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by LUGGit Marketing Team
Published September 12, 2024
Portugal has become a hotspot for tourists in recent years, driving a significant boom in the short-term rental market. If you're considering entering this market, understanding the regulations, licensing requirements, and tax obligations is essential. This guide provides information to help you launch your own short-term rental business in Portugal while complying with local laws.
What is Alojamento Local (AL)?
In Portugal, short-term rentals are known as Alojamento Local, meaning “local lodging”. AL encompasses any establishment that provides temporary accommodation to tourists for a fee, as long as it doesn’t qualify as a touristic enterprise.
A property is considered an AL when the following conditions are met:
- It is advertised or made available as temporary accommodation through any platform, including travel agencies or websites.
- The property is fully furnished and equipped, offering not just overnight lodging but also additional services, such as cleaning, for stays of less than 30 days.
Types of AL
- House - autonomous, single-family building.
- Apartment - an autonomous fraction of a building or part of a building that can be used independently.
- Lodging establishment - local accommodation establishment whose units consist of bedrooms. It can also be considered a hostel if the predominant accommodation unit is a dormitory.
- Bedroom - the local accommodation is in the owner’s home and the accommodation unit is a bedroom (no more than three of them).
Registering AL
To legally operate a vacation rental business in Portugal, obtaining an AL license is mandatory. To register your property, you must submit a notification to the president of the municipality where the accommodation is located. This process is free of charge and is completed online through Balcão Único Eletrónico.
The notification must include the following information:
- Authorization to use the property.
- Identification of the AL owner (individual or business), including name and tax ID number.
- The owner’s address.
- The name and address of the AL establishment.
- The establishment’s capacity, detailing the number of bedrooms, beds, and maximum guests.
- The intended opening date to the public.
- The name, phone number, and address of an emergency contact person.
You will also need to provide the following documents:
- A copy of your ID (for individuals) or the access code to the permanent business certificate (for businesses).
- A statement of responsibility confirming compliance with all legal and regulatory requirements.
- A copy of the land registry certificate, if you own the property.
- A copy of the rental contract or other document granting permission to provide lodging services, if you are a tenant.
- A copy of the declaration of commencement of activity for providing lodging services, submitted to the Tax and Customs Authority.
- Minutes of the tenants' meeting with authorization for installing an AL, in the case of hostels.
- The type of establishment (house, apartment, etc.).
Once you make your request, the municipality has 10 days to object to the opening of the AL (or 20 days in the case of hostels). If no objections are raised, you will receive an AL registration number to legally operate the rental.
Fines
Operating or advertising an unregistered AL can lead to significant penalties. Individuals may face fines of up to €4,000, while companies can be fined as much as €40,000 for non-compliance with AL regulations.
Requirements
Capacity
The maximum capacity for Alojamento Local (AL) establishments is 9 bedrooms and 30 guests, with some exceptions. Hostels have no limit on the number of guests, while bedroom rentals are limited to a maximum of three bedrooms.
Additionally, the total capacity is determined by multiplying the number of bedrooms by two. For apartments and houses, an additional two guests can be accommodated in the living room. Each unit may also include up to two extra beds for children under 12 years old.
General requirements
AL establishments must meet several requirements, including:
- Adequate maintenance and proper functioning of all facilities and equipment.
- Connection to a water supply system.
- Connection to the public sewage system or the presence of septic tanks.
- Availability of both hot and cold running water.
- Provision of an information book outlining the operation of the establishment and its internal rules.
- Bathrooms equipped with a security system that ensures privacy.
- Maintaining cleanliness and hygiene at all times.
Additionally, each unit must:
- Have a window or balcony.
- Be furnished with appropriate furniture, equipment, and utensils.
- Include a system to block external light.
- Feature doors with a security system that guarantees guest privacy.
Identification plaque
All types of AL, except for “houses” must have an identification plaque next to the entrance of the establishment.
Containment zones
In recent years, the Portuguese government has introduced "containment zones" to manage the growth of AL and protect local communities in popular urban centers. These zones are designated by individual municipalities, which set specific regulations, and within containment zones, the issuance of new AL licenses is either strictly limited or entirely frozen.
These zones are most commonly found in central neighborhoods of Lisbon and Porto, where the concentration of AL establishments has been particularly high. In these areas, there’s a cap that limits each owner to a maximum of seven AL properties.
Taxes
The main taxes you have to pay on an AL are the following:
IRS (Personal Income Tax)
- If you run the AL as an individual, your income from it is taxed under Category B (business income).
- In the Simplified Regime, 35% of your income is taxed, and 65% is assumed to cover expenses.
- If your earnings exceed €200,000 per year, you must use Organized Accounting, where you report actual income and expenses.
IRC (Corporate Income Tax)
- If a company runs the AL, it pays a 21% tax on profits.
IVA (Value Added Tax)
- AL is subject to an IVA of 6%.
- You may be exempt from IVA if you earn less than 10 000€ a year and opt for the simplified regime.
Final thoughts
Navigating the AL system may seem complex at first, but with the right steps, you’ll be set up for success. By staying informed and compliant, you’ll not only avoid fines but also offer a reliable experience for your guests. With the right preparation, your AL can become a rewarding venture in one of Europe’s most popular destinations.
Do you own a vacation rental in Portugal?
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