Switching from Alojamento Local to a long-term lease in Portugal

Moving a home from alojamento local (AL, licensed short-stay letting) to a long-term lease is mostly paperwork. You notify the end of the AL operation, which cancels the registration. You close or amend your business activity with the tax office. Then you sign and register a normal residential lease. The full IRS exemption for ex-AL homes is now closed to new switchers, because the lease had to be signed and registered by 31 December 2024. Rent from a new lease is taxed as ordinary rental income instead, often at 25% or 10%. Before you switch, check whether you could ever return to AL in your area, and whether VAT you reclaimed in the past has to be paid back.

Where AL rules stand in 2026

• Mais Habitação (Lei 56/2023) suspended new AL registrations nationally in 2023.
• Decree-Law 76/2024, in force since 1 November 2024, lifted that national suspension and handed control to municipalities:
  • Registrations no longer expire.
  • Municipalities can adopt their own AL regulations, with áreas de contenção (containment areas) and áreas de crescimento sustentável (sustainable-growth areas), defined by parish (DL 128/2014, art. 15-A).
• Decree-Law 151/2026 gives municipalities that had more than 1,000 AL registrations on 31 December 2025 until 31 December 2026 to decide on their regulation. In the meantime they may extend suspensions of new registrations.
• Lisbon and Porto already restrict new AL heavily:
  • Lisbon's regulation, approved in December 2025, has absolute and relative containment areas.
  • Porto has suspended new AL in the historic centre and Bonfim.

Why this matters before you switch. In a containment area, a municipality's regulation may refuse a new AL registration for a home that was let on a residential lease in the previous two years (DL 128/2014, art. 15-B). Once you cancel, getting a registration back may be difficult or impossible. Check your municipality's current AL regulation first.

How to close an AL registration, and what happens to it

There is no "pause" option for a registration you hold. Under DL 128/2014 as amended:

• Notifying the end of operation. You must notify the cessação da exploração (end of operation) through the Balcão Único Eletrónico (electronic single counter, on gov.pt) within 10 days of it happening (art. 6). You need to log in with Chave Móvel Digital, a Citizen Card or a digital certificate. Porto, for example, charges no fee.
• What happens to the registration. Ending the operation means the registration is cancelled (art. 9). The update goes automatically to Turismo de Portugal's national register, the Registo Nacional de Alojamento Local (RNAL). Your AL number then stops existing, and you cannot reactivate it later.
• Booking platforms. You must tell Airbnb, Booking and other platforms within the same 10 days, and remove your listings.
• Tourist tax. Close your account on the municipal tourist-tax platform, where your municipality has one.

Closing the business activity with Finanças

AL income is business income, taxed under IRS Category B. Most owners therefore have an open início de atividade (business activity registration) on Portal das Finanças.

• If AL was your only activity: file a declaração de cessação de atividade (cessation declaration) within 30 days of stopping (CIRS art. 112, CIVA art. 33). You can file it online on Portal das Finanças. If you have contabilidade organizada (full accounting), your contabilista certificado (certified accountant) must submit it.

• If you have other Category B activity: you file a change declaration instead, removing the AL activity code.

• VAT. Long-term residential letting is VAT-exempt (CIVA art. 9). If you were in the normal VAT regime and reclaimed VAT on the purchase, renovation works or furniture, moving the home to exempt letting can trigger a regularização (adjustment) in favour of the State:

  • for the property and building works, over a 20-year period;
  • for other investment goods, over 5 years (CIVA art. 24–26).

  If you only used the small-business exemption and never reclaimed VAT, this usually does not arise.

• Capital gains and depreciation. Taking a property out of a business activity has its own rules on gains, which are generally deferred until a sale. If you deducted depreciation under full accounting, it may have to be added back over the year of the transfer and the following three years (CIRS art. 3(10)).

The VAT adjustment and the capital-gains position are the two technical points to have an accountant check before you file.

From Category B to Category F: how the tax changes

For long-term rent:

• The 25% rate falls for longer leases, starting from leases of 5 years or more.
• The 10% rate (EBF art. 45-C, added by Decree-Law 97/2026) applies from 1 January 2026 to 31 December 2029. It covers contracts used exclusively for housing, with rent within the moderate limit, which is €2,300 a month in 2026.
• Deductions. You can deduct expenses such as IMI, condominium charges, repairs, maintenance and rent insurance. You cannot deduct financing costs, depreciation, AIMI, or furniture, appliances and decoration (CIRS art. 41).

Some points about the 10% rate are still unresolved. Ask your adviser how it applies to non-residents and whether it requires a minimum lease term.

Does the ex-AL rent exemption until 2029 still apply?

Mais Habitação created a full IRS and IRC exemption for rent from homes moved from AL to permanent residential letting (EBF art. 74-A). It covers rent received up to 31 December 2029, with no rent ceiling. All of these conditions had to be met:

1. The rent comes from moving a property that was used for AL to a lease for permanent housing.
2. The AL was registered, and still in use as AL, by 31 December 2022.
3. The lease was signed and registered with the tax office by 31 December 2024.

What this means today:

• If you switch now, you cannot qualify. The 2024 deadline has passed and has not been extended.
• If you already qualify:
  • Automatic renewals of that same lease keep the exemption.
  • If the lease ends and you sign a new contract after 2024, even with the same tenant, the exemption is lost. The tax office confirmed this in a binding ruling (process 26669, 2024).
  • Deregistering the AL before 31 December 2022 also disqualified owners.
• Non-residents qualify on the same terms, according to the tax office (January 2025).
• Reporting. You still declare the exempt rent in your annual IRS return, in a dedicated field of Anexo F.

Comparing the net yield of the two options

Do not compare gross figures. Use your own numbers, for at least one full year, in this framework.

AL net income

1. Nights booked × average nightly rate = gross revenue.
2. Subtract platform commissions, cleaning and laundry, utilities, internet and TV, consumables, management fees, maintenance and furniture replacement, AL insurance, accounting, condominium charges and IMI.
3. Subtract income tax. Work it out on 35% (or 50%) of revenue at your marginal rate, and add any VAT you cannot pass on.

Long-term net income

1. Monthly rent × 12, minus an allowance for vacant months between tenants.
2. Subtract IMI, condominium charges, insurance, maintenance, management fees and any rent-guarantee insurance.
3. Subtract the stamp duty you pay at the start of each lease, which is 10% of one month's rent.
4. Subtract tax at 25% or 10% on the net figure (rent minus deductible expenses), or your aggregated rate if lower.

Net yield = net income ÷ current market value of the home × 100. Also compare the hours you spend, how much your income varies, and the risk of rent arrears. A long-term lease also limits when you can get the home back, because of the renewal rules.

Furnished or unfurnished, utilities and insurance

• Furniture. You can let the home furnished, but furniture and appliances are not deductible from long-term rent. Attach a signed inventory, with photos, to the lease. Remove hotel-style extras such as linen, toiletries and key boxes.
• Utilities. In long-term lets the tenant usually takes electricity, water and gas in their own name. Agree in the lease who holds which contract, and take meter readings on handover. Cancel AL-only services, such as guest Wi-Fi, cleaning contracts and channel-manager subscriptions.
• Insurance. AL requires liability insurance with at least €75,000 per claim (DL 128/2014, art. 13-A). Replace it with landlord home insurance. If the home is in a building under propriedade horizontal (a condominium), keep fire insurance on your unit. Consider rent-guarantee insurance.
• Licence and certificate. Check that the licença de utilização (licence of use) allows housing. Check that the energy certificate is valid before you advertise.

Checklist

1. Check your municipality's AL regulation and containment areas, and decide whether you accept that you may not be able to return to AL.
2. Ask an accountant to review VAT regularisation, capital gains and depreciation before you close anything.
3. Honour or cancel any future bookings, then notify the end of the AL operation on the Balcão Único Eletrónico within 10 days.
4. Remove your listings and tell the platforms within 10 days. Close the tourist-tax account.
5. File the cessation declaration (or a change declaration) on Portal das Finanças within 30 days.
6. Switch insurance, sort out the utilities, and prepare the inventory and the energy certificate.
7. Sign the lease, then submit Modelo 2 and pay stamp duty by the end of the month after the lease starts.
8. Issue electronic rent receipts each month, and declare the rent in Anexo F the following spring.