The Algarve Remains Open for Business — But the Rules Have Changed

If you're considering buying a property in the Algarve to rent out short-term — whether through Airbnb, Booking.com, or direct bookings — understanding Portugal's Alojamento Local (AL) licensing framework is essential. In 2026, the rules have been significantly updated, and the Algarve stands out as one of the most investor-friendly regions in the country.

Here's what every buyer and investor needs to know.

What Is Alojamento Local?

Alojamento Local (AL) is Portugal's official licensing regime for short-term tourist rentals — any furnished property rented to guests for stays of fewer than 30 days. Without a valid AL licence, you cannot legally list your property on any rental platform. The licence is issued by your local Câmara Municipal (town hall) and comes with a unique RNAL registration number that must appear on all listings.

Key Changes in 2025–2026: What's New

Following major reforms introduced by Decree-Law No. 76/2024 (effective January 2025), the AL landscape has shifted considerably:

• No more expiry dates: AL licences are now granted for an indefinite period. The previous rule requiring renewal every five years — and the feared mass expiry in 2030 — has been abolished.
• Licences are now transferable: When you sell a property with an AL licence, the new owner can retain it. This is a major win for investors, as it preserves the asset's rental value upon resale.
• New licences are open again: The national freeze on new AL registrations (introduced in 2023) has been lifted. You can once again apply for a new AL licence across Portugal — subject to local municipal rules.
• Municipalities have more control: Local councils can now define "containment zones" where new licences are restricted. However, this primarily affects Lisbon and Porto — not the Algarve.
• Stricter enforcement: Inspections are more frequent. Compliance with safety standards, insurance, and guest registration is being actively monitored.

Why the Algarve Is a Standout Opportunity

While Lisbon and Porto have introduced significant restrictions on new AL licences — with large parts of their historic centres now closed to new registrations — the Algarve remains broadly open.

As of May 2026:

• No Algarve municipality has enacted a blanket ban or moratorium on new AL licences.
• Key towns including Lagos, Luz, Burgau, Salema, and Portimão continue to accept new applications under standard compliance requirements.
• The region counts over 40,000 registered AL units — nearly one-third of Portugal's total AL supply — reflecting its dominance as a short-term rental market.
• Summer occupancy rates regularly exceed 90%, with nightly rates for well-located villas and apartments ranging from €100 to €200+.

That said, some municipalities — including Lagos — are monitoring AL density in their old town areas. Investors are advised to verify local conditions before purchasing.

What You Need to Operate Legally

To run a compliant short-term rental in the Algarve, you'll need:

• A valid AL licence from your local Câmara Municipal
• An RNAL registration number displayed on all listings
• A valid licença de utilização (residential use permit) for the property
• Active civil liability insurance covering tourist accommodation
• Compliance with safety standards: fire extinguisher, first aid kit, emergency contacts
• Registration of foreign guests via the SIBA platform (managed by AIMA) within 3 days of arrival
• Correct tax registration and invoicing for all bookings

Tax Snapshot: What to Expect

AL income is taxed under IRS Category B (professional income). Under the simplified regime — the most common choice for individual investors — only 35% of gross revenue is considered taxable. The remaining 65% is treated as a flat-rate expense deduction.

For non-residents, note that the VAT exemption threshold does not apply — you must register for VAT from the first euro of AL income and charge guests 6% VAT on nightly rates.

For a full breakdown of buying costs and taxes in Portugal, see our earlier guide: The Real Cost of Buying Property in the Algarve.

The Investor Takeaway

The 2025–2026 AL reforms have made Portugal's short-term rental market more stable and investor-friendly than ever — particularly in the Algarve. Permanent, transferable licences mean your investment retains its rental value. The absence of containment zones in West Algarve towns like Lagos, Luz, and Burgau means you can still enter the market with a new licence.

With strong seasonal demand, rising property values, and a clear legal framework, the Algarve continues to offer one of Europe's most compelling short-term rental investment cases.

Thinking about buying a rental property in the West Algarve? Get in touch with the VerLuz team — we know the market, the regulations, and the best opportunities on the ground.