Property owners are often undecided regarding the best way to earn money from rentals in Portugal. Perhaps they have heard that tourist rentals (Alojamento Local) are subject to less income tax, or long-term rentals provide more stable income. So which is the right way to go?
Here we provide our readers with a way to simulate both types of rentals for one property, in the hope that it helps to make the decision on how to move forward. For the moment, we ask readers to download an Excel spreadsheet where several variables may be changed to do the simulation. In the future, we hope to provide an online web tool for greater ease of use and efficiency.
IMPORTANT: Please only edit the cells in yellow.
– The calculations assume that you would like to compare a 1-year long-term rental with a year of doing short-term rentals.
– Utility bills are assumed to be paid by the tenant, for long-term rentals
– We assume that the owner is an individual, registered in the simplified accounting regime (for the Alojamento Local activity), and we disregard other possible earnings.
– For the moment, the IRS tax rate for residents is not calculated automatically, meaning that each user will have to make their best guess. Non-residents are always taxed at the rate of 25%.
– We take into account reservations from only Booking.com and Airbnb, which are almost always the 2 main portals used, and assume 100% of your bookings come from these two portals
The file should be fairly self-explanatory, but here follows some detailed instructions to fill in the variables:
There are costs that are common to both types of rentals, although in the case of long-term rentals, they are deductible.
Condominium: only applies to properties located in a shared, condominium building. Price per month
IMI: The yearly property tax paid on the property. Normally just a few hundred euros
TRADITIONAL LONG-TERM RENTALS
Monthly price: The rent you expect to receive every month for 1 year
Estate agent fee: If you work with an estate agent, they normally charge a commission equal to a certain number of months of the final rental price (e.g. 1, 1.5, 2, etc)
IRS rate: Always 25%, unless the initial rental contract is for more than 5 years, which we don’t consider here.
Accountant: We believe that an accountant is not necessary for long-term rentals, so normally this will be set to zero, but some people may prefer the accountant to register the rental contracts and issue the rental receipts. Amount with no IVA/VAT
SHORT-TERM RENTALS (ALOJAMENTO LOCAL)
AL Category: A drop-down box, allowing you to select one of two options (e.g. if your AL is registered in the Moradia category, select “Apartamento or Moradia“)
Contention area: Drop-down box (Y/N). At this moment, only applicable to central Lisbon and central Ericeira areas. It changes the amount to be taxed.
Registered for IVA: Drop-down box (Y/N). Note that in almost all cases it is more beneficial to be registered for VAT, but here you can simulate with or without this option
Management fee: Typically, management companies charge a % (and this is often 25%) of the Net value of each booking, meaning the amount received AFTER the booking portal charges a commission. If the management company includes all fees in the cost, cell I7 should be set to Y
Including portal commissions: Set to Y if the management fee in I6 includes all costs
Booking.com commission: Always make sure that the correct commission (normally 15%, although it could be more) is indicated. If the management fee in cell I6 includes booking commission, this cell won’t be taken into account.
% Booking.com bookings: The % of total reservations coming from this portal
Airbnb commission: Always make sure that the correct commission is indicated (normally 3%, although it could be more). If the management fee includes booking commission, this cell won’t be taken into account.
% Airbnb bookings: The % of total reservations coming from this portal (adjusted automatically after setting the value for Booking)
Average daily price: This is the average daily price for the entire year. It could be greater in the Summer and lower in the Winter, but it is necessary to indicate the average for the year.
Occupation rate: This is the average occupation for the entire year. There could be 100% occupation in the Summer, but it is necessary to estimate the average for the whole year.
Monthly price of utilities: Applicable only for short-term rentals, and the amount with no IVA/VAT should be specified
Accountant: Monthly price of accountant, specified with no IVA/VAT
Insurance: Obligatory for AL. We suggest the amount of €88, which is the yearly quota for ALEP, including the obligatory insurance
IRS Rate: In our example, we have used the fixed rate of 25%, applicable to non-residents. Residents will have to work out their approximate IRS tax rate based on the progressive tax brackets.
CEAL CALCULATION FOR AL
RevPar: The Mais Habitação law says that the RevPar for Alojamento Local for 2019 (29.95) will be used for the new CEAL tax charged in 2024. The CEAL tax charged in 2025 will use the RevPar for 2023, which is currently at 45.78 according to the Turismo de Portugal site at https://travelbi.turismodeportugal.pt/alojamento/revpar-e-adr/
Urbanistic coefficient: The first value of this coefficient has to be published by Finanças before 6th December 2023, but at the date of this publication, is not yet available. It is expected to be between 0.75 and 1 for most areas.
Area in m2: If the AL is not exempt from the CEAL, then the “área bruta privativa” from the caderneta predial document should be stipulated here. If exempt, put this value as zero.
Min. Area T1: This figure comes from the RGEU regulations and should not be changed. It is used in the calculation for the AL coefficient.
The AL coefficient, taxable amount and final CEAL tax are all calculated automatically.
After filling in all the above fields, the calculations below are completed automatically.
CALCULATIONS TRADITIONAL LONG-TERM RENTALS
The total, gross, yearly amount is shown, as well as the yearly expenses with IVA where applicable. Certain costs are deducted from the total before the tax rate is applied. This gives a yearly and monthly final net value.
CALCULATIONS SHORT-TERM RENTALS (ALOJAMENTO LOCAL)
The total, gross, yearly amount is shown, calculated from the average daily rate and average occupation. If the IVA variable was set to Y, IVA at 6% is deducted from the gross total. The other costs indicated are calculated, including the new CEAL tax. IVA is added to certain costs, but then deducted if the owner is registered for IVA. The net amount is calculated, and also the IRS income tax on the gross earnings. Then, the final absolute net amounts per year and per month are shown.