Newsletters
The Portuguese Tax and Customs Authority (‘AT’) recently issued a Binding Information containing a new interpretation of the VAT rules applicable to short-term rental, with an impact on the sector vis-à-vis operators' market practice.
In the case under review, an owner transferred the operation of a property to an operator, receiving 70% of the net invoiced value, with the operator retaining the remainder - a common practice in the sector - and the licence for the short-term rental unit was registered in the name of the operator.
Contrary to what it had already held, the AT ruled that:
- The owner's remuneration, relating to the transfer of operation rights, is subject to the standard rate of VAT;
- Only accommodation services provided directly by the operator to guests, in its own name, benefit from the reduced rate.
This position is in contrast with a Binding Information published by the AT in 2019, which considered the operator to be the owner's agent, applying the reduced rate to both the owner's remuneration and the accommodation services provided by the operator. According to the AT's new interpretation, the majority of contracts signed between owners and operators will be construed as an assignment of operating rights - regardless of who holds the registration for the short-term rental unit - based on the argument that the owner does not simply rent the property, but rather assigns the right to commercially operate it, and in many cases may reserve its use for themselves or third parties for specific periods.
In view of this change in the framework, which could have practical and tax implications (especially as regards VAT), we recommend reviewing the contracts currently in force between owners and operators.
CCA is available to assist in the review of ongoing agreements and procedures, with a view to assessing risks and identifying any necessary adjustments, ensuring full compliance with the new AT guidance.