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The Buying process
Real Estate Taxes and Levies
Download Buyers Guide
Buyer's Guide
Helping you safely navigate the property ownership journey
Becoming a property owner in Portugal is an exciting adventure. But, like any real estate process, it’s not without its complexities. To help make buying, moving and ownership as efficient, effortless and enjoyable as possible, we’ve collated a wealth of useful information in our downloadable Buyer’s Guide.
While you’ll find this guide an invaluable starting point, we always recommend that you contact a local lawyer or tax advisor for specific and personalised advice. And remember that your friendly and knowledgeable Vale do Lobo Real Estate team are always available to answer your questions.
Advantages of investing in Portugal
Portugal offers a selection of extremely attractive investment advantages with favourable tax regimes and special residency visa permits available for those who choose to purchase property within the country.
lNon Habitual Resident (NHR)
This regime allows for tax exemption on almost all income from foreign sources and a flat income tax rate of 20% on the majority of revenue sources, such as salaries. Some other advantages of this special tax regime include:
- Low rate tax on pensions (10%)
- Tax exemption on inheritance
- Tax exemption on capital income
- Tax exemption on dividends and interests
The Buying Process
Initial steps
• Establish what type of property suits your needs and budget (apartment, linked villa, detached villa, plot of land for construction).
• Define what will be the main use for the property: as a residence, a holiday home or to rent.
• Seek advice from an accountant or financial advisor.
• Always use a lawyer or solicitor to finalise the contract and required paperwork for the purchase of the property.
• If you are considering buying through a foreign company for tax reasons, carefully analyse the pros and cons.
• Never buy shares in a property-owning company without instructing your lawyer to do a thorough due diligence of the company, its assets and respective legal situation.
• Finally, remember the legal title to transfer the property is the Notarial Deed (Escritura), which needs to be signed in an official Notary’s Office.
Property ownership structure
There are a number of different owner-ship options available. It is very important to look at these options and take tax advice on them. The potential tax savings you could make in the future by setting it up properly at this stage are huge. The main options for purchasing the property are:
• Buying the property in the name of the prospective buyer(s).
• Buying in the name of a company, national or international, although given current property tax provisions, it is not advisable to do so in the name of a “blacklisted offshore entity” (list issued by the Portuguese tax authorities)
• Buying the property freehold or the leasehold.
Please discuss the above options with your lawyer before proceeding with the purchase.
Property taxes & costs
Taxes and costs related to property transfer
All acquisition costs can be offset against future capital gains tax liabilities providing they are properly documented, so it is important to keep and file records carefully.
Notaries and Registration fees are fixed although they could vary according to the type, number or complexity of acts to be done or registered, whereas Purchase Transfer Tax (IMT) and Stamp Duty are based on the declared price of the property.
Stamp Duty is charged at a fixed rate of 0,8%, whereas Purchase Transfer Tax for villas and apartments is charged according to a sliding scale that is altered each year, varying between 1% and 8% (e.g. 6% over €550.836 for non-permanent habitation) of the declared value of the sale. For urban plots for construction, the tax rate will be 6,5% of the declared value of the sale.
Mortgages
Mortgages for property in Portugal are normally available for up to 75 percent of the value of the bank valuation (loan to value LTV).
This generally means you’ll need to find a 25 percent of own capitals and be able to provide evidence of your income. Mortgages in Portugal are available over periods of between 5-30 years.
Lending criterias & interest rates, spreadsor costs associated vary between credit institutions.
Annual property tax (IMI)
The IMI tax is due annually and can be paid up to 3 instalments, depending on the value. The tax is calculated upon the taxable value (VPT – Valor Patrimonial Tributário) of the real estate property. The IMI rate is determined by the competent Municipality Assembly for the next year. The applicable rate ranges between 0,3% and 0,5% for urban buildings.
Stamp Duty (IS)
Residential properties and plots of land for construction with a taxable value of at least 1 million euros are subject annually to stamp duty of 1% over the taxable value.
| Notarial and registration fees | Approx. €2.000 |
| Stamp Duty | Calculated at 0,8% of the declared value of the deal. |
| Legal Fees |
Depending on the lawyers, but can usually be calculated at 1% or 2% of the value of the deal of the deal. |
Off-Plan Properties
Off-plan properties are a very successful way of securing a property investment while only putting in minimum capital in most cases, making them a very popular option for investment purposes.
It usually takes between 12 and 24 months to complete a development cycle and this allows buyers ample time to be able to arrange moving plans while seeing their capital grow.
Every off-plan property is checked and approved before a final purchase is made and Vale do Lobo adheres to very strict criteria in all off-plan developments to ensure complete transparency at every stage of the project.
