Portugal Real Estate Taxes: All You Need to Know
Taxes are never fun, never easy, and never interesting. But unfortunately, they are a must. And that goes for when purchasing property in Portugal, as well.
Don’t let it confuse you, though. You can simply divide it into to categories:
- One time fees you will pay when you’re acquiring property in Portugal, these include:
- Stamp Duty
- Notary and registrations fees
- Legal fees (if you are using a lawyer)
- Recurring fees you will pay when you own a property in Portugal, these include:
- Maintenance fees
With that, let’s dive in to see what these taxes mean, how they are calculated, and when they are due. We will also go through what other fees you may encounter.
Property Purchase Tax (IMT)
If you’re purchasing property in Portugal, the IMT tax will be familiar ground. The Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT) is due every time a property is acquired in the country. The rate depends on the property type and its value, and you’ll need to pay it before you finalize your property purchase.
In Portugal, IMT is only paid by the buyer and not paid by the seller when you then go on and decide to sell your property.
Assuming you are acquiring a €500,000 property in Lisbon, your IMT would amount to:
6.0%, so €30,000 if you are buying a residential property
6.5%, so €32,500 if you are buying a commercial property
7.0%, so €35,000 if you are buying a land
Exemptions on IMT Taxes
Interestingly, certain conditions might exempt you from paying the IMT. Properties in mainland Portugal valued at or under €92.407, for instance, are exempt. The same goes for properties in autonomous regions (Madeira, Azores, etc) valued under €115.509. Additionally, there are other scenarios like purchasing properties for urban rehabilitation or properties seen as of public interest that can lead to exemptions or reductions.
Other Circumstances Regarding IMT
The criteria under which you purchase the property – whether as an individual, through a corporation from blacklisted or whitelisted jurisdictions, etc., can also influence the IMT you owe.
Stamp Duty (IS)
When you’re making a significant transaction like a property purchase or undertaking a financial commitment in Portugal, you’ll often encounter the Stamp Duty (Imposto de Selo). It can apply to deeds, contracts, mortgages, and more.
While purchasing a house, the stamp duty is typically 0.8%, paid at the notary during the sale. If you’re taking out a mortgage, stamp duty applies there too, with rates depending on the repayment period.
Notary and Registration Fees
Upon purchasing a property in Portugal, you’re required to pay for notary and registration fees. The deal is finalized once the purchase is registered at the Land Registry Office.
In Portugal, notaries play an indispensable role in the property buying process. They ensure the legal validity of the transaction, making sure everything is above board.
Generally, notary fees range from €800 to €2,000. It’s safe to allocate about 0,5% to 1,5% of the total property cost for these fees in total.
Immovable Property Tax (IMI)
Nope, it does not end with the acquisition costs. Owning property in Portugal comes with its own set of tax obligations, the main one of which is the Imposto Municipal Sobre Imóveis (IMI).
Essentially, it’s a municipal property tax that homeowners need to pay yearly. The rate at which you’re taxed largely depends on the municipality your property is located in. The funds gathered from this tax support the maintenance of public infrastructures within Portuguese municipalities. If you’re the property owner on the last day of a tax year, the IMI tax is applicable to you. Rates vary, with rural properties taxed at 0.8% and urban properties ranging between 0.3% and 0.45%. The date of the property’s last valuation can also influence the rate.
Exemptions on IMI Tax
While the IMI tax is fairly straightforward, there are exemptions. If you’ve recently purchased a property as your permanent residence or if you’re renting it out, you might be exempt from this tax for up to three years. Other factors, such as the property’s taxable value and the taxable income of the owner, can also play a part in these exemptions.
Rental Property Taxes in Portugal
Tax for non-residents in Portugal is a flat fee of 28% on rental income.
You can deduct expenses like maintenance, insurance, taxes, and more. Keep invoices as proof.
For those interested in the D7 visa, securing a long-term rental contract is essential. Learn more about the program in our Portugal D7 Visa article.
Wealth Tax (AIMI)
In Portugal, the Adicional Imposto Municipal Sobre Imóveis (AIMI), or the wealth tax, targets those who have property holdings over €600,000. It’s a relatively recent introduction, in place since 2017, with rates depending on whether you’re an individual or a company and the total value of your properties.
Capital Gains Tax
Capital gains tax is all about the profit you make when selling assets like real estate. In Portugal, the rate you’ll pay varies depending on your residency status and the nature of the asset in question.
Exceptions to Capital Gains Tax in Portugal
Certain situations, like being a tax resident and selling your primary residence to buy another one in Portugal, can offer you exemptions on capital gains tax.
In Portugal, when it’s time to sell property, sellers foot the bill for agency fees, not buyers. And since 2008, these agency fees can be deducted as a sales cost from any capital gains made on a property sale. The typical Portuguese real estate brokerage fee is 5%+VAT.
In Portugal, there is no inheritance tax for immediate family members (children/parents/spouses). They are exempt from paying Inheritance Tax since 2004. But there is a stamp duty.
If the inheritance isn’t for the immediate family, the rules and rates differ, so it’s crucial to understand the ins and outs before making any decisions.
Fiscal Representation in Portugal
If you’re not living in Portugal but have assets there, like a house or a car, the law requires you to have a local tax agent. This person makes sure you’re meeting all the tax responsibilities that come with your Portuguese assets. Think of this agent as a bridge between you (or your company) and Portugal’s tax authorities. They work with the tax office on your behalf, dealing with issues like property tax bills, income from renting out property, and other tax matters.
Paying Your Taxes in Portugal While Living Abroad
If you’re not living in Portugal full-time, but have the responsibility of fulfilling tax obligations in Portugal, rest assured that the tax payment can easily be done through a bank transfer. You can fulfill your tax responsibility without hassle from abroad.
Many international homeowners in Portugal choose to delegate these payments either to their lawyers, their fiscal representatives, or to their accountants.
Additionally, if you purchase a home in Portugal to live in permanently, there’s a chance you could be exempt from certain property taxes for a few years. Just remember to check on these tax breaks.
6 Key Tax Takeaways for Buying Property in Portugal:
Now that we’ve gone through the taxes associated with buying property in Portugal, let’s sum it up.
#1 Staying too Long Could Change Your Tax Status:
Planning to vacation at your Portuguese home? Understand the residency rules. Spending more than 183 days a year might classify you as a tax resident. This means you may owe taxes on worldwide income. However, moving permanently might bring some tax benefits. To learn more, check out our article on Non-Habitual Residency (NHR) in Portugal.
#2 Expect Transfer Taxes and Stamp Duty:
When you buy property in Portugal, you’ll pay up to 8% in transfer tax and an additional 0.8% in stamp duty. Annually, you’ll also owe a property tax ranging between 0.3% to 0.8% based on various factors.
#3 Annual Wealth Tax on High-Value Properties:
If your property’s worth is over €600,000, it may attract an annual wealth tax. But for couples owning jointly, this tax kicks in only if the property’s value exceeds €1.2 million.
#4 Potential Double Capital Gains Tax:
Selling your property might lead to capital gains tax in both Portugal and your home country. The details depend on where you reside, how long you’ve owned the property, and how you use the sale proceeds.
#5 Reconsider Owning Through a Company:
Some people used to buy properties via offshore companies for tax advantages. However, this strategy isn’t as tax-friendly as it once was, especially since 2018.
#6 Think About Inheritance Taxes:
When planning for the future, consider potential inheritance taxes. If someone other than your immediate family inherits your Portuguese property, they may face a 10% stamp duty. If you still have ties to the UK, there might be UK inheritance tax implications as well.
Frequently Asked Questions
How is Capital Gains Tax calculated in Portugal?
If you're selling a property in Portugal, it's wise to understand capital gains tax. Despite simplifications in the tax system, consult a certified Portuguese accountant who specializes in helping international clients. It guarantees timely tax payments, avoids misunderstandings, and lets you savor Portugal's beauty without worries.
How can foreigners become taxpayers in Portugal?
Non-EU property owners need a tax representative to obtain an NIF (tax identification number). This representative can be a local resident, lawyer, or even a friend. Necessary documents include a valid passport and proof of address in Portugal. Becoming an NIF holder doesn't make one a tax resident automatically. Tax obligations kick in under specific residency or property ownership conditions. Special status like Non-Habitual Residency offers tax breaks for newcomers.
Are there annual property taxes in Portugal?
Absolutely. Once a property is yours, you owe the municipal property tax (IMI) every year, with rates set by the local council. Properties above €600,000 may also attract AIMI.
Who pays VAT in Portugal?
Businesses exceeding a €13,500 turnover on taxable products/services are VAT-bound. This limit is set to increase over the next couple of years. Portugal introduced VAT in 1986 and it has multiple rate bands.
Should rental income be taxed in Portugal?
Certainly. If your Portuguese property generates income, 15% of the net income should be paid as tax.
What taxes apply when buying Portuguese property?
Buyers shoulder an IMT, potentially up to 8%, plus a 0.8% stamp duty.
Comparing property taxes: Portugal vs. UK – how do they stack up?
Both countries have analogous property taxes. For instance, Portugal's IMT can be likened to the UK's Council Tax. Before making a move, familiarize yourself with both purchase-time and annual property taxes in both nations. Furthermore, consider the income tax disparities. Portuguese property tax intricacies warrant consultation with specialists. Ensure you're fully briefed on what's expected.