If you buy a property in Portugal that you’re not going to use as your main residency, at least not in the short term, you may want to grab the chance of getting a return on your investment by renting it out to tourists. This activity is called in Portugal “Alojamento Local“.
Portugal is one of the most sought-after tourism destinations in Europe, generating many business opportunities. Its diversified landscape ranges from the mountainous north to the warm, plain south lined with long golden beaches in the Algarve and includes the paradisiac, unspoiled islands of the Azores and Madeira archipelagos. In these cities, among the safest to visit, tourists can feel the genuine Portuguese hospitality and experience the taste of delicious gastronomy and surprisingly unique wines.
In light of the housing crisis in Portugal, a habitation program called ‘Mais Habitação‘ was set in motion by the Government. And Alojamento Local was one of the biggest issues discussed. The official changes to the program are as follows.
Alojamento Local or AL (that translates literally to “Local Accommodation”) establishments in Portugal are those that provide temporary accommodation services, namely to tourists, for remuneration, as long as they don’t meet the requirements to be considered tourist resorts. In simple terms, it corresponds to the commercial use of a property for short-term rentals to tourists.
When you purchase a property in Portugal in order to rent it to tourists, there are many options, as tourism is well established in most parts of the country. However, the bigger the city, the more AL offers and opportunities you’ll find.
Tourists coming to Portugal choose a specific type of AL to be accommodated in depending on their vacation goals: it might be the destination as a whole, the proximity to the city center, a comfortable and spacious place to stay, services and amenities or privacy, among other things. The Portuguese AL offer is vast and contemplates all sorts of needs and tastes.
The AL establishments are categorized according to the types of units of accommodation and include:
AL establishments may have a maximum capacity of 9 rooms and 30 users, with the exception of hostels, which have no capacity limit, and rooms – that can only be 3 in the owner’s residence.
In terms of users, AL capacity is determined by the characteristics/size of the dwellings. It cannot exceed the number resulting from multiplying the number of rooms by 2. In the case of apartments and houses, it’s possible to accommodate 2 additional users in the living room. In all types of housing, provided there are living conditions, up to 2 additional beds can be installed for children up to 12 years of age.
Under the AL apartment modality, each owner or Alojamento Local operation holder may operate more than 9 units per building if they do not exceed 75% of the number of its existing fractions or independent parts.
For the purpose of calculating the number of units, apartments registered in the name of the spouse, descendants, and ascendants of the owner or operation holder are considered, as well as those registered in the name of different legal entities, where there are common shareholders.
Once you have concluded your initial research, you will have a general idea of the price to charge for your Alojamento Local. The value you establish should take into account these important factors:
Calculate an average price per night that takes into account fixed costs. Setting up a pricing strategy assures your AL won’t be out on the market at a rate that’s lower than it should.
Establish which will be the high and the low season, according to the calendar and the demand for your specific alojamento local location characteristics (for instance, in the mountains of Serra da Estrela, winter is considered a high season because it is a snow destination). Don’t forget to check out all the festive days and holidays, not only in Portugal but also in your international client’s country of origin. Adjust your rates according to these factors.
To preserve neighborhoods and affordable rent for locals, Portuguese municipalities can define containment zones (‘zonas de contenção’), which are all those that exceed 25% of the available housing allocated to alojamento local. There are also temporary suspension zones for areas between 10% and 20% of the available housing related to this activity.
In these zones a limit is set on the number of alojamento local establishments – a single owner can only operate a maximum of 7 lodgings and the corresponding licenses are personal and non-transferable.
Right now, July 2023, you can only set up new AL in certain municipalities, located mostly in inland Portugal. The city centers of Lisbon and Porto are prohibited, for example.
If you want to open an AL in a building on horizontal property with autonomous fractions, you can only do so with the authorization of the other condominium owners. If more than half of the condominium owners oppose the accommodation, it cannot be an AL.
After having obtained your Portuguese Tax Number (NIF), you have to go to the Portuguese Tax and Customs Authority portal or to a tax office to declare the opening of your activity as an independent contractor (Atividade Independente). Although you can do that online, we recommend registering on-site, as the online process isn’t that simple and most probably you’ll have doubts that can be answered on-site.
You have two options regarding your income declarations and taxation:
Depending on your specific situation, the best option may not be obvious. We suggest seeking professional AL advice from an accountant for this decision since it will have an impact on your finances.
The registration of alojamento local establishments is a necessary and compulsory condition for their operation. The registry process starts with prior communication with a deadline addressed to the mayor of the municipality in which your alojamento local is located.
This prior notice must include information such as
It has to include several documents, among which are
You can proceed to the registry by accessing the Balcão do Empreendedor (BdE – meaning “Entrepreneurs’ Counter”), accessible through the EPortugal Portal, through the Tourism of Portugal Portal, or even by accessing the websites of the municipalities.
The registry procedure gives each request the registration number of the AL establishment if the competent city council doesn’t object to it (within 10 days or, in the case of a hostel, 20 days). The registry number acts as the valid title. With it, you are allowed to begin your AL operation and advertise it, including on platforms like Airbnb and Booking, which require that number.
The Portuguese law states that whoever operates a alojamento local unit is “jointly and severally liable with guests for damage caused by the latter to the building in which the unit is installed“. Thus, the person in charge of the establishment is obliged to take out an insurance policy that covers fire risks and property and non-property damage caused to guests and third parties.
The insurance must be contracted immediately and its non-existence may lead to the cancellation of the registration, meaning that your alojamento local license will be revoked.
At the end of the 30-day period following the prior notice with a deadline to the municipal council, there’s a mandatory inspection of the alojamento local to verify its compliance with all the requirements.
Here are the legal obligations that the alojamento local must provide its guests on every visit, whose compliance the inspection will verify:
AL establishments must comply with certain legal requirements:
AL establishments with a capacity of 10 people or less, must also meet safety requirements, but simpler ones:
If the capacity exceeds 10 people, the alojamento local must comply with the rules against fire according to legislation: DL N.º 220/2008 and Portaria N.º 1532/2008.
The Portuguese Foreigners and Borders Service (Serviço de Estrangeiros e Fronteiras – SEF) require that the responsible for AL national apartments and hotels communicate the data of all foreigners that use them – the person who makes the reservation and the other guests. The demanded data is:
Some Portuguese municipALities have implemented the Municipal Tourist Tax (Taxa Municipal Turística) on overnight stays. It’s a fee charged to all guests staying in tourist or alojamento local developments in cities where the tax is in effect. Adding to the room rate, an extra amount is charged, per night and per person. For instance, in Lisbon, it’s mandatory to charge a nightly occupancy tax of €2 per person and stay, excluding children under 13, for a maximum of 7 nights.
If the property is only partially used as an AL, only 25% of the expenses will be considered as deductions. The deductible expenses include:
As tax legislation is frequently subject to changes in Portugal, please do check all the updated relevant information at the time you decide to go forwards with your alojamento local business.
From the moment you start operating your alojamento local services, these are the tax obligations you’ll have to fulfill:
To be sure you have all the correct information for your specific situation and are compliant with all the legal obligations, we advise you to consult a specialized accountant. We at Pearls of Portugal can assist you in this demand by counseling you to our trusted, experienced professional partners.
One good way to give your alojamento local visibility is to have your own alojamento local website. You can do it by yourself with a small investment in a WordPress pre-built theme, domain name purchases, and server hosting. An advantage of having your own website is that you can create a direct sales channel, that answers with no delay the client’s questions. You can include a direct reservation option in it and settle your deals directly from your website.
An alternative way to get more immediate visibility and put your new business on the map, as well as gain reputation and trust with customers, is to advertise your alojamento local on the best available platforms. Booking, Airbnb, HomeAway, Rentalia, Trip Advisor, and Expedia are among the most known advertising and reservation platforms. But not all might be the best fit for you.
Our advice is that, firstly, you determine your business profile based on the type of accommodation you offer and the audience segment you want to target. Then you are prepared to decide which platform meets those needs to the best extent. Even then, to maximize your reach, diversification is key: consider advertising on at least 4 different platforms, including the ones with a broader reach, like Booking, and those which are more niche-segmented, such as Vrbo. These platforms obviously charge commissions, so it’s a cost that has to be budgeted for in your business.
A detailed description of the property and its surrounding is very important to inform and attract clients, but having a gallery of good quality photos might take your AL a long way and set it apart from your competitors. Consider hiring a professional, specialized photographer to capture your alojamento local best features in the most appealing way. You could even add a professional video for a more immersive virtual experience.
As the leading real estate buyer’s agent, we at Pearls of Portugal grant you the best guide to alojamento local in Portugal. Our goal is to help you find the best possible solution to gain a sustainable return on your house purchase investment in this country. We work with professional partners to assist you all the way, so don’t hesitate in asking for our help!
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