IRS on AL: when the 15% works, when it doesn't, and what it costs if you get it wrong

The simplified regime has obvious appeal: less paperwork, a coefficient applied to your gross income, done. But that apparent simplicity hides a few decisions that, if you get them wrong, cost real money — and sometimes late-payment interest on top.

This article isn't a substitute for your accountant. It's here so you walk into that conversation already knowing what's at stake.

How the simplified regime works for AL

Under the simplified regime, the AT (Portuguese Tax Authority) doesn't ask you to prove your actual expenses. Instead, it applies a coefficient to your gross revenue — that coefficient represents the fraction treated as taxable income. The rest is assumed to be expenses, with no receipts required.

For alojamento local, the applicable coefficient depends on the income category your AL earnings fall into — and that isn't the same for everyone.

Category B or Category F: the distinction most owners overlook

AL income can fall under Category B (business and professional income) or Category F (property income), depending on how the activity is structured. The distinction directly affects which coefficient applies and, therefore, how much of your income is taxable.

As a general rule:

• If you have an open activity registered with Finanças as an AL holder, your income tends to be classified under Category B.
• If the property is leased to a company that runs the operation, or in certain other specific arrangements, Category F may apply instead.

Assuming the wrong category — or not checking at all — is one of the most common sources of errors on AL owners' IRS returns.

When the simplified regime makes sense

The simplified regime works in your favour when your actual expenses are lower than the notional deduction implied by the coefficient. In other words: if what you genuinely spend on the property (maintenance, platform commissions, cleaning, insurance, and so on) is a smaller slice than what the coefficient already deducts automatically, you come out ahead.

It's also easier to manage if you have one or two properties, moderate revenue, and don't want the fixed cost of organised accounting.

When the simplified regime can cost you

Actual expenses exceed the flat-rate deduction

If your costs are high — significant maintenance works, platform commissions, external management fees, insurance, rents — organised accounting may let you deduct more than the coefficient covers. Paying tax on a higher taxable income than necessary is money you didn't need to lose.

The turnover ceiling

The simplified regime has an annual turnover cap. If you exceed it, you're required to move to organised accounting — and if you don't do so in time, the AT can make the correction for you, with consequences.

The exact threshold is set in the IRS Code and can be updated. Check with your accountant what the limit is for the tax year in question.

The illusion of "automatic expenses"

The coefficient isn't a deduction of real expenses — it's a legal presumption. That means you cannot combine the flat-rate deduction with specific expenses you want to document. It's one or the other: either you use the simplified regime and accept the coefficient, or you move to organised accounting and justify everything.

Many owners assume they can cherry-pick the best of both worlds. They can't.

How the AT checks

The Tax Authority cross-references your declared figures against several sources:

• Digital platforms (Airbnb, Booking, etc.) are required to report payments made to hosts resident in Portugal. What you declare must be consistent with what the platforms report.
• RNAL records (the national AL register) allow the AT to know which properties are registered and during which periods they were active.
• Invoices issued — you're required to issue an invoice or receipt for every stay. Missing or incomplete invoicing is a red flag in the AT's systems.

A discrepancy between what the platforms report and what you declare doesn't go unnoticed. And when the AT opens an inspection, the burden of proving your return is correct falls on you.

What it costs when you get it wrong

The most frequent — and most penalised — mistakes are:

• Omitting income: failing to declare platform revenue, even partially.
• Wrong income category: treating Category B income as Category F (or vice versa) without a valid basis.
• Staying in the simplified regime after exceeding the turnover cap: the AT can assess the outstanding tax with compensatory interest.
• Not issuing invoices: beyond the fine for missing invoices, it creates inconsistencies that are hard to defend during an inspection.

Fines and interest vary depending on the infraction and how long it goes unresolved, but the principle is straightforward: the longer the situation stays uncorrected, the more expensive it gets.

What to do before you file

1. Confirm the income category your AL earnings fall into with an accountant — don't assume.
2. Compare the tax you'd pay under the simplified regime with what you'd pay under organised accounting, based on your actual expenses for the year.
3. Check whether you've exceeded the turnover threshold that requires a change of regime.
4. Make sure your invoicing is complete and consistent with the payments received from platforms.
5. Keep all expense documentation — even if you're on the simplified regime this year, you may need it if you switch regimes or face an inspection.

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The simplified regime isn't a bad option — for many AL owners it's genuinely the right one. The problem isn't the regime itself; it's choosing it (or staying in it) without checking whether it still makes sense for your situation. Fifteen minutes with an accountant before you file is worth more than any coefficient.