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What do I need to do first?
In order to buy a property in Portugal, you need to be registered with the Portuguese tax authorities and to have a tax identification number (Numero de Contribuinte). |
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Will I need a solicitor?
Don't do anything without engaging a lawyer first. Expect to pay 1-2% of the purchase price in lawyer's fees. |
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What happens once I've decided to buy?
Once you have made a verbal agreement to buy, your lawyer will check the legal status of the property, ensuring that the title deeds, official tax documents and habitation licence are in order. A promissory contract is then drawn up by your lawyer detailing the purchase price, payment schedules, completion date, guarantees for building work, details of the builder's insurance policy, a copy of the plans and drawings, and any special terms and conditions agreed by both parties. At this stage the agreed deposit, usually 10-20%, is paid by the buyer.
Between 30 and 60 days later, completion takes place, and the deed of sale is signed at a notary's office. Legal ownership is transferred and the balance is paid, along with the notary's and deed registration fees. Transfer tax must be paid beforehand, and the receipt handed to the notary on completion. The final act of the sale is signing the escritura, or Public Deed, in the presence of your lawyer and the notary. In Portugal, any transfer of ownership of a property must be effected by way of a Public Deed executed at a notary. The original of the deed is kept at the notary's office and certified copies can be requested at any point. The Public Deed is then used by the notary to register the transfer at the Land Registry and tax department. Registering ownership is the most important act of buying property in Portugal: it prevents anyone claiming subsequent rights on the property. It can take months, so it's essential to do it as soon as possible.
As opposed to the British system where the relevant property documents (or title deeds) are in the possession of the owner or the lender, in Portugal, all property documents are lodged at the Land Registry and tax office, and owners are provided with copies. If the Portuguese property documents are lost or missing, new documents or certified copies can be obtained from these registries.
A property is registered at the Land Registry of the borough of its location and identified by a registration number. The Land Registry holds information such as the type of property (rustic or urban), ownership (current and past), description of the property (area, adjacent properties etc), and any charges, encumbrances etc on the property.
The property purchase must also be registered with the local tax office, who will require your tax number. The information held by the tax department is more detailed and includes the tax value (Valor Patrimonial or Valor Tributário) of the property, which is used for assessing the municipal rates. |
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What extras should I budget for?
Extra fees can add 10-15% to the purchase price - higher than in most EU countries.
Notary and registration fees equal about 2.5% of the purchase price.
In general, a transfer of property is subject to Transfer Tax (IMT) of up to 6%, and stamp duty. However, if the property is a gift to children or spouse it is now exempt from transfer tax and is only subject to stamp duty.
VAT (IVA) and deed utility fees are charged on new properties only. VAT of 19% should be included in the asking price, so check that it's not being added on afterwards. |
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What is the rental potential of my new property?
Rental yields are good. Non-residents who let their property are charged tax at a flat rate of 25% on all the income. |
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What taxes should I expect to pay?
In accordance with EC tax law, Portugal has recently introduced measures to clamp down on the use of offshore tax havens. The abolition of the tax on bequests to resident direct family members, along with reductions in capital gains and corporation tax make Portugal one of the most inheritance tax-friendly countries in Europe.
You are considered to be resident in Portugal if you spend more than a total of 183 days in Portugal per calendar year (cumulative, not consecutive), or if a "habitual residence" is available to you on December 31st of the relevant tax/calendar year and it appears that you intend to keep it and occupy it as your habitual residence. A person resident in Portugal is liable to Portuguese tax on worldwide income and gains. A person not resident in Portugal is liable to income tax on Portuguese source income, and to capital gains in respect of assets in Portugal.
Portuguese income tax is levied at a rate of 12% for the first 4,266 euros, up to 40% for anything over 53,322 euros.
Property tax varies from 0.7% to 2% of the fiscal value of the property, and is levied annually by the local authority.
Stamp duty of 10% is levied on numerous transactions in Portugal.
There is no Wealth Tax (as there is in Spain). Inheritance and Gift Tax (estate tax or death duties) is payable by the beneficiaries.
For non-residents, CGT is charged at a flat rate of 25%, regardless of the number of years of ownership. Residents will pay 25% CGT on 50% of the gain, unless it is a principal residence and sale proceeds (net of mortgage) are re-invested in another residence. |
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Will I need a visa or residency permit?
Check first whether you will need a visa or a residence permit. Foreigners are freely permitted to buy property in Portugal but visitors aren't allowed to remain longer than 60 or 90 consecutive days (depending on nationality) or 183 cumulative days in any year without a visa extension or residence permit. If there's a possibility that you or a family member might want to live permanently or work in Portugal, you should first ascertain whether this is possible.
British nationals with passports endorsed "British Citizen" or "British Dependent Territories Citizen" can stay up to 90 days without a visa, after which time a temporary residence will be required. To apply, contact the Portuguese consulate in London on 0207 581 8722/3/4 or email mail@cglon.dgaccp.pt. For recorded information on visas call 0207 581 3598.
When applying for a resident's card you will need to provide proof of health insurance. |
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