VAT on guest invoicing: 6% or 23%? The detail that changes your final price

When you issue an invoice to a guest, the question seems straightforward: what VAT rate applies? The answer depends on exactly what you're charging for — and this is where many hosts go wrong, sometimes without noticing for months.

The core logic: not everything is taxed the same way

Short-term rental (alojamento local) isn't treated as a single block for VAT purposes. The Portuguese Tax Authority (AT) draws a clear line between the accommodation service itself and any additional services you offer guests.

That distinction has direct consequences for the rate you apply — and, by extension, for the final price your guest pays or the margin you absorb if you don't pass the tax on correctly.

Pure accommodation

The accommodation component — providing the space for overnight stays — benefits from a reduced VAT rate. This rate is significantly lower than the standard rate, which makes alojamento local fiscally competitive compared to many other services.

Additional services

This is where things get complicated. Services such as:

• breakfast or meals
• transfers or transport
• equipment hire (bikes, surfboards, etc.)
• experiences organised by the host

…may be subject to different VAT rates depending on their nature. Some fall under an intermediate rate, others under the standard rate. Invoicing everything at the same rate — whichever you choose — is almost always a mistake.

Your VAT regime matters too

Before you even get to the question of rates, there's a prerequisite: you're only required to charge VAT if you're registered under the standard VAT regime.

If you benefit from the exemption provided in the Portuguese VAT Code — available to taxpayers whose turnover stays below the legally defined threshold — you may not charge VAT on your invoices. The trade-off: you also can't deduct the VAT you pay on your own expenses.

This status isn't fixed. If your turnover grows and crosses the legal threshold, you automatically move to the standard regime the following year. Many hosts discover this shift too late.

Practical note: your VAT regime is independent of your IRS regime (simplified regime vs. organised accounting). They're two separate axes — and conflating them is a classic mistake.

The most common invoicing mistakes

1. Applying the reduced rate to everything

The reasoning is understandable: "it's all alojamento local, so I'll always use the lowest rate." But if you're charging separately for breakfast, or invoicing a transfer, that logic won't hold up with AT.

2. Not itemising lines on the invoice

Even if the guest pays a single amount, the invoice must break down what's included — and apply the correct rate to each component. An invoice with a single line reading "stay + services" is an open invitation to problems during an inspection.

3. Missing the regime change

Moving from the exemption regime to the standard regime means you must start charging VAT on invoices — and remitting it to the state in periodic returns. Hosts who don't track their turnover throughout the year can be caught off guard.

4. Confusing platform VAT with your own VAT

Some booking platforms charge VAT on their commissions — but that's their VAT, not yours. The VAT you owe (or don't) to the state is calculated on the amount you receive from guests for your services, not on the commissions you pay to the platform.

Keeping this under control

Alojamento local invoicing has layers — and the more services you offer, the more layers there are. A few practices that help:

• Always itemise services on the invoice, even if the guest paid a single total.
• Review your VAT regime at least once a year, ideally before the end of the financial year.
• Keep receipts for all expenses that include VAT — if you're on the standard regime, you can deduct that tax.
• Talk to your accountant before launching new services. Adding breakfast or a transfer to your offering seems simple, but the tax implications are worth clarifying before you issue the first invoice.

The good news: once you understand the underlying logic — accommodation vs. additional services, exemption regime vs. standard regime — invoicing stops being a mystery. It becomes a process.

The goal isn't to memorise rates. It's to understand the principle, so you don't make mistakes that quietly accumulate over months.