Rental income tax in Portugal: long-term rentals and Alojamento Local

If you let out a flat or house in Portugal, the tax you pay depends mainly on one question: is it a long-term lease to a tenant who lives there, or a short-term holiday let run as Alojamento Local (AL, licensed local accommodation)? The two are taxed in completely different ways. 2026 also brought a big change for long-term landlords: a 10% rate for moderate rents. This guide covers both regimes as they apply to the 2025 income year (filed in 2026) and the 2026 income year (filed in 2027).

Long-term rentals: Category F income

Rent from a normal lease is rendimentos prediais, property income in Category F of IRS (imposto sobre o rendimento das pessoas singulares, personal income tax). By default it is not added to your other income. It is taxed separately at a flat "autonomous" rate on your net rent, meaning rent received minus deductible expenses.

Rates in 2026

What changed:

• The "Mais Habitação" law (Lei 56/2023) cut the residential rate from 28% to 25% and reset the reductions for long contracts to the figures above. Many websites still show the older tiers (23%, 20% and so on), which no longer apply.
• Decree-Law 97/2026 of 20 May 2026 added a 10% rate for rent from leases used exclusively as housing, where the monthly rent does not exceed 2.5 times the 2026 national minimum wage. That works out at €2,300, and the limit can be updated by ministerial order. It applies to rent received from 1 January 2026 to 31 December 2029, on new and existing contracts, unless a lower rate (such as 5% for a 20-year lease) already applies.

The tax authority has confirmed in a binding ruling that the 10% rate can also apply when a company is the tenant. The lease must name the person who will live there and say the property is for housing only. If the rent is above the limit, or the property is not used as housing, the normal rates apply.

A new affordable-rent scheme, the RSAA (regime simplificado de arrendamento acessível), started on 1 September 2026. If your rent stays below a cap set at 80% of the municipal median rent, and the lease is for a permanent home and lasts at least three years, the rent is fully exempt from IRS. The contract has to be submitted on the IHRU (housing institute) platform.

Opting to aggregate (englobamento)

If you are a Portuguese tax resident, you can choose englobamento: adding your net rent to your other income so it is taxed at the progressive IRS rates instead of the flat rate. This only pays off when your overall income is low. With a 10% flat rate now available for most ordinary rents, it rarely helps. Run the numbers both ways in the simulator on Portal das Finanças before you choose.

Deductible expenses

You can deduct expenses you actually paid to earn or protect the rent, property by property:

• maintenance and repair work, including work paid in the 24 months before the first lease, as long as the property was not used for anything else in between
• IMI (municipal property tax) and stamp duty for the year the rent is taxed
• mandatory condominium charges for the flat
• rent-guarantee insurance (seguro de renda) and other costs you can show were needed to obtain the rent

Not deductible: mortgage interest and other financial costs, depreciation, furniture, appliances, decoration and AIMI (the additional property tax on high-value portfolios). Keep invoices issued with your NIF (número de identificação fiscal, tax number). The tax office can ask for proof.

Illustration: a residential flat let for €1,000 a month brings in €12,000 a year. With €2,000 of deductible expenses (IMI, condominium, a repair), net rent is €10,000. At the 10% rate the tax is €1,000. At 25% it would have been €2,500.

Paperwork for long-term landlords

These are the steps foreign landlords most often miss:

1. Communicate the lease on Portal das Finanças (the stamp duty declaration, Modelo 2) by the end of the month after the lease starts. The same applies when the contract changes or ends.
2. Pay the stamp duty (imposto do selo): 10% of one month's rent, paid once, by the end of the month after the lease starts. It is charged when you submit the declaration.
3. Issue an electronic rent receipt (recibo de renda eletrónico) on Portal das Finanças for every payment, including deposits and advances.
4. Declare the rent in Annex F of your annual IRS return (Modelo 3), filed between 1 April and 30 June of the following year.

Who doesn't have to issue electronic receipts: landlords who were 65 or older on 31 December of the previous year, landlords on rural leases, and landlords who have no electronic mailbox (and aren't required to have one) and received no more than twice the IAS (social support index) in rent the year before (€1,045 for 2025). If you use this exemption you must file the annual rent declaration, Modelo 44, by the end of February for the previous year.

If your tenant is a company or a business with organised accounts, it must withhold tax when it pays you: 25%, or 10% for qualifying moderate-rent leases. This is an advance payment that is credited against the tax due on your annual return.

Non-resident landlords

Rent from Portuguese property is taxed in Portugal wherever you live, so you need a Portuguese NIF and must file an IRS return with Annex F every year.

• The same autonomous rates apply: 25% for residential and 28% for non-residential. The 10% moderate-rent rule is not limited to residents. Confirm that it applies to you before you file.
• Residents of another EU or EEA country can in some cases choose to be taxed at the progressive rates that would apply to a resident. Whether that helps depends on your worldwide income.
• Non-residents can't use englobamento the way residents can.
• If you live outside the EU/EEA, you may need a fiscal representative in Portugal unless you sign up for electronic notifications on Portal das Finanças.
• Your home country will usually tax the rent too, normally giving credit for the Portuguese tax under the double tax treaty. Keep your Portuguese assessment note (nota de liquidação) as proof.

Not sure whether you count as resident? See when you become a Portuguese tax resident.

Alojamento Local: short-term holiday rentals

Short-term letting to tourists is not Category F. It is a business activity, taxed in Category B (business and professional income).

Before your first guest

1. Register the AL with the municipality (câmara municipal) through the online Balcão Único Eletrónico. Your registration number goes into the national AL register (RNAL) and must appear on your listings. The municipality can oppose a registration within a set period, and some areas have restrictions or containment zones. The "Mais Habitação" freeze on new apartment licences and the five-year licence renewals were reversed by Decree-Law 76/2024.
2. Open an activity (início de atividade) at Finanças for local accommodation, choosing the simplified regime or organised accounting.
3. Take out the liability insurance required for AL, and set up invoicing so you issue an invoice for every stay.

How AL income is taxed

Under the simplified regime (available up to €200,000 of annual turnover), you don't deduct actual costs. A coefficient decides how much of your gross income counts as taxable:

• 0.35 for AL in a house or flat (moradia or apartamento): 35% of turnover is taxed
• 0.50 for a house or flat in a containment area (área de contenção) set by the municipality
• 0.15 for other AL types, such as guesthouses (estabelecimentos de hospedagem)

The taxable amount is added to your other income and taxed at the progressive IRS rates. The 0.35 coefficient also depends on you showing real expenses equal to 15% of turnover: invoices with your NIF that you assign to the activity on e-fatura, plus 4% of the property's tax value (VPT). If you fall short, the difference is added to your taxable income.

Illustration: €20,000 of bookings in a flat outside a containment area gives €7,000 of taxable income, taxed together with your other income.

Instead of the simplified regime, you can choose organised accounting and deduct real costs. You can also choose each year to have AL income from a house or flat taxed under Category F rules, still declared in Annex B. Which option is cheapest depends on your costs and your other income.

VAT, tourist tax and the CEAL

• VAT (IVA): AL is usually subject to VAT. If your turnover in Portugal stayed under €15,000 in the previous year, you can use the small-business exemption. Above that you charge VAT and file returns. Ask an accountant which rate applies to your stays.
• Tourist tax (taxa turística): many municipalities, including Lisbon and Porto, charge a per-night fee that you collect from guests and pay to the council. Amounts and exemptions vary, so check your municipality's rules.
• CEAL: the extraordinary AL contribution created in 2023 was revoked by Decree-Law 57/2024 and is no longer charged.

Long-term lease vs Alojamento Local at a glance

Common mistakes

• Not registering the lease. It is a legal obligation with fines for missing it, and a registered contract is the basis for receipts and for the reduced rates.
• Deducting non-deductible costs such as mortgage interest or new furniture.
• Assuming a holiday let is "just rent". Without a municipal registration and an open activity, AL income is irregular and expensive to fix later.
• Forgetting the tax when you sell. A property used for AL counts as a business asset, which affects the capital gain on sale. See selling property and capital gains. Decree-Law 97/2026 also created a capital gains exclusion for gains reinvested in moderate-rent housing.
• Missing the return. Rental income has to be declared every year. See filing your IRS return as an expat.

When to get an accountant

You can handle a single long-term lease yourself: register the contract, issue receipts and fill in Annex F. It is worth getting help if:

• you run an Alojamento Local and need to choose between the simplified regime, organised accounting and the Category F option, and manage VAT and e-fatura
• you are non-resident and need to coordinate Portuguese tax with your home country's
• you have several properties, co-owners, a company as tenant, or want to use the 10% rate, the RSAA exemption or the reinvestment relief

A contabilista certificado (certified accountant) can file your returns and invoices and check that your contracts meet the conditions for the reduced rates. You can compare accountants who specialise in property on Accountants Hub.