If a property  located in Portugal is rented out this income is subject to tax  here even if the owner is not tax resident in Portugal. If the owner is not tax resident in Portugal then this income should also be included on his tax return in their home country.

There is a specific tax category for rental income. However this category is more appropriate for long term rentals as the costs which are deductible are limited to those which the landlord is legally obliged to support. As such for short term rentals where mosts of the costs are incurred by the landlord the use of this category of income would result in a very substantial proportion of the owner's costs being considered non deductible even though a lot of these costs may be considered as legitimate costs.

Short term rentals should are taxable under schedule B of the tax code. Under this system the client has two options. They can either be taxed under the simplified regime in which their taxable income is based on 15% of the rentals received or on the real accounting profit. The later option requires not only that the client appoint a Certified Accountant but they also automatically go into the VAT system meaning that they must include 6% of VAT on their invoices. If the client opts for the simplified regime and their rentals are less than 10,000 Euros in the calendar year they are exempt from VAT.

If the client is non resident they are taxed at a flat rate of 25% of their taxable profit.

Short term rental premises must also be licensed by the local council irrespective of the tax option included above.