If you own a property in the Algarve and want to rent it to tourists, you need an Alojamento Local (AL) licence. There is no way around it. Operating without one exposes you to fines of up to 4,000 euros for individuals and 40,000 euros for companies.
The good news is that Portugal’s regulatory landscape has shifted significantly in your favour. The national suspension on new AL licences, introduced under the controversial “Mais Habitacao” law of 2023, was fully revoked in late 2024. As of 2026, new registrations are open across the Algarve, licences no longer expire after five years, and the extraordinary tax (CEAL) that once penalised short-term rental owners has been eliminated.
This guide walks you through the entire process, from understanding the legal framework to submitting your application, meeting the technical requirements, and managing your ongoing obligations.
The current legal framework: what changed and what it means for you
For the bigger picture beyond the licence itself, see where the Alojamento Local rules stand in 2026.
The AL regime in Portugal has been through considerable turbulence. In 2023, the government introduced Lei number 56/2023, known as “Mais Habitacao”, which froze all new AL registrations nationwide, imposed a five-year expiry on existing licences, made licences non-transferable, and introduced a 15 per cent extraordinary tax on short-term rental income.
Then came Decreto-Lei number 76/2024, effective from 1 November 2024, which reversed the most restrictive measures:
- New registrations are open again – the national suspension was lifted entirely
- Licences are now indefinite – they no longer expire after five years
- Licences are transferable – when you sell your property, the AL registration can pass to the new owner
- The CEAL tax has been abolished – no more 15 per cent extraordinary contribution
- Condominium approval is no longer required – except for hostels, you do not need your neighbours’ prior consent
For property owners in the Algarve, this is the most favourable regulatory environment since the AL regime was first established.
Who can register an Alojamento Local
Any individual or legal entity that holds the right to exploit the property can register an AL. This includes owners, usufructuaries, and tenants provided the lease agreement explicitly permits subletting for tourism purposes.
The AL regime recognises four categories:
- Moradia – a standalone house or villa
- Apartamento – a unit within a building (the most common in the Algarve)
- Estabelecimento de Hospedagem – a guesthouse or hostel-style establishment
- Quartos – up to three rooms within the owner’s own residence
The maximum capacity for any AL establishment is 9 rooms and 27 guests.
Step-by-step: how to get your AL licence in the Algarve
Step 1: Open your tax activity with the Autoridade Tributaria
Before anything else, you need to register your rental activity with the Portuguese tax authority. This is done by submitting a declaracao de inicio de atividade under Categoria B of IRS, using the activity code CAE 55201 (furnished accommodation for tourists).
You can do this online through the Portal das Financas or in person at a local tax office. If you are a non-resident, you will also need a fiscal representative in Portugal, which has been more strictly enforced since 2025.
Step 2: Ensure your property meets the technical requirements
Your property must comply with safety and quality standards before registration.
Fire safety (for properties with up to 10 guests):
- A fire extinguisher accessible to guests
- A fire blanket accessible to guests
- A first aid kit
- The emergency number 112 displayed visibly
General requirements:
- Adequate ventilation and natural light
- Running water, both hot and cold
- Furniture and equipment in good condition
- Appropriate hygiene and cleaning standards
Mandatory documentation on-site:
- Livro de Reclamacoes – a physical complaints book, plus registration in the electronic complaints system
- Livro de Informacoes – an information book in Portuguese, English, and at least two additional languages, covering house rules, emergency contacts, noise regulations, and safety instructions
Step 3: Take out civil liability insurance
You must hold a civil liability insurance policy with a minimum cover of 75,000 euros per incident (as defined by Portaria number 248/2021).
Since March 2025, you are required to upload proof of your insurance to the gov.pt portal. This is not optional. Portugal’s AL association (ALEP) estimates that up to 45,000 AL registrations could be cancelled before summer 2026 because owners have not uploaded their insurance documentation. Municipal authorities are already issuing cancellation notices.
If you take one thing from this article, let it be this: get your insurance in order and upload it immediately.
Step 4: Gather your documentation
Before submitting your application, make sure you have:
- Licenca de Utilizacao – the usage licence from your camara municipal confirming residential use
- Caderneta Predial – the updated property tax record
- Certidao de Registo Predial – the land registry certificate
- Identification of the person or entity responsible for the establishment
- Proof of civil liability insurance
- Declaration of commencement of activity (from Step 1)
Step 5: Submit your application on the Balcao do Empreendedor
The registration is submitted as a comunicacao previa com prazo (prior communication with deadline) through the Balcao do Empreendedor on ePortugal. This is an online platform and you do not need to visit any office in person.
Once submitted, the camara municipal has:
- 60 working days to respond in standard areas
- 90 working days in designated containment zones
If the municipality does not object within this period, your registration is automatically approved and you receive your RNAL number (Registo Nacional de Alojamento Local) from Turismo de Portugal.
Step 6: Install the AL plaque
Once registered, you must display the official AL identification plaque at the entrance of your property.
How much does it cost
The registration fees vary by municipality. In the Algarve, expect the following ranges:
- Municipal registration fee (e.g. Albufeira): approximately 170 euros
- Civil liability insurance (annual): 100 to 300 euros
- AL identification plaque: 15 to 30 euros
- Complaints book: 20 to 30 euros
Total upfront cost for a typical apartment in the Algarve: roughly 350 to 550 euros, excluding any property improvements.
Containment zones: does the Algarve have restrictions?
Under the current legislation, each municipality can define containment zones where the density of AL registrations is capped:
- Absolute containment – maximum 10 per cent ratio (10 AL per 100 residential properties)
- Relative containment – maximum 5 per cent ratio
Lisbon and Porto have implemented the most aggressive zoning. However, as of early 2026, no coastal municipality in the Algarve has implemented a general moratorium on new licences. The region has benefited fully from the national reopening.
Our recommendation: if you are considering registering a property, do not wait. The current window is favourable, but it may not remain so indefinitely.
Taxation: what you will pay on your rental income
AL income is taxed under Categoria B of IRS (personal income tax). Most owners fall under the regime simplificado, which applies if gross annual income is below 200,000 euros.
Simplified regime
- Coefficient 0.35 for apartments and villas: only 35 per cent of gross income is taxable
- Coefficient 0.50 in containment zones: 50 per cent is taxable
- Coefficient 0.15 for guesthouse establishments: only 15 per cent is taxable
The taxable portion is added to your other income and taxed at progressive IRS rates from 13 per cent to 48 per cent.
For context: if your Algarve apartment generates 30,000 euros in gross rental income, only 10,500 euros (35 per cent) is considered taxable. For many owners with no other significant Portuguese income, this results in a very favourable effective tax rate.
VAT
AL services are subject to VAT at the reduced rate of 6 per cent on mainland Portugal. If your annual turnover is below 15,000 euros and you are a Portuguese tax resident, you may qualify for the VAT exemption regime.
Important for foreign owners: non-residents can no longer benefit from the VAT exemption as of 2025. You must charge VAT, appoint a fiscal representative, and file periodic VAT returns.
Ongoing obligations you must not ignore
Guest registration (SIBA)
You must register all foreign guests in the SIBA system within 3 working days of check-in. Fines range from 100 to 40,000 euros.
Invoicing
Every stay must be accompanied by an invoice issued through a certified programme approved by the Autoridade Tributaria.
Insurance renewal
Your civil liability insurance must remain active at all times, and proof must be uploaded to the gov.pt portal. This is currently the number one reason for AL cancellations across Portugal.
Common mistakes that delay or block registration
- Missing or outdated Licenca de Utilizacao – some older Algarve properties were never formally issued one
- Not opening tax activity before applying – the registration will not proceed without it
- Forgetting to upload insurance to gov.pt – even existing registrations are being cancelled for this
- Incorrect property classification – registering as a moradia when the property is technically an apartamento
- Ignoring SIBA obligations – one of the most common compliance failures
Why working with a local management company simplifies everything
The registration process itself is not insurmountable, but the ongoing compliance, including guest registration, invoicing, insurance, tax filings, and property standards, adds up quickly for owners who do not live in Portugal.
A professional property management company handles all of this on your behalf. At Monte, we manage the full lifecycle: from helping owners navigate the AL registration process to handling daily operations, guest communication, SIBA reporting, invoicing, and maintenance. As we explored in our guide on how to choose a property management company in the Algarve, the right partner does not just manage your property, they protect your investment.
If you own a property in the Algarve and want to understand your options, talk to our team. We will walk you through the process and help you make an informed decision.
