If you own property in the Algarve and want to rent it out on a short-term basis, you need an Alojamento Local licence. Without one, renting to tourists is illegal, and the fines are significant. The rules have tightened in recent years, and what was once a simple registration has become a process with real legal implications, particularly if you are buying a property with the intention of renting it out.
What is Alojamento Local?
Alojamento Local (AL) is Portugal's official licensing framework for short-term tourist accommodation. It covers holiday apartments, villas, guesthouses, and rooms rented for periods under 30 days. Any property listed on Airbnb, Booking.com, Vrbo, or similar platforms in Portugal must hold a valid AL licence. Operating without one is an administrative offence that can result in fines starting at 2,500 euros for individuals and significantly more for companies.
The licence is registered with the local camara municipal (town hall) and linked to the specific property. It is not transferable between properties, and it comes with ongoing obligations: safety standards, a complaints book, tax reporting, and communication of guest data to the SEF (immigration authority) through the SIBA platform.
How have the rules changed in the Algarve?
Portugal introduced major changes to AL regulation in 2023 and 2024. The most significant was a moratorium on new AL licences in certain areas, aimed at protecting the long-term rental market. While the Algarve was largely exempt from the strictest measures (which targeted Lisbon and Porto), the framework shifted in ways that affect property owners across the country.
New AL registrations now require approval from the condominium (for apartments) with a majority vote. This means your neighbours can block your application. For properties in apartment buildings, this is a real obstacle, not a formality. Municipalities also gained more power to suspend or revoke licences that generate repeated complaints.
In towns like Albufeira, Lagos, and Portimao, where tourist demand is highest, the local camaras have been more active in enforcing compliance. Properties that were operating informally, renting to tourists without a licence, are increasingly being identified and fined. If you are buying a property that is already being rented out, verifying that the AL licence is legitimate and current is now a critical part of due diligence.
What happens to the AL licence when a property is sold?
This is one of the most misunderstood aspects of Alojamento Local in the Algarve. An AL licence is tied to the property, not the owner. When a property changes hands, the licence can transfer to the new owner, but this is not automatic. The new owner must formally request the transfer within a set period, and the camara must approve it.
Here is where problems arise. If the seller did not hold a valid licence, or if the licence had lapsed, the buyer inherits a property without AL status. Re-applying under the new rules (including condominium approval for apartments) may be difficult or impossible. Buyers who assumed the property "came with" the AL licence discover after completion that they cannot legally rent it.
Your lawyer checks the AL status as part of the property due diligence, alongside the land registry, caderneta predial, and use licence. If the property is marketed as a rental investment, the AL licence should be verified before you sign the CPCV, not after.
What are the tax obligations for AL owners?
AL income is taxable in Portugal. You must register the activity with the tax authority (Financas) and report all rental income. There are two main tax regimes available to AL operators.
Under the simplified regime, 35 percent of your gross AL income is considered taxable profit. This means if you earn 20,000 euros in rental income, you pay tax on 7,000 euros at your marginal income tax rate. This regime suits most small operators and requires minimal bookkeeping.
Under the organised accounting regime, you deduct actual expenses (maintenance, cleaning, platform commissions, utilities, insurance) from your income and pay tax on the net profit. This makes sense if your expenses are high relative to your income, but it requires a certified accountant.
In addition to income tax, AL properties are subject to a municipal tourist tax in many Algarve municipalities. Albufeira, Faro, Lagos, Loule, and Portimao all charge a nightly rate per guest (typically 1 to 2 euros), which you collect from the guest and remit to the camara. Social security contributions may also apply if AL is your primary activity.
Can you still get an AL licence in the Algarve?
Yes, but it depends on the property type, the location, and the current local regulations. Detached houses and villas in most Algarve municipalities can still obtain a new licence, subject to meeting safety, hygiene, and registration requirements. Apartments in buildings with existing condominiums face the additional hurdle of condominium approval.
Some municipalities have introduced containment zones where new licences are restricted or require additional justification. These zones are reviewed periodically, so what is open today may close next year, and vice versa. Your lawyer checks the current status with the relevant camara before you commit to a purchase based on AL income assumptions.
Why AL status matters before you buy, not after
The most expensive AL mistakes happen at the point of purchase. A buyer pays a premium for a "rental property" in Lagos or Albufeira, only to discover that the licence was never properly registered, that it lapsed, or that the condominium will not approve a new one. By then, the CPCV is signed, the deposit is paid, and the options are limited.
A property lawyer in the Algarve who handles AL transactions regularly knows what to check, where to check it, and what the red flags look like. They verify the licence with the camara, confirm the condominium status for apartments, and make sure the AL transfer is included as a condition in the purchase contract. This is standard due diligence for any rental property in the Algarve, and skipping it is how buyers end up with a property they cannot legally rent.