booking platforms.

Portugal receives approximately 25 million guests per year, with the Algarve in particular receiving per month about 232,728 Guests in Local Accommodation which totals approximately 2,7million guests in A.L properties every year.

In this guide we will explain how you can start your local accommodation by defining a strategy, starting the registration of A.L and finally how to manage and maintain a successful Local Accommodation!

Step #1. Strategy

To form a successful Local Accommodation in any location there are 2 fundamental considerations to make:

• Seasonality
• Costs

Seasonality

Different locations have different levels of seasonality. For example, the high season in a region like the Algarve is in summer, while the high season in a region like Bragança or Gerês is in winter.

Although the Algarve in particular is visited throughout the year, there is still a great disparity between winter occupancy rates compared to summer occupancy rates. However, there are several ways to mitigate the effect of seasonality, such as improving your strategy of bihayê, improve SEO strategy and improve the images of your property.

If you want to know more ways to mitigate the effect of seasonality click here.

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Costs

There are some costs associated with the creation of a Local Accommodation, namely IMI (Municipal Property Tax), IRS or IRC, depending on the taxation regime chosen (explanation ahead).

Thus, in a first phase, it is necessary to choose the mode of taxation, and be aware of other costs such as compulsory insurance, telecommunications, water, gas, electricity, digital advertising (including commissions from booking platforms) cleaning, possible works and costs of managing your property to third parties, such as companies specialized in management of short-term leases.

Step #2. A.L Register

Is my property suitable for the formation of an A.L?

First of all, it is necessary to know what type of property can be constituted as Local accommodation.

It is considered a Local Accommodationan establishment providing temporary accommodation services (not exceeding 30 days), in particular to tourists, for remuneration. In concrete terms, Local Accommodation is mainly divided as follows:

Apartment- Local Accommodation Establishment consisting of the autonomous fraction of a building.

Dwelling- The main accommodation unit consists of an autonomous single-family building.

Is there any kind of support for the formation of a local accommodation?

OTourism of Portugal, in partnership with the Banking System developed aTourist Offer Support Line which consists of financing investment projects of tourism companies that result in the requalification, repositioning and/or creation of ventures, establishments and activities, as well as in the development of entrepreneurship projects.

If you cannot or do not want to use any support, you can always opt for a bank loanspecialized for the area of tourism or resort to a traditional housing loan for the acquisition of a second home.

Whether you choose a line of support for tourism or a loan to Own Housing, you should always consider your investment considering the surroundings of the location of your property, noting if there is any future urban change that could enhance (for example construction of a supermarket, train line or metro) or devalue (for example construction of a factory) the value of the property.

What documents are needed for the formation of a local accommodation?

Legalizing a Local Accommodation establishment is a simple process, but all the steps must be followed to obtain a seamless registration experience.

Start by making a prior communication onElectronic Single Counter.

The prior notification shall contain the following information:

• Identification of the owner of the operation of the establishment, including the mention of the name of the owner or respective firm that exploits the use of the property, as well as the respective tax identification number (s);
• Authorization to use or valid title to use the property, document issued by the city council defining its use;
• Address of the owner of the holding of the establishment;
• Name of the Local Accommodation establishment and respective address;
• Type of establishment (apartment or villa) in which the activity will take place;
• Capacity of the establishment (number of rooms, beds and guests);
• Intended date of opening to the public.

It is also necessary to provide a copy of your citizen card, property book, declaration of commencement (or change of activity with Finance), and Terms of Liability- subscribed by the owner of the operation of the establishment, ensuring that the property is legally enabledto serve as Local Accommodation.

Then, wait for a response from the municipality (usually within 10 days) with the registration number that you must use to start your Local Accommodation, as well as to advertise it on booking platforms (Booking, Airbnb, VRBO etc.).

The municipality and ASAE can, within a maximum period of 30 days, carry out a histories to the accommodation to confirm that it meets all the conditions required by law.

You also need to open activity inTax and Customs Authorityand define the CAEs (the codes of the areas of activity) that you intend to exercise:

• 55201 for furnished accommodation intended to host tourists;
• 55202 for rural passenger cars;
• 55204 for other short-term accommodation.

In addition to all the documentation, do not forget to make the compulsory insurance (DS CREDITO) to protect your Local Accommodation.

There are also other legal obligations such as the book of complaints or obtaining energy certification (mandatory if the property refers to buildings or autonomous fractions covered by this certification system).

Advertising an unregistered AL, keeping outdated data in the establishment's registry or exceeding the maximum capacity stipulated for local accommodation are three of the infractions provided by law. The fines can go up to 4 000 euros if they apply to an individual, or up to 40 000 euros, in the case of legal persons.

‍What are the tax obligations?

After having created your Local Accommodation, you must comply with tax obligations, choosing the type of taxation that brings you the most benefits according to your situation. Before deciding, get to know what your alternatives are:

INHERITANCE

Simplified regime

The tax in the simplified regime affects 35% of the income obtained with your Local Accommodation. The remaining 65% are considered costs arising from the operation of the Local Accommodation.

As a new State Budget 2020, and for Local Accommodation located in containment areas, the tax will now affect 50% of income (and not the previous 35%), which will not happen for regions that do not have containment zones such as the Algarve.

Organized Accounting

You can opt for organized accounting, if you eventually start billing more than 200 thousand euros per year, this modality becomes mandatory. Income will be taxed according to the IRC rules, so it presents, in relation to the simplified regime, the advantage of being able to deduct all costs with the activity, from cleaning products, furniture, electricity, water or gas.

IRC

If you want your Local Accommodation to be a company, you have to opt for the IRC (Corporate Income Tax), which also has numerous benefits, but also has more complex rules, so before taking this step, you should consult a certified accountant (TOC) who will help certify that you do not end up paying unnecessary taxes, also being responsible for the completion and organization of the legal and tax part of your business.

YES

Local Accommodation is subject to the reduced VAT rate of 6%, but only if annual income exceeds 10.000 euros, otherwise it is exempt from this tax.

However, even if you have to pay it, you can deduct the VAT rate from the expenses of operating the Local Accommodation, including commissions paid to the platforms where you advertise your property.

MINE

The value of the IMI (Municipal Property Tax) depends on the Tax Patrimonial Value (VPT) of the property and the fee charged by the municipality and can vary between 0,3% and 0,45%.

AIMI

There is the possibility of having to pay AIMI (Additional Municipal Property Tax) in the case of having a real estate asset of more than 600,000 euros (separate taxation) or 1,2 million euros (joint taxation).

IMT

The Municipal Tax on Onerous Transfers of Real Estate (IMT) is intended for those who buy a property to exploit it precisely as a form of Local Accommodation, and must pay it immediately at the time of acquisition.

Booking platform commissions

If you advertise your Local Accommodation on foreign platforms, such as Airbnb, deliver to Finance the Model 30.

You can also request the sending of the Model 21-RFIto obtain the total or partial exemption from withholding tax at source on commissions, in order to avoid double taxation between Portugal and the country where the reservation platform resides.‍

Insurance - compulsory and coverages

Created and legalized your project, you must make insurance for your Local Accommodation, thus complying with the new legislation and ensuring that your business is protected and the safeguarding of your responsibilities as owner.

As of 2020, all LAs are required to have civil liability insurance, with a minimum capital of 75.000 euros per claim. Not having the compulsory insurance is sufficient reason to cancel the registration of the AL.

Step #3. Local Accommodation Management

Ways to manage your AL: in person or through hired partners?

Instead of dealing with this whole process that can become tedious or you simply do not have time to perform all the tasks necessary for the formation and maintenance of a successful Local Accommodation, you may prefer to resort to specialized companies with experience in the market, which deal with all the day-to-day aspects of Local Accommodation for you, freeing up time in your calendar for other activities.

As a The Albufeira Conciergeyou can always count on a service from team with specialized know-how,including photographs to increase the visibility of your ads, strategy of bihayêwell defined with dynamic prices adapted to seasonal demand, allowing an increase between 25% to 35% in booking requests, realization of personal or remote check-in, welcome packages, laundry and cleaning service, creation and management of online advertisements, specialized decoration to increase the attractiveness of the property and recommendations of local partners from restaurants to companies oftransfer, passing through event and tour companies that constantly elevate the experience of their guests and make their visit an experience that they want to repeat in the future.

Requirements to take into account for the management of your AL

There are some legal requirements that you must obey when caring for your AL. In addition to meeting the general requirements, you must also ensure the appropriate conditions of conservation and operation of installations and equipment.

Always keep in mind that failure to comply with obligations entails monetary penalties. In the case of failures in the identification of the AL, the fines vary between 50 euros and 7.500 euros, while the penalties for not complying with the security requirements range from 125 euros to 40.000 euros.

Booking management

At the beginning of your business you may not want to define a minimum stay under the illusion that you may be “driving away” customers.

On the contrary, accepting a short reservation (one, two days) can make it impossible for a long reservation (seven days) that arrives soon after. In the long run, defining a minimum stay pays off.

On the other hand, it can make the offer more flexible, allowing shorter stays in the low season. The important thing is to study your city or region and realize that events - such as international football games, sporting events, concerts and music festivals, summits and business conferences, etc. - can attract short-term customers in the less busy periods of your accommodation. What works with most of our owners and presents the best results is a minimum reservation of 5 nights.

Unforeseeable situations

Damaged furniture, clogged pipes, damaged air conditioning, lack of hot water are always small incidents resulting from keeping doors open to the public, what matters is to be prepared and careful for each situation. In such a case, you must act immediately to avoid constraints for your guests and try to restore the normality of the establishment.

You should check if the situation is covered by the insurance you have taken out for your AL and contact the insurer to act quickly.

Collaborate with your neighbors

Remember that, according to the new legislation, the condominium may have the power to decide on the opening of its Local Accommodation or, once opened, on its viability and continuity.

Thus, it is essential to count on the goodwill of your neighbors and assure them that you have taken all the steps so that your property is enjoyed by your guests without disturbing the other inhabitants of the building/condominium.

To do this you can develop an information leaflet/guide that explains the rules of the building or condominium there is harmony between your guests, your neighbors and you.

Don't have time to devote yourself to this whole process?

When you rent a property, as a rule it is not close to it or even available at all times, so the idea of “delegating” this entire management process makes perfect sense.

The main advantage of using a property service is the level of organization in all aspects inherent in this activity. In addition to managing, we add value to your property.

Instead of just focusing on the logistics and management of our clients' property, we are constantly looking to place higher values in property listings without lowering occupancy rates and offer them a better service, maximizing revenue from bookings and guest satisfaction, using infrastructures, know-how and technical skills that our owners alone may not have or have time to invest in these activities.

If you want all this service for the management of your property click here.

We hope that this guide has clarified your doubts regarding the creation and maintenance of a Local Accommodation.

To know more detailed information about the formation and registration of a Local Accommodation, download our Local Accommodation Guide!