With the purpose of regulating properly the activity of short term touristic lettings, Portugal has introduced the Local Lodging regime (in Portuguese Alojamento Local or AL).

The activity of short term touristic lettings carried out by property holders will be qualified in the framework of category B (Business Income) regarding Personal Income Taxation instead of category F (Rental Income).

Property holders who wish to explore their properties on this regime should:

– Register the start of activity before the Tax Authority for Personal Income Tax and VAT purposes, on the respective local accommodation category (CAE 55201 or 55204);

– Submit a request to the City Hall of the property’s municipality to award the property with the respective local accommodation license.


Tax framework:                                                                                                   

If the annual turnover is less than 200,000 euros property holders will be included in the IRS simplified scheme and the taxable income of the Local Accommodation will be calculated based on a 0.35 coefficient applied to the gross annual turnover. This income will be then aggregated with other categories’ income.

If the owner is not a tax resident in Portugal, since the personal income tax rate applicable to income earned in Portugal is 25%, the total amount of tax payable will correspond only to 8.75% (0.35 x 25%) of the annual turnover.

Property holders are required to issue invoices for all stays and also for reservations received and must pay VAT at a 6% rate if they exceed the annual turnover of 10 000 euros.