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Portugal's 2023 AL License Rules: Updates Impacting Short-Term Airbnb Rentals

Updated: Dec 20, 2023

Are you considering the purchase of a property in Portugal? The option to turn it into a lucrative investment by renting to tourists might be worth exploring. To list it on popular platforms like Airbnb or Booking, you are required to obtain an 'AL license'. In Portugal, this activity is known as 'Alojamento Local'. In this article, we delve into the recent modifications, explore the political dynamics surrounding them, and provide insights into the locations and procedures for acquiring a new Alojamento Local (AL) license.

A beautiful balcony view over Lisbon old town with two wine glasses on the table describing the blog post Portugal's 2023 AL License Rules offered by the trusted buyer's agent Lagos Homes in the Algarve Portugal by real estate agent Benjamin Seide

1. New Short-term Rental Regulations

As of October 7, 2023, Law 56/2023 of October 6, commonly known as the 'Mais Habitação' bill, has been enacted by the Portuguese government, ushering in significant changes in the holiday rental, real estate, and housing sector. Most importantly, new AL licenses will no longer be issued in high-density municipalities, primarily along the coastline and in the Algarve. The transfer of existing AL licenses will not apply to property purchases.

This prohibition, however, excludes low-density municipalities and autonomous regions such as Madeira and Açores. The district administration does retain the authority to grant new licenses in specific municipalities within high-density regions.

A clean Airbnb bedroom with a plant in fron of the door describing the blog post Portugal's 2023 AL License Rules offered by the trusted buyer's agent Lagos Homes in the Algarve Portugal by real estate agent Benjamin Seide

Existing licenses remain unaffected by these changes. Importantly, the ban is targeted at single apartments within domestic buildings and does not extend to entire houses dedicated solely to tourist renting. This nuanced approach seeks to strike a balance between regulating high-density areas and accommodating the unique circumstances of different property types.

2. Portugal's 2023 AL License Rules

1. Suspension of New Licences

  • Scope: Suspension includes apartments, rooms, or hostels integrated into an autonomous property fraction.

  • Geographical Application: Coastal areas and the entire Algarve are affected, excluding Autonomous Regions, 165 low-density municipalities, and 73 low-density parishes within high-density cities.

  • Restriction Summary: Coastal and high-density areas experience new issuance restrictions.

2. Revision of AL Licences

  • Reassessment: Licences reassessed in 2030, renewable every five years.

  • Exception: Automatic renewal in 2030 for those who purchased using a bank loan, following the loan term. Applies to loans until February 16, 2023.

  • Unused Properties: Owners of unused AL properties have until December 7 to submit income statements.

  • License Nature: Personal and non-transferable, exceptions for succession situations.

3. New CEAL Fee

  • Fee Type: Extraordinary Contribution on Alojamento Local (CEAL).

  • Rate: 15% fee, revenue directed to Instituto da Habitação e da Reabilitação Urbana (IHRU).

  • Applicability: Applies to apartments or hostels in horizontal properties. Not deductible from Corporate Income Tax (IRC).

  • Exemptions: Does not apply in low-density municipalities and parishes.

4. Increased Condominium Power

  • Decision-Making: Condominium assembly can oppose Local Lodgings in a horizontal property.

  • Rejection Criteria: Two-thirds majority objection (66.6%) leads to rejection, with exceptions for constitutive title specifications.

5. Municipal Role in Management

  • Balancing Act: Municipalities to ensure a balance between housing, Alojamento Local, commerce, and student housing.

  • Municipal Housing Charter: Municipalities draft their charter, aligning with Housing Basic Law.

6. IMI Increase for AL Properties

  • Applicability: IMI increase for active Local Lodging businesses.

  • Transferability: Limited to specific autonomous fractions, not transferable to all horizontal property units.

  • Rate: Potential increase to 1%, compared to the usual 0.30% or 0.45%.

7. Proof of AL Activity

  • Deadline: Submit evidence of Local Lodging activity by December 7, 2023.

  • Documentation: Submit the 2022 IRS statement or, for new businesses in 2023, the declaration from business commencement.

  • Registration: Complete registration on the RNAL platform or at City Hall. Failure to provide proof results in license revocation.

3. Where to apply for a new AL license in Portugal

Former Prime Minister António Costa acknowledged the significant growth of Alojamento Local over the years, with the country now having more than 109,000 allocated properties. This activity has a "very significant" impact on the housing market, prompting the need for control measures, such as the suspension of licenses for new accommodations. However, Costa clarified that the restrictions on Alojamento Local will not apply to regions and municipalities with low population density, nor the autonomous regions Madeira and the Azores.

Refer to the map below, where municipalities are indicated (white represents high-density municipalities, and blue represents low-density municipalities).

A government map indicating low and high density areas in Portugal describing the blog post Portugal's 2023 AL License Rules offered by the trusted buyer's agent Lagos Homes in the Algarve Portugal by real estate agent Benjamin Seide
© Government

Here are a few selected low-density parishes in Portugal:

1. Vila do Bispo: Located in the Algarve region, known for its beautiful coastline and proximity to the southwestern tip of Europe.

2. Setúbal: While Setúbal is a city, it has surrounding low-density areas known for their natural landscapes, including the Arrábida Natural Park.

3. Aljezur: A municipality in the Algarve region known for its picturesque landscapes, beaches, and the historic Aljezur Castle.

4. Odemira: Located in the Beja District, Odemira has a mix of coastal and inland areas with a more rural character.

5. Mértola: Situated in the Beja District, Mértola is known for its historic charm, including a castle and archaeological sites.

6. Monchique: A municipality in the Algarve region, Monchique is known for its mountainous terrain and thermal spa.

7. Alcoutim: Located in the Faro District, Alcoutim is known for its riverside location along the Guadiana River, which forms the border with Spain.

These areas are often appreciated by those seeking a quieter lifestyle, proximity to nature, and a more rural environment.

4. How to apply for a new AL license in Portugal

A stylish beige table view of a checklist with coffee mug and vase describing the blog post Portugal's 2023 AL License Rules offered by the trusted buyer's agent Lagos Homes in the Algarve Portugal by real estate agent Benjamin Seide

Step 1: Verify the AL Authorization Zone

Check if the building or house is situated in an AL-authorized zone. Some Portuguese municipalities establish containment zones ('zonas de contenção') to preserve neighborhoods and ensure affordable rent for locals. These zones have specific limitations on the number of alojamento local establishments, and licenses are personal and non-transferable.

As of July 2023, new AL setups are restricted to certain municipalities, mostly located in inland Portugal, excluding city centers like Lisbon and Porto.

Step 2: Acknowledge Condominium Board Authority

In a building with horizontal property and autonomous fractions, AL opening requires authorization from other condominium owners. If more than half oppose, AL operation is prohibited.

Step 3: Register as an Independent Contractor at the Tax Office

After obtaining your Portuguese Tax Number (NIF), declare the opening of your independent contractor activity at the tax office. Two income declaration options exist: Category B for self-employed individuals, with a simplified tax regime for income up to €200,000, or Category F for property income taxed at a 28% rate.

Professional AL advice from an accountant is recommended for the best tax option.

Step 4: Register the Alojamento Local

Registration is mandatory for AL operation. Begin by submitting a prior notice to the mayor of the municipality where your establishment is located. Include details like the valid property use title, establishment name, modality, and capacity. Required documents include a term of responsibility, copies of the urban land register, a declaration of activity commencement, and testimony of condominium owners' approval.

Access the Balcão do Empreendedor (Entrepreneurs’ Counter) via the EPortugal Portal or Tourism of Portugal Portal for registration.

Step 5: Obtain Compulsory Civil Liability Insurance

Operate responsibly by subscribing to compulsory civil liability insurance. This insurance covers fire risks, property damage, and non-property damage caused to guests and third parties. Failure to have insurance may result in registration cancellation and the revocation of your alojamento local license.

Step 6: Prepare for the Municipal Council Inspection

Following the 30 days after the prior notice to the municipal council, an obligatory inspection of the alojamento local is conducted to ensure compliance with all requirements. The inspection evaluates the establishment's adherence to legal obligations, including:

- Fire extinguisher, fire blanket, first aid kit, visible explanation of the 112 emergency number

- Information on the availability of a complaint book (both in paper and digital format)

- House instruction book in four languages (including Portuguese and English), containing neighborhood and house rules, as well as AL owner/manager contacts

- Acrylic identification plate "AL" visibly affixed

Step 7: Fulfill AL Tax Obligations

Issue Invoice Receipts (Recibos Verdes): Utilize the AT Portal or provide invoices for your services.

Value-Added Tax (IVA): If your annual income exceeds €10,000, you must pay a 6% tax on invoiced amounts. Submit the corresponding tax return quarterly through the AT online portal.

Personal Income Tax (IRS): Comply with Personal Income Tax obligations.

Extra IHRU Tax (15%): Applicable to Alojamento Local situated in high-density regions, effective from July 2023.

5. The Future of Short-term Rentals in Portugal

This suspension isn't a one-size-fits-all measure; it's a strategic move. Municipalities now wield the power to explicitly define, within their Municipal Housing Charters, a delicate equilibrium between housing supply and student accommodations in their respective territories. This flexibility allows for a potential end to the suspension in designated areas, all while preserving rules and limits for the use of housing units for local accommodation.

A person sitting on a bench at the Tejo river in Lisbon describing the blog post Portugal's 2023 AL License Rules offered by the trusted buyer's agent Lagos Homes in the Algarve Portugal by real estate agent Benjamin Seide

In the realm of Local Accommodation registrations, a new era has dawned. These registrations will now have a fixed term of five years, with the option for identical renewals. The clock starts ticking from the issuance of the opening license, creating a streamlined process for property owners.

For those who've already embarked on their Local Accommodation journey and secured registrations before October 7, 2023, there's a checkpoint on the horizon. Come the year 2030, these registrations will undergo a thorough reevaluation, offering a chance for a fresh five-year renewal. Municipalities will play a crucial role in this renewal process, examining each case within the defined periods set by their regulations.

This legislative narrative is a testament to Portugal's commitment to thoughtful urban planning and sustainable tourism. It weaves a tale of adaptability, recognizing the diverse needs of different regions while fostering a balanced approach to housing and tourism. As the legal landscape evolves, property owners and municipalities engage in a delicate dance, finding harmony between housing availability, tourist accommodations, and the unique charm of each locale.

6. Useful Links

Lagos Homes is your reliable partner for all your real estate needs in Portugal. We go beyond helping you find your dream property, offering expert guidance across all aspects. Do you have any inquiries before embarking on your real estate journey? Feel free to contact us now!

Dona Ana panoramic beach view describing the blog post Portugal's 2023 AL License Rules offered by the trusted buyer's agent Lagos Homes in the Algarve Portugal by real estate agent Benjamin Seide



7. FAQ - Alojamento Local 2023

What are the key changes to Alojamento Local (AL) licenses in Portugal in 2023?

In 2023, significant changes were introduced to AL licenses in Portugal. These include the suspension of new AL registrations for apartments in high-density municipalities, a renewal requirement every five years starting in 2030, and the implementation of the CEAL (Extraordinary Contribution on Alojamento Local), a 15% fee for certain types of AL properties. Additionally, there are new rules regarding AL activity in condominiums and increased scrutiny on property owners to provide proof of AL activity.

What should I do with my existing short-term rentals in Portugal?

How does the CEAL (Extraordinary Contribution on Alojamento Local) affect AL owners in Portugal?

What is the process for renewing Alojamento Local licenses in Portugal after 2023?


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