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Traditional property rentals versus Alojamento Local (AL)?

Although traditional property rentals and “Alojamento Local” are similar activities, they have some differences and their own legislation...

Most foreigners who buy a property in Portugal decide to have some return on their investment when they are not enjoying it themselves. Normally, this is when the question arises: Should I opt for traditional property rentals or “Alojamento Local”? Traditional property rentals and Alojamento Local (also known as “AL”) are two different methods available to rent your residential property in Portugal:

  • Traditional property rentals is the less regulated rental of property for the longer term;

  • AL is the regulated short term rental of property with a range of services that is more similar to the hotel industry, often referred to internationally as “Residential Tourism”.

Services and licensing

AL rentals requires that the property be furnished, equipped and that complementary services be offered such as cleaning and reception, for a maximum period of 30 days. It is also mandatory that the property be advertised as tourist or temporary accommodation. All properties that are not part of tourist complexes and are rented for holidays, are required by Portuguese law to obtain an AL Licence.

Associated costs

Whilst it is generally accepted that AL is more profitable than traditional rentals, they have different tax and cost structures. The costs that AL and traditional landlords have in common include the IMI property tax, condominium fees, insurance and maintenance costs of the property. The difference is mainly in terms of operating costs.

Under AL, homeowners have additional costs that may include: booking commissions; VAT at 6%; cost of services such as on-site check-in whenever guests arrive and check-out and inspection when they leave; laundry fees; as well as publicity costs to advertise the property. Talk to your accountant about how those costs may differ for your particular property.


To legalize a traditional or residential lease contract, landlords in Portugal must notify the Portuguese Tax Authority (Finanças) of all contracts celebrated with tenants. This obligation is required for each contract. The AL property owners must register the property with the Registo Nacional de Alojamento Local (RNAL). It’s advisable to take advice from your property manager in regards to guiding you through the administrative process of obtaining the AL licence. The AL licence is essential and required by law to advertise your property online with rental platforms such as Airbnb, Booking, etc.


Traditional property rentals - Income from traditional property rentals is generally included in Category F of Portuguese IRS statements. However, since 2015, with the recognition of rentals as a business activity, some landlords have opted for Category B. Although some doubts remain as to the best option between the two categories, it ultimately depends on the taxpayer’s total income:

  • Category F: If you choose taxing your rental income by filling in Annex F of your IRS statement, it will be taxed at a special rate. This means that rental income will not be added to other income categories that the owner may have: rental income is taxed at 28% and other income (such as wages or pensions) pay the corresponding tax rate according to their value.

  • Category B: In this category, rental income is taxed under category B (business and professional income), i.e. by carrying out the rental activity as an economic activity.

Taxes on Alojamento Local (AL) - All income obtained with AL rentals must also be registered with the Portuguese Tax Authority, reporting the start of a service activity. For annual income under 200,000 Euros, the taxpayer who owns an AL business can opt for the simplified tax scheme or for organised accounting. If annual rental income is over 200,000 Euros, it is mandatory to have organised accounting and to hire a tax accountant that is certified in Portugal. Under the simplified scheme, the IRS tax rate will apply to 35% of income in the case of houses and apartments, and to 15% of income obtained through accommodation facilities such as hostels. Also under the simplified system, the IRC (corporate income tax) rate will apply to 35% of income in the case of houses and apartments, or to 4% of income in the case of accommodation facilities.

Which scheme is better?

Traditional property rentals are fixed at reduced levels and carry some collection risk. AL rentals have more upside with less collection risk, with higher operational costs and taxes. However, AL rentals can be more profitable as renting to tourists makes it possible to earn more money than in long term rentals. My advice? Carefully analyse the advantages and disadvantages of both schemes, and choose the option that works best for you!

Author: Sofia Cardoso - Accountant, PORTUGAL ACCOUNTING

This article was originally published in the July 2021 edition of Portugal The Simple Life Magazine. Download your FREE copy on this link!


Need help managing the Accounting of your rental property in Portugal?

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