In 2015 – we believe like many other holiday home owners in Portugal – in order to pay tax on 'rental income under the so-called Category B ‘Simplified Regime’, we complied with Decree Law nº128/2014, stating that "All holiday rental property must have a licence for Alojamento Local and the person or company operating the AL licence must register that business activity."
We have now been told that when someone complies with this law by registering an "activity, category B, of local accommodation" with a property they own personally, the property should immediately be allocated to the AL business. Put more simply, this means that even though nothing actually happens, for tax purposes, a sale or transfer from personal to business ownership is considered to have taken place. This can then generate capital gains or losses in category G, calculated on the difference between the price paid for the property when it was originally bought and the registered fiscal value at the time of this imaginary sale.
Has anyone else had any experience of this or even heard about it? It was certainly news to us!
"Property transfer" under Simplified Regime
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Property transfer" under Simplified Regime
Info from my accountant in Portugal.
"This has been news on the Portuguese Media lately as well, and there is pressure from several political, entrepreneurial and social factions to avoid the application of this situation to Sole Traders doing rentals under the Simplified Regime of Taxation.
Basically what the law states is the following:
Whenever you affect a property to your Sole Trading Activity, meaning a transmittion from your personal sphere to the sole trading activity, they consider this transmittion to be subject to Capital Gains.
That Capital Gain is calculated by having the affectation price subtracted of the purchase price. The affectation price should be equal to the market value of the property, which we will always try to affect by the same value as the purchase price, so this Capital Gain is equal to zero.
However, there is a second Capital Gain involved, which is when you close your activity and desaffect the property back to your personal sphere.
In this situation, the property will suffer for Capital Gains purposes a depreciation of 5% a year over 75% of the property value (2,5% on the first year)
In this case, you also need to desaffect the property by the current market value.
Please look at the example below to better understand this issue:
2016 – Purchases property for 150.000 €
2017 – Opens Sole trading activity and affects the property to the activity for 150.000 € (easy to justifiy this amount as market value since you just paid it one year ago)
Capital Gain on IRS Income Category G: Affectation amount – Purchase Price = 150.000 € - 150.000 € = 0
2018 – Closes actvity and reafects the property to its personal sphere for 150.000 € as well
Capital Gain on IRS Income Category B: Desafectattion value – Affectation Value = 150.000 € - (150.000-2.812,50 €) = 2.812,50 €
Also, only 95% of the Capital Gain is taxed
Capital Gains Tax = (2.812,50 € * 95%)* 25% = 667,97 €
Hope this helps .
"This has been news on the Portuguese Media lately as well, and there is pressure from several political, entrepreneurial and social factions to avoid the application of this situation to Sole Traders doing rentals under the Simplified Regime of Taxation.
Basically what the law states is the following:
Whenever you affect a property to your Sole Trading Activity, meaning a transmittion from your personal sphere to the sole trading activity, they consider this transmittion to be subject to Capital Gains.
That Capital Gain is calculated by having the affectation price subtracted of the purchase price. The affectation price should be equal to the market value of the property, which we will always try to affect by the same value as the purchase price, so this Capital Gain is equal to zero.
However, there is a second Capital Gain involved, which is when you close your activity and desaffect the property back to your personal sphere.
In this situation, the property will suffer for Capital Gains purposes a depreciation of 5% a year over 75% of the property value (2,5% on the first year)
In this case, you also need to desaffect the property by the current market value.
Please look at the example below to better understand this issue:
2016 – Purchases property for 150.000 €
2017 – Opens Sole trading activity and affects the property to the activity for 150.000 € (easy to justifiy this amount as market value since you just paid it one year ago)
Capital Gain on IRS Income Category G: Affectation amount – Purchase Price = 150.000 € - 150.000 € = 0
2018 – Closes actvity and reafects the property to its personal sphere for 150.000 € as well
Capital Gain on IRS Income Category B: Desafectattion value – Affectation Value = 150.000 € - (150.000-2.812,50 €) = 2.812,50 €
Also, only 95% of the Capital Gain is taxed
Capital Gains Tax = (2.812,50 € * 95%)* 25% = 667,97 €
Hope this helps .
Yes - looks like it's true!
http://www.algarvedailynews.com/news/11 ... s-tax-blow
https://nalle.pt/2017/06/25/815/
http://www.algarvedailynews.com/news/11 ... s-tax-blow
https://nalle.pt/2017/06/25/815/