New Rules for Alojamento Local (AL) Licensing in Portugal (2025)

AL Rental Income Tax

• Flat Tax Rate: Non-residents are taxed at a flat rate of 25% on Portuguese AL rental income
• Deductions: Under the Simplified Accounting method, the tax calculation for AL rental income is based on a fixed profit percentage of 35% of the rental income.

This means that 35% of the rental income is considered taxable profit, while 65% is assumed as deductions for the costs associated with running the rental property.

In cases where the rental income is above 27.360 euros, it will be necessary to allocate some costs to the business activity, to cover 15% of the turnover, otherwise the taxable income percentage can raise from 35% to 50%,

Alternatively to the Simplified Accounting method, the taxpayer has the option to be taxed under the rules of a long term contract (rules of category F) in which 95% of the profit is taxable and it is calculated on the difference between gross rents and expenses such as maintenance, repairs, IMI, condominium, house insurance,  with exception for financial costs, purchase of equipment, furniture and fittings. The taxable amount of 95% of the profit made is then taxed at 25% or 28%.

Registration and Invoicing: All AL operations must be registered with the Tax Department in Portugal. Property owners are required to issue digital receipts for all rental transactions and file an annual tax declaration to report the rental income and pay any applicable taxes.

• Capital gain:

By registering a property under AL, the tax authorities automatically assume that the property has been transferred from personal assets to business assets. As a result, if the property is later sold, the capital gains calculation will take this into account. In this case, no expenses related to the property can be claimed, and a 0.75% wear-and-tear deduction may be added for each year the property has been registered under the AL activity, unless the business activity is ceased at least 3 years prior to the sale.

VAT (IVA) Obligations

• VAT Registration:

All non-residents must register for VAT, charge VAT to guests, and file quarterly VAT returns.

The standard VAT rate applied to AL services is 6% or 23%, depending on each specific circumstances.

• Platform Commissions:

If using online platforms (Booking, Airbnb), VAT must be accounted for on their commissions and reported accordingly.

Other Legal & Operational Requirements

• Tourist Tax: Some municipalities charge a separate municipal tourist tax, which must be collected from guests and remitted by the AL property owners.
• Reporting Foreign Guests: AL operators must report details of all foreign guests to the immigration agency (AIMA).
• Insurance & Complaints Book: Landlord’s insurance is mandatory for AL properties, as is maintaining an official complaints book, both in paper and online formats, for guests.