Alojamento Local in Madeira (or Portugal)
Short-term rental in Madeira is not a side arrangement…
It is a regulated business with a name, Alojamento Local, a registration of its own, and a tax life that runs whether you live in Funchal or five time zones away.
Done properly, an AL is one of the island’s most reliable small businesses: demand is real, the VAT rate on accommodation is low, and the compliance is entirely systematisable.
Done informally, it accumulates exactly the liabilities you would expect from an unregistered business with foreign guests and platform income.
This page covers the circuit: registration, the tax framing, VAT, the reporting obligations owners rarely hear about until a letter arrives, and the standing service we run for resident and non-resident owners alike.
The registration: becoming an AL, formally
Registration is made for a specific property and modality (apartment, house, rooms or lodging establishment), carries operational requirements (safety equipment, civil liability insurance, the complaints book, capacity limits and the identification plaque), and is communicated through the official channels for the municipality where the property sits.
One caution belongs in the first conversation, not the last: the national AL framework moved repeatedly between 2023 and 2025, and the Autonomous Region of Madeira applies its own adaptations, so the current rules for your municipality and modality are confirmed at the date you decide, not assumed from a forum post.
That verification is where every engagement of ours begins.
That classification triggers the self-employment circuit our Freelancers page describes in general form: activity opening with the correct codes, invoicing through certified means for every stay, and taxation under either the simplified regime (which taxes a deemed share of revenue, with coefficients that vary by modality and, in defined cases, by location, per the rules in force) or organised accounting on real profit, with the choice simulated on your actual numbers rather than inherited from habit.
For owners weighing AL against a long-term lease, the comparison is genuinely two different tax worlds (business income against Category F rents), and running both scenarios before committing the property is a service we provide precisely because the honest answer is not always AL.
Alternatively, AL can be conducted trough a company and subject to corporate income tax rates, instead of personal income tax rates.
VAT at Madeira’s reduced rate, and the invoices behind it
Below the small-operator threshold, the exemption regime may apply instead; above it, or by option, you charge the reduced rate on stays, deduct the VAT you bear on the operation’s costs, and file the periodic returns. The mechanics are unforgiving about form: every stay invoiced through certified software or the official portal, the AL number and rate correct on each document, and the platform payouts reconciled to the invoices behind them.
This is exactly the kind of repetitive precision that should never depend on the owner’s memory, and in our engagements it does not.
Not sure where to start?
The obligations owners discover late
Three layers arrive after the listing goes live.
Guest reporting: accommodation providers must communicate the identification of foreign guests to the border authorities through the official channel, within days of arrival, every time; it is quick when systematised and conspicuous when ignored.
Platform flows: commissions charged by non-resident booking platforms are payments abroad with their own declaration and potential withholding implications, managed with the platform’s residence documentation in the file, and the platform’s reported figures are increasingly cross-checked against your declared revenue, so the reconciliation must hold.
Local layer: municipal tourist taxes, where adopted, are collected from guests and delivered by you, per the municipality’s rules. None of these is difficult; all are annual sources of assessments for owners who learned the business through a listing tutorial.
Our setup installs the three as routines in the first month.
Non-resident owners: the filing that never stops
You do not need to live in Madeira to run an AL here, and many of our AL clients never have: the property earns, the platform pays, and the Portuguese obligations continue year after year regardless of where you file your personal taxes.
For non-resident owners, the standing structure is: the activity and its invoicing maintained, the VAT and guest-reporting routines running, fiscal representation in place where required (our setup page explains the role), the Portuguese return filed annually on the AL’s results, and the whole operation conducted without your presence, in English, with a yearly summary and the documents where your accountant abroad needs them.
This is the arrangement our Personal Income Tax Compliance page promises in one line: the property produces income, we produce the compliance, and your involvement is a summary and a signature.
What do we do for AL owners?
End to end or by module: the pre-decision analysis (AL versus long-term lease on your numbers, and the current regional rules for your municipality verified at date); the registration and its operational requirements; activity opening with the correct codes (or company incorporation); the VAT framing including the regional rate and the exemption threshold; certified invoicing set up and, where wanted, operated; the guest-reporting routine installed if requested by client; platform reconciliation and the commission obligations; the periodic filings; and the annual return, resident or non-resident.
MCS has run compliance for property owners and their businesses from Funchal since 1995, with certified accountants under one roof and everything in English.
Help
Frequently asked questions about Alojamento Local (AL) in Portugal (or Madeira island)
Do I need a licence to rent my Madeira property short-term?
You need the AL registration for the specific property and modality, with its operational requirements, before operating; the AL number then appears in every listing. Current rules for your municipality are confirmed at the date you decide, as the framework includes regional and municipal variation.
Can I run an AL if I live abroad?
Yes; many owners do. The obligations continue regardless of your residence: activity, invoicing, VAT, guest reporting and an annual Portuguese filing on the AL’s results, with fiscal representation where required. We run this as a standing service across time zones.
How is AL income taxed?
As business income (Category B), not as passive rent: activity registration, invoicing per stay, and taxation under the simplified regime (deemed-income coefficients per the rules in force) or organised accounting on real profit, whichever your numbers favour. Alternatively you may wish to incorporate a company as a way to limit personal liability and benefit from the island’s corporate income tax rate. We simulate both, and we also run the AL-versus-long-term-lease comparison before you commit the property.
Do I charge VAT to guests?
Above the small-operator threshold, yes, at the reduced rate applicable to accommodation, which in Madeira is the regional reduced rate (rates per the tables in force); below it, the exemption regime may apply. Every stay is invoiced through certified means either way.
Does Airbnb or Booking handle my taxes for me?
No. Platforms collect payments and report figures, increasingly also to the authorities, but the invoicing, VAT, guest reporting and filings remain yours, and platform commissions paid abroad carry their own documentation and potential withholding implications. Reconciliation between platform reports and your declarations is exactly what an assessment will test.
Is AL still allowed after all the law changes?
AL continues to operate in Madeira, under a framework that changed repeatedly at national level between 2023 and 2025 and is applied with regional adaptations here. The honest method is verification at date for your municipality and modality, which is where every engagement of ours begins.
What is the guest reporting obligation?
Accommodation providers communicate foreign guests’ identification to the border authorities through the official channel within days of each arrival. It takes minutes when installed as a routine, and it is one of the first things an inspection asks about.