Positive Shift: A Promising Change in Portugal’s AL License Law

5th of December 2023

Owners of active local accommodation licences have until 7 December to provide proof of activity, or they will be automatically cancelled, according to the government’s Mais Habitação (More Housing Policy). Understandably, many of Sadler’s clients may be concerned or feel threatened by these changes.

Read on to find out more information about the changes and why they will actually be a positive benefit for the area.

Raising the Roof on the new Mais Habitação rules

According to the new Mais Habitação rules, all cancelled active licences are prevented from being validated again until at least 31 December 2030. This is because, until that date, new local accommodation licences will be suspended, except for hostels and guest houses and LAs operating in inland areas of the country, Madeira and the Azores. Also excluded from this suspension are local accommodation centres operating in the homes where the owner lives, provided they don’t rent them out for more than 120 days a year.

The licences that will now remain active expire on 31 December 2030 and will be renewable every five years.

Key Points

The alterations to the AL License were approved by law nº 56/2023 on the 6th of October, resulting in the following changes.

  • The changes apply only to apartments. Townhouses and stand-alone villas are not included in the proposed AL changes.
  • Existing licenses will be reviewed in 2030 and are renewable every five years.
  • The creation of the Extraordinary Contribution to Local Accommodation (CEAL) for all apartments with AL licenses. Compliance with this obligation is carried out by the owner of the license holder and is to be submitted before 20 June of each year. The tax rate will vary according to the property area, the income from the previous year, and the urban pressure of the area where it is located. CEAL will not be applied to Local Accommodation establishments located in low-density areas.
  • Condominiums will have the power to cancel AL licences granted to apartments. More than half of the building’s per mileage must oppose the licence in order for it to be revoked.
  • AL property owners considering switching their property to the long-term rental market will benefit from income tax (IRS) and corporate tax (IRC) exemption on rental income until December 31, 2029.

How to Submit Proof of Activity for AL Licenses

Proof of activity must be submitted on the Balcão Único Eletrônico (e-balcão) platform, taking into account the last income declaration for IRS or IRC purposes or the last periodic VAT declaration with reference to the activity of operating local accommodation. It is up to each owner which declaration to send.

Some of our clients have reported that you can do this in the Lagos câmara building and that the staff were helpful and friendly.

Suppose the LA activity has been declared with the tax office this year. In that case, the holder must submit a VAT declaration or if they don’t have one yet, they must submit the declaration of commencement of activity first.

If you have more than one active licence, you must repeat the process for each registration, but you can send the same tax document for all processes.

This is a process that ALEP – Alojamento Local em Portugal criticises for having been decided “without knowledge of the reality of the sector and without dialogue, creating situations in which the continuity of many operators is unnecessarily put at risk”.

Although the association defends measures to “clean up” non-active registrations, in a statement, ALEP warns that the process “is creating countless doubts and uncertainties for LA owners” because it is based on a law that “lacks consistency”.

The association led by Eduardo Miranda points out, for example, that the concept of inactivity is not defined, given that there is nothing specific in the law that obliges an LA to receive clients or bill for a certain period of time. “There is no legal basis for a town hall to cancel a registration for lack of proof of invoicing, and it could find itself in a fragile legal situation due to lawsuits for the damage caused,” points out ALEP.

The More Housing Policy

The vacation rental industry has witnessed exponential growth over recent years, with platforms like Airbnb revolutionising the way people travel and seek accommodation. However, this sudden surge in popularity also raised concerns regarding property regulations, locals’ well-being, and market fairness. In response, Portugal has made significant changes to their Alojamento Local (AL) license system, aiming to strike a balance between tourism promotion and the preservation of local communities. In this blog post, we will explore the transformative shift in the AL license law and its potential impact on Portugal’s tourism sector.

Despite its initial success, concerns arose about the influence of short-term rentals on housing availability and affordability for locals. The increasing numbers of AL-licensed accommodations began to put pressure on communities, leading to rising rents and the displacement of residents. There was also concern about a potential imbalance between locals and tourists, threatening the social fabric of neighbourhoods. Consequently, Portugal recognised the necessity for change to address these issues while maintaining the tourism sector’s growth trajectory.

Prime Minister Antonio Costa, when introducing his government’s proposed reforms, argued that they are necessary because housing has become unaffordable in many parts of the country for many low-paid Portuguese families. Prices and rents have been rising faster than incomes, putting homes out of reach. The effect is most dramatic in Lisbon, where property prices have increased from €1300 per square metre in 2015 to €4800 now. Rents in the capital rose by 37% in the last year. But many other areas, including the Algarve, have also seen large price and rent increases.

Understanding the AL License

The AL license, introduced in 2008, was designed to regulate short-term rentals and ensure safety, quality, and fair competition within the industry. It required hosts to comply with certain standards, pay taxes, and fulfil various legal obligations. This licensing system contributed to the growth of tourism in cities like Lisbon and Porto, stimulating the local economy and drawing attention to Portugal’s unique charm.

In July 2018, Portugal passed legislation amending the AL license system. These reforms aimed to strike a balance between tourism’s benefits and local communities’ well-being. The key changes included:

Benefits and Potential Impact

Sadler’s Property have witnessed the unsustainable property price growth in the area driven by investors and this has led to an acute crisis with locals being forced out of the market and unable to live in the area.

This housing crisis is affecting schools which cannot find teachers as well as tourism, with bars, restaurants and hotels unable to recruit. While the changes in the law might temporarily slow the market, the demand for second homes is such that it will not cause a crash.

It is in no one’s best interest for the western Algarve to become a hot spot of cheap Airbnb accommodation, which will destroy the character of the area by forcing out the locals, who contribute to the rich cultural tapestry of the area.

Portugal’s reform of the AL license allows for a more sustainable and inclusive tourism industry. By enabling municipalities to regulate and limit the concentration of ALs in specific areas, the reforms aim to preserve local communities and safeguard their social fabric. This will help alleviate concerns about increasing housing costs and ensure that the communities of the western Algarve maintain their authenticity, benefiting both locals and tourists.

We wish to see tourism and expats coexist harmoniously with local communities rather than overpowering them.


Portugal’s decision to reform the AL license law reflects a forward-thinking approach to the vacation rental industry. The changes are intended to strike a delicate balance between fostering tourism growth and safeguarding local communities.

By granting municipalities control, distinguishing between primary and non-primary residences, and imposing penalties on violating hosts, this new legislation paves the way for a more sustainable and inclusive future.

Time will reveal the true impact of these changes, but Portugal’s commitment to finding this balance should be applauded as a positive step forward for responsible tourism.

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