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Choosing between short-term or long-term rentals in Lisbon is the first big decision for anyone who wants to earn income from a property in the city. Each option has advantages and challenges that affect income, management, legal obligations and risk. A long-term residential lease pays personal income tax (IRS) on rents at a flat rate of 25% (or less for long contracts); local accommodation (alojamento local, AL), the Portuguese regime for short-term rentals, is a business activity with its own rules and is subject to the condominium’s decisions. This guide compares five factors to help foreign investors choose the option that best fits their profile.
In short
- Income: short-term rentals can earn more per month but are seasonal; a long-term lease is predictable.
- Management: local accommodation works like a small hotel operation; a long-term lease needs little intervention.
- Tax: residential rents pay 25% IRS, with reductions for long contracts and 10% for moderate rents until 31 December 2029; local accommodation is taxed as business income (category B).
- Condominium: it can ban local accommodation by two-thirds of the permillage (for future registrations only) or ask the mayor to cancel one that disturbs the building.
- Risk: short-term rentals are more exposed to legal changes, crises and competition.
1. Income: stable rent or higher potential
A long-term lease provides a stable, regular income. Contracts for permanent housing have, as a rule, a minimum term of one year (art. 1095 of the Civil Code), and if nothing is agreed on the term, they last five years. This option suits those who value security and little involvement.
Its limits are also clear: rent can only be updated once a year, using the legal coefficient, and the market is heavily regulated. See how the rental market in 2026 is changing.
Short-term rentals, usually to tourists, charge higher nightly prices and allow rates to be adjusted to demand. In return, income depends on occupancy, which varies with the season.
| Criterion | Long-term lease | Short-term rental (AL) |
|---|---|---|
| Monthly income | Fixed, set in the contract | Variable, higher in high season |
| Stability | High | Low, depends on occupancy |
| Management | Low, almost passive | High, a business activity |
| Tax on income | IRS category F, 25% flat rate as a rule | Category B (business income) |
| Exposure to legal change | Moderate | High |
| Condominium control | Rare | Often subject to objection |
To compare the two options properly, look beyond monthly income. Gross yield is annual rent divided by the property’s value; net yield subtracts IMI (the municipal property tax), condominium contributions, insurance, maintenance and taxes. In short-term rentals, add cleaning, platform commissions, furniture replacement and tourist tax management. A spreadsheet that looks profitable can become unviable if there are months without bookings or if the condominium bans local accommodation.
2. Management: simplicity or constant dedication
In a long-term lease, management comes down to choosing the tenant, signing the contract, registering it with the Tax Authority, collecting the rent, dealing with occasional repairs and inspecting the property at the end. Everything can be delegated to a rental management company for a commission on the rent.
Local accommodation is close to hospitality. It requires adverts and photographs, booking management on several platforms, quick replies to messages, check-ins and check-outs, cleaning and linen changes between stays, frequent maintenance and attention to reviews and prices. Every stay means at least one arrival, one departure and one cleaning, so the workload grows with the number of bookings. For an owner who lives abroad, this almost always means hiring a local accommodation manager, who charges a percentage of revenue.
3. Tax and legal obligations
In a long-term residential lease, rents are taxed in category F at a flat rate of 25%:
«2 – Os rendimentos prediais decorrentes de arrendamento habitacional, incluindo os referidos na alínea b) do n.º 5 do artigo 8.º, são tributados à taxa autónoma de 25 %.» — Personal Income Tax Code (CIRS), article 72(2)
In plain English: income from residential leases is taxed at a flat rate of 25%.
The rate is reduced by 10, 15 or 20 percentage points for permanent housing contracts of 5, 10 or 20 years or more. Contracts with a moderate rent pay 10% until 31 December 2029, under Decree-Law 97/2026. Expenses such as IMI, condominium contributions and maintenance works can be deducted.
Local accommodation is taxed as business income (category B), under the simplified regime or with organised accounts, and may be subject to VAT depending on turnover. It also requires prior registration, a complaints book, safety equipment, mandatory civil liability insurance, reporting of foreign guests and, in Lisbon, the collection of the municipal tourist tax from guests. See the new rules for local accommodation.
4. Condominium and Lisbon rules
In a building under horizontal property, the condominium has a say. Since Decree-Law 76/2024, the general meeting can amend the regulations to ban local accommodation:
«A deliberação posterior de criação ou alteração do regulamento de condomínio (…) com o objetivo de proibir o exercício da atividade do alojamento local, deve ser aprovada pela assembleia de condóminos por maioria representativa de dois terços da permilagem do prédio e produz efeitos para futuro, aplicando-se apenas aos pedidos de registo de alojamento local submetidos em data posterior à deliberação.» — Decree-Law 128/2014, article 6-B(5), as republished by Decree-Law 76/2024
In plain English: a later decision to create or amend the condominium regulations to ban local accommodation needs a majority representing two-thirds of the building’s permillage and only applies to registration requests submitted after the decision.
For local accommodation already registered, the condominium can ask the mayor to cancel the registration, by a reasoned decision of more than half of the permillage, in cases of repeated disturbance. Municipalities can also define containment areas and object to new registrations, so check the municipal regulation in force with Lisbon City Council before buying.
5. Risk and investment goals
A long-term lease is less volatile: housing is a basic need, contracts have minimum terms and rents are updated with inflation. The main risks are a tenant who does not pay, unforeseen works and legislative changes.
Short-term rentals are exposed to tourism seasonality, economic or health crises, frequent regulatory changes and growing competition. Their main risks are long periods without bookings, fines or cancellation of the registration for non-compliance and the effect of negative reviews on occupancy.
Conservative owners tend to choose the long-term lease for its predictability. Investors seeking maximum return who can manage, or pay for management, may choose local accommodation. Some owners start with a long-term lease and, with experience, consider local accommodation, after checking the condominium and municipal rules.
Before you decide
- Simulate both options with realistic occupancy and real costs.
- Read the condominium regulations and the latest minutes.
- Check the Lisbon municipal rules on local accommodation.
- Compare the tax regimes and confirm them on the Tax Authority’s portal.
- Decide who will manage the property day to day.
For renovations that raise the value of a rental, see our four tips for a property investment in Lisbon.
How Condoroo helps
Condoroo provides rental management and manages more than 600 condominiums, with a team of more than 20 professionals. We take care of the contract, the rent, communications with the Tax Authority and the relationship with the condominium.
Short-term or long-term rentals in Lisbon: frequently asked questions
Which is more profitable in Lisbon: a short-term or a long-term rental?
It depends on the location and tourist demand. Local accommodation can generate more monthly income but is less stable; a long-term lease offers a more predictable return.
Can I switch from a long-term lease to local accommodation?
Yes, but check the condominium regulations, the municipal rules and your tax obligations first. The change may require a new registration.
Which option takes more management time?
Local accommodation: bookings, frequent cleaning, guest communication and constant maintenance. A long-term lease needs much less intervention.
Do I have to declare rental income to the Tax Authority?
Yes, in both cases. A long-term lease falls under IRS category F; local accommodation is a business activity under category B.
Can the condominium stop local accommodation?
Partly. A ban in the regulations needs two-thirds of the permillage and only applies to later registration requests. For an existing registration, more than half of the permillage can ask the mayor to cancel it in cases of repeated disturbance.
What IRS rate applies to residential rents in 2026?
25% as a rule, reduced by 10, 15 or 20 points for permanent housing contracts of 5, 10 or 20 years or more, and 10% for moderate-rent contracts until 31 December 2029.
This article is for information only and does not replace personalised tax or legal advice. Legislation checked on 26 October 2026.
