Local Accommodation in Portugal: Business Income versus Rental Income
Local Accommodation in Portugal: Rental Income or Business Income?
If you own property in Portugal and use it for local accommodation (Alojamento Local, AL), you may wonder: will my income be treated as rental income or as business income?
The answer is provided in the Ofício-Circulado n.º 20180/2015, of 19 August, which clarifies how the Portuguese Tax Authority (AT) classifies income from AL depending on the titularity of the AL license.
The Key Rule from Ofício-Circulado n.º 20180/2015
- If the AL license is in the property owner’s name, the income is always considered business income, even if the owner hires third parties to manage bookings, cleaning, or day-to-day operations. The decisive factor is the license holder, not who performs the services.
- If the owner grants the AL license and operation to another person or company through a proper cedência de exploração contract, then:
- The owner earns rental income.
- The operator (the license holder) declares business income.
In other words: what matters is who holds the AL license. The license holder is always taxed under business income, while a non-operating owner without the license simply earns rental income.
Why This Distinction Matters
The way income is classified has a major impact on tax treatment and obligations:
- Business income (for the AL license holder) involves registration as a business activity, issuing invoices/receipts, complying with VAT and social security rules, and reporting under the rules for business income.
- Rental income (for the non‑license holder who only leases the property) follows the simpler regime for property rents, without the operational obligations of AL.
In short: this distinction is not just formal — it changes how you are taxed and the obligations you face with the Portuguese Tax Authority. We will publish a separate blog post focused exclusively on the different tax treatments and obligations for business income and rental income in AL.
Practical Examples
1. License Holder is the Owner
João owns an apartment in Lisbon, registers the AL license in his name, and hires a company to handle bookings and cleaning. Even though he delegates the management, João remains the license holder, so the income is business income.
2. Cedência de Exploração
Maria owns a villa in the Algarve but doesn’t want to deal with AL responsibilities. She signs a contract granting the AL license to a company.
- Maria receives rental income from the company.
- The company, as license holder, declares business income from the AL activity.
Key Takeaways
- It’s not about who cleans or manages – it’s about who holds the AL license.
- The license holder always has business income.
- The owner, if not the license holder, receives rental income.
Final Thoughts
The Ofício-Circulado n.º 20180/2015 provides clear guidance: in local accommodation, what matters is the AL license holder. If the license is in your name, your income is business income. If you only lease the property to an operator who holds the license, your income is rental income.
Need help applying these rules to your AL? At Step Inside Legal, we help property owners and operators stay compliant with Portuguese law.
Email us at info@stepinsidelegal.com
Or book a consultation directly to speak with one of our corporate law specialists.
