The steps of buying a Privately Owned Property

If you purchase property in Portugal and you are not a resident in Portugal, you are liable to pay some taxes. By definition you are considered to be not living in Portugal if you do not spend 183 days per year (Tax Calendar Year) or more living in Portugal or if your primary address is not there.

INDIVIDUAL TAXATION As a Non-Portuguese resident, you are liable to tax on your Portuguese sourced income and a married couple are taxed jointly. 

If you decide after you have purchased your property that you wish to rent it out, then you will be taxed on that rental income. Net rental income is taxed at a flat rate of 15%, which is withheld at the source.

The Taxable income, can be calculated as the gross rent minus any maintenance costs, related expenses for example insurance premiums and the municipal tax, and also any repair costs that may have arisen. You cannot deduct your interest costs which may have incurred when you bought the property.

As an owner of property in Portugal you will have to pay property tax (Immovable Property Tax, IMI).

Each individual municipal has its own rate, and is decided by the municipal assembly. The person/Corporation that owns the property on the last day of the respective tax year is liable to pay the IMI Tax.

• The Tax rates range from 0.3% to 0.45%.
• Property in rural areas are be taxed at 0.8%( Rustic Properties), whereas property in more urban areas will fall in the stated range.
• Property that has been re-valued since 2004 will fall between 0.2 and 0.5%, and property valued before 2004 will be between 0.4 to 0.8%.
• Property owned through a corporation domiciled in "Black" listed jurisdictions (Tax havens - E.G British Virgin Islands, Isle of Man, Gibraltar) will pay a straight 7.5% Tax of the rateable value.
• Some property cases will be exempt from the property tax (IMI). Property which is to be used as a permanent home or to be rented out will be exempt from property tax (IMI) for a period of 3 years and will depend upon the patrimonial value of the property.
• Exemption applies for a three-year period, in case of urban properties with a Tax Registration Value up to € 125,000, held by individuals which obtained a taxable income in the year prior to the acquisition, of up to € 153,300.

Is a property transaction tax paid by the buyer when there is a transfer of ownership of real estate in Portugal. The percentage of tax charged can range from 1% to 8%, depending on a few factors including the purchase price for the real estate, the location of the property and whether it is first or second home in Portugal.

It’s also worth noting that Portugal’s property transfer tax or IMT has to be paid before the completion of purchase but if the transfer takes place outside the territory of Portugal, the payment may be made the following month.

Some facts are exempt from IMT, namely the ones mentioned below. Exemption may depend on certain requirements:

• acquisition of properties for resale by Real Estate Trading companies;
• acquisition of properties intended for urban rehabilitation;
• acquisition of property or autonomous fraction of urban property intended to install tourism complex to which has been attributed tourism utility;
• acquisition of real estate by Real Estate Investment Funds for Residential Letting;
• restructuring operations or cooperation arrangements;
• acquisition of buildings classified as of national/public/municipal interest;
• exemption or reduction of the IMT rate, regarding the acquisition of property that constitute eligible investment under Investment Promotion Tax Regime (RFAI).

• Commercial & Building Plots: Pay flat rate of 6.5% IMT.
• Agricultural & Rustic Lands: Pay flat rate of 5% IMT.
• Property acquired by a Corporation domiciled in White listed jurisdictions: Pay the same rates of IMT as in the chart above.
• Property acquired by a Corporation domiciled in Black listed jurisdictions: Pay 15% IMT.
• The purchase of shares of a White listed Jurisdiction Corporation: Pay NO IMT.
• The purchase of shares of a Black listed Jurisdiction Corporation: Pay 8% IMT.

You can calculate an estimated Portugal’s property transfer tax cost on your purchase in here:

First introduced back in 2017, the Adicional Imposto Municipal Sobre Imóveis (AIMI) is seen as Portugal's version of a wealth tax, which affects owners with a share in Portuguese property worth over €600,000. Regardless of residency status, rates applied are 0.4% on the total amount for properties held by companies, 0.7% for individuals and 1% for those owning property valued over €1 million.

There is some relief which comes via a €600,000 allowance per person, deducted from the value of all Portuguese properties.

• Up to the value of €600,000 No AIMI is payable
• Between €600,000 and €1Million 0.7% on the value between €600,000 and €1 Million
• Valued above €1 Million 0.7% on €400,000 + 1 % on Value in excess of €1 Million

Those not eligible for the allowance pay AIMI on the full property value. However, for both IMI and AIMI, the tax authorities calculate property value using the Valor Patrimonial Tributário (VPT), bear in mind these values are usually lower than the actual market value.

To be paid by the purchaser prior to signing the notarial deed and the registration of the property of the property into the buyer's name. Stamp duty is 0.8% of the sales price. Notary and registration fees vary between EUR 1.000 to 2.000. 

There is a Capital Gains tax in place in Portugal on the sale of a property at a rate of 28% for individuals and 25% for companies (non-residents).

If the money from a sale is re-invested then only 50% of the net taxable income will be subject to capital gains tax.

To calculate the taxable gain, you take the selling price, minus the acquisition costs, any costs incurred during the transfer of ownership, and also any property improvement costs that have incurred within 5 years of the sale.

There are a few exceptions to Capital Gains Tax in Portugal:

• If you are a tax resident of Portugal (Domiciled in Portugal) and you are selling your primary resident in Portugal and you buy another residence in Portugal. Importantly this rule applies for sales that are within 3 years after, or 2 years before.
• If the property in question was first occupied before January 1989 in your name.
• If you decide to reinvest the monies made from the sale of your Portugal primary residence into another primary residence in the EU, you are then able to roll over the costs.

There are no agency fees paid by the buyer. In Portugal it is always the seller that pays the agency fees. As of July 2008 agency fees can be deducted as a sales expense from any capital gains realised from the sale of a property.

Between close relatives there is no inheritance tax in Portugal. On gifts a 0.8% stamp duty based on the VPT must be calculated. Other situations of inheritance or gift are subject to a stamp duty at the rate of 10% of the VPT.