A local housing association is preparing to challenge CEAL after the election

The Local Housing Association of Portugal (ALEP) is preparing to challenge the Extraordinary Contribution for Local Housing (CEAL) after the legislative elections in March, arguing that it is illegal and unconstitutional. The elections may bring news related to this issue, so the association will wait for the results to evaluate the necessity of moving forward in confronting the challenge, which threatens to create a large financial burden on the next government.

The legality of CEAL has been debated since its announcement, with local accommodation representatives claiming that it violates the law and even the constitution, by failing to ensure proportionality in charging fees. For this reason, ALEP has already requested opinions on this issue, opinions that support the idea that the contribution (which there are doubts about whether it does not constitute a tax in practice) is illegal.

“We are very confident that there are materials here to challenge and challenge this law and that is what we are working on at the moment,” ALEP president Eduardo Miranda told JE, referring to the end of March or April. Starting the challenge process… The idea is to move forward before the bill is collected, which, if confirmed, will take place in June.

Previously, legislative elections in March could have reversed the situation, meaning there would be no need to impeach him. If the new government decides to abolish this measure, ALEP's intention will be defeated; In the opposite direction, an attempt to challenge will move forward. Given the average duration of experiments of this type and the approximately 75,000 entrepreneurs in the university sector, this could generate a “huge financial burden” for the next government, warns Eduardo Miranda. In other words, estimated revenues that could reach €100 million may have to be returned if the courts object to the measure.

In July last year, ALEP had already asked Abreu Advogados for her opinion on the Mais Habitação package, which included CEAL. The law firm considers this contribution unconstitutional, claiming that it violates some principles such as proportionality, and that it actually constitutes a tax in disguise.

By not specifying the cause of the problem it intends to address, this contribution cannot be classified as a private contribution, the opinion says, claiming that the attack on the Arab League sector is motivated solely by ideological issues. Thus, this “imposes increases in the value of properties intended for local housing, and therefore their IMI settlement, without being based on appropriate criteria or demonstrating the actual need and proportionality of the measure offered.”

Moreover, it “only affects ‘apartments’ without demonstrating to what extent, for example, the provision of local housing in houses would have a different impact,” in addition to being based “on income assumptions that have no relation to the amount of income.” An assumed general allocation, similar to an income tax calculated on the assumed total income of a confiscatory nature.”

“Furthermore, since subsidiary liability is at stake, the situations in which a landlord may assume liability are instances of tenant insolvency, situations in which the landlord is, with a high probability, a creditor of the tenant,” the opinion adds.

Landlords can be liable for tenants

CEAL was announced alongside the Mais Habitação package, which was described as a way to fund the Institute of Housing and Urban Rehabilitation (IHRU) and stimulate public housing supply.

Like most measures in this package, a large portion of society reacted negatively, with accusations of unconstitutionality, discrimination and ideological bias. In the case of CEAL, these issues were raised immediately, to which was now added the late publication of the corresponding transactions (on the last business day of the year, at night).

The contribution is for properties assigned to AL with an active license on December 31, 2023, and applies only in the case of apartments or parts of urban buildings, exempting entrepreneurs with AL in the interior of the country.

The 15% rate will vary according to operating income, rental development and the weight of local accommodations in the area. The tax base of the contribution includes applying the local housing economic factor and the urban pressure factor to the total private area of ​​residential properties, at a fixed rate of 15% on this resulting basis.

In another aspect criticized by ALEP, the factor to be paid is determined by the average annual income per room and the minimum total area T1, which, at the maximum, may make some operations infeasible.

Business owners who prove that the property is zoned AL only for a maximum of 120 days per year are also exempt. On the other hand, property owners without HR prospecting are subsidiary responsible for paying the contribution related to their property, which will lead to difficult collection situations.

Case Example: A landlord who purchases a property that previously had AL may be required to pay a CEAL. This is possible if the previous tenant, responsible for the operation, forgot to cancel the AL registration. When the Tax Authority (AT) imposes a CEAL, it becomes attributable to the property owner, who was not liable even when the AL existed, the opinion explains.