VAT on Short-Term Rentals in Portugal: a practical guide for 2026

Most short-term rental owners in Portugal have never paid VAT. Not out of oversight — because the law provides an exemption for operators below a certain annual revenue threshold. In 2025, that threshold increased to €15,000.

The topic becomes relevant in three situations: when revenue approaches the threshold, when using platforms like Airbnb or Booking.com (which charge VAT on their commissions), or when planning major works on the property. This article explains the exemption regime, the obligations that apply even to exempt operators, the question of the applicable VAT rate, and when opting into the standard VAT regime might make financial sense. For a complete overview of short-term rental taxes in Portugal — including personal income tax, Social Security, and IMI property tax — see our complete guide to short-term rental taxes in Portugal.

The VAT exemption for short-term rentals

Article 53 of the Portuguese VAT Code (CIVA) exempts operators whose annual turnover in Portugal did not exceed €15,000 in the previous calendar year. This threshold was updated in March 2025 by Decree-Law 35/2025, replacing €14,500 (the 2024 figure) and €13,500 (2023).

What counts as “turnover” is defined in Article 52-A CIVA: the total annual value of supplies of goods and services, net of VAT. For an exempt short-term rental operator who does not charge VAT, this is effectively the gross revenue received from guests.

One detail that often goes unnoticed: the figure to track is gross booking revenue before any platform commission. If Airbnb paid out €18,000 after retaining €3,000 in commission, the turnover for VAT threshold purposes is €18,000, not €15,000. The commission is an operating cost, not a reduction of taxable revenue.

For owners who are taxed under Category F of personal income tax (no registered business activity at the Tax Authority), the VAT exemption is effectively automatic: without a registered activity, there is no VAT registration or obligation.

Obligations even in the exemption regime

The Article 53 exemption does not remove all VAT-related obligations. Exempt operators must:

• Not charge VAT on invoices issued to guests
• State the exemption on invoices — Article 57, n.2 CIVA requires the mention “IVA – regime de isenção” on every invoice
• Not deduct input VAT on purchases, services or works related to the rental activity (CIVA Art. 53, n.3)
• Monitor annual revenue to anticipate when the threshold may be exceeded

That last point matters more than it looks, because there are two distinct scenarios for losing the exemption, each with different rules (CIVA Art. 58):

• If the previous year’s turnover exceeded €15,000, the exemption ends on 1 January of the following year. The deadline to notify the tax authority is 15 business days from 31 December
• If in the current year turnover exceeds the threshold by more than 25% (i.e., exceeds €18,750), the exemption ends immediately. The notification deadline is 15 business days from that moment

In practice: an operator who earned €16,000 in 2025 loses the VAT exemption from January 2026. An operator having an exceptional year who passes €18,750 before year-end loses the exemption in the month that happens.

Which VAT rate applies to short-term rentals: 6% or 23%?

This is the question that most confuses operators who cross the threshold. The answer requires attention to the exact wording of the law.

List I of the Portuguese VAT Code, item 2.17, provides a reduced rate of 6% for “accommodation in hotel-type establishments”. The same list specifies that the rate applies exclusively to the accommodation price, including breakfast if not invoiced separately.

The key question is whether a short-term rental qualifies as a “hotel-type establishment”.

Under Portuguese law, it does not. Hotel establishments — hotels, apart-hotels, pousadas, resorts — are regulated by Decree-Law 80/2017, of 30 June. Short-term rentals are governed by a separate law: Decree-Law 128/2014, of 29 August. These are two distinct legal regimes with separate licensing and classification requirements.

Without a legal classification that places short-term rentals within the “hotel-type establishment” category, the most prudent reading of the VAT Code in force (May 2026 version) is that the applicable rate is the standard rate of 23% (CIVA Art. 18).

Some operators with a hotel or similar activity code (CAE) apply the 6% rate without challenge from the Tax Authority. However, List I item 2.17 does not mention short-term rentals as a separate category, and there is no general administrative ruling from the Tax Authority confirming this practice across all cases. Applying 6% without specific confirmation is a tax risk.

The way to obtain legal certainty is to request a binding ruling (informação vinculativa) from the Tax Authority, submitted through the Portal das Finanças. The request is free and the Tax Authority has a statutory response deadline of 150 days. A favourable binding ruling is legally binding on the Tax Authority as long as the circumstances remain the same.

VAT on platform commissions

Airbnb, Booking.com and most booking platforms charge a commission on each reservation. That commission is subject to Portuguese VAT when the operator is a tax resident in Portugal.

For exempt operators, the VAT charged by the platform on its commission cannot be recovered. It is a definitive cost on top of the base commission. On a €300 commission with VAT at the standard rate, the VAT element is an irrecoverable expense for the exempt operator.

For operators in the standard VAT regime, the situation is different: the VAT paid on platform commissions is deductible input VAT, offsetting the VAT owed to the state. For operators with high booking volumes and significant commission costs, this difference has a real impact on whether to maintain or waive the exemption.

When opting into the standard VAT regime makes sense

Any exempt operator can voluntarily waive the exemption and opt into the standard VAT regime. Under Article 55 CIVA, once this option is exercised the operator must remain in the standard regime for a minimum of five years (n.3). Returning to the exemption requires filing a declaration during January of the relevant year (n.4).

Opting into the standard regime can make financial sense in three situations:

• Major renovations or refurbishments: operators recovering or refurbishing a property for short-term rental pay significant VAT on materials and labour. In the standard regime, that VAT is deductible
• High-value equipment purchases: appliances, HVAC systems, furniture — the VAT on these acquisitions becomes recoverable
• High commission costs: when the VAT paid on platform commissions is large enough to justify the administrative complexity of the standard regime

The break-even point depends on a concrete calculation: the total deductible input VAT (renovations, equipment, commissions) must exceed the VAT to be charged on rental services (23% on gross revenue). For most operators below the €15,000 threshold, the arithmetic rarely favours opting in. For those undertaking major works, the calculation is worth doing with a certified accountant before deciding.

When waiving the exemption, operators who have not yet registered a business activity with the Tax Authority must file a declaration of commencement of activity. This declaration also determines the activity classification (CAE), which in turn affects the income tax and Social Security treatment of the rental income.

Obligations in the standard VAT regime

For operators in the standard regime — whether due to exceeding the threshold or having waived the exemption — the main obligations are:

• Issue invoices with VAT itemised on each rental service
• Periodic VAT return: quarterly for operators with annual turnover below €650,000; monthly above that figure. Filed through the Portal das Finanças
• VAT settlement and payment: the difference between output VAT (charged to guests) and input VAT (paid on purchases and services). If output VAT is higher, the difference is remitted to the state; if input VAT is higher, the credit can be carried forward or claimed as a refund
• Document retention: invoices and supporting documents kept for 10 years (CIVA Art. 52)

A practical point worth emphasising: the VAT charged to guests is not the operator’s income. It is state money that passes temporarily through the operator’s account until the periodic return is due. Treating this amount as available revenue is one of the most common mistakes made by operators entering the standard regime for the first time.

VAT and professional short-term rental management

For owners who work with a property management company, VAT obligations continue to apply to the owner as the registered short-term rental operator. The management company issues its service invoices with VAT to the owner. If the owner is in the exemption regime, that VAT is an irrecoverable cost on top of the management fee.

If you would rather delegate the full operation of your property, you can learn about Host Wise’s short-term rental management service.