Hyundai team manager Alain Penasse explained the incident, which happened 2.4 kilometres into SS7 – the day's final gravel test.
"In a right corner, Hayden tried to avoid a stone on the inside," Penasse told Autosport.
"He went to the outside of the corner and went to the ditch. The ditch was ending and the car hit the end of the ditch with a strong impact on Hayden's side.
"They both came out of the car themselves, then Hayden started to have some lower back pain, so they decided to ask for a doctor.
"The ambulance came, it took them back to the start and Hayden was airlifted to the hospital in Porto where they are doing a check-up."
Rally Portugal is just Paddon's second event of the year, in his newly abbreviated calendar on the World Rally Championship, and his first in three months.
-More to come