Innovative property investments
Investment property in Portugal
Buying Guide
Buying Costs
General
The buyer is responsible for most of the costs associated with purchasing a property.
The notary fees and land registry fees are approximately 1.5% of the purchase price.
Imposto de Selo (Stamp Duty), is approximately 0.8% - 1% of the purchase price.
Property transfer tax
IMT tax, formerly known as SISA tax, is a tax on the transfer of property and is dependant on the declared purchase price and the type of property.
For properties up to 83,500 euros there is no IMT tax to pay:
83,500 euros - 114,800 euros - 2%.
114,800 euros - 156,500 euros - 5%
156,500 euros - 260,900 euros - 7%
260,900 euros - 521,700 euros - 8%
over 521,700 euros - 6%
Exceptions are rural properties, which are subject to a flat tax based on the title deed value; commercial properties, subject to a tax rate of 6.5% and purchases by an offshore company which are subject to a tax rate of 15% of the title deed value.
Under-declaration leads to penalties and heavy Capital Gains Tax, as the declared value is used to calculate the profit made on the sale of the property.
Mortgages
Mortgages are available to foreign buyers and they can borrow up to 75% of the property price.
Refinancing an existing mortgage is also possible, allowing the buyer to cover 100% of the price and any additional costs.
Fiscal representative
Portuguese law requires that a non-resident buyer appoints a person as a “fiscal representative”.
This person can be a friend, a tax adviser or a lawyer and will receive all correspondence from the tax authorities.
Annual property tax
Once you have your home, you will also have to pay IMI. IMI is an annual property tax and is calculated according to the valor tribitavel (registered value of the property).
The registered values are very low and may not be anything like the real value of the property.
However, the law is changing and the registered values are rising but are still lower than council tax on a UK property.
Income tax
Personal taxes in Portugal include an Income Tax, so any activity from letting your property must be declared.
There is a treaty between the UK and Portugal so double taxation relief on Portuguese assets is available.
Capital gains tax
When you get round to upgrading your Portuguese property or exiting the market entirely, as a vendor you will be subject to Capital Gains Tax.
In Portugal, capital gains are treated as part of their taxable income for the year in which the gains occur and do not have a separate system of assessment.
Capital Gains Tax is charged at a flat rate of 25% of the difference in purchase and sale price.
If you are lucky enough to be a Portuguese resident, then only 50% of the gain is taxable, and if a non-resident then the entire difference is subject to tax.
Key facts
- Notary and land registry fees are approximately 1.5% of the purchase price
- Stamp Duty is less than 1% of the purchase price
- The transfer tax (IMT) is scaled according to declared purchase price and type of property
- Transfer tax is not applicable to rural or comercial properties and those bought by offshore companies, which have different tax rates to pay
- Under-declaration leads to penalties and heavy Capital Gains Tax, as the declared value is used to calculate the profit made on the sale
- Foreign buyers can obtain mortgages of up to 75% or refinance an existing one to cover 100% of the price and additional costs.
- Non-resident buyers must appoint a “fiscal representative” to receive all correspondence from the tax authorities
- The annual property tax (IMI) is calculated on the registered value of the property
- Income tax is payable on any rental income
- Capital Gains Tax is charged at a flat rate of 25% of the difference in purchase and sale price - but only on 50% of the gain if sold to a Portuguese resident
- Capital gains are treated as part of their taxable income for the year in which the gains occur and do not have a separate assessment system
Downloadable Reports and Documents
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