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Key Legal And Tax Aspects

When buying property in Portugal there are a number of legal and tax issues that must be considered prior to the purchase.

Tax numbers for non-resident persons

Non-residents and non-resident companies must obtain a tax number and if they are non-European they must have a tax representative in Portugal. The cost to obtain such tax number is around € 10,00 for persons and € 50,00 for companies.

Due diligence

Prior to the acquisition of the property or of the company that owns the property, the buyer should conduct their own due diligence. Documents that should be analised will depend on the structure of the transaction and the type of property, but generally they form the following:

  • Certificates issued by the Land Registry Department and Tax Authorities
  • Permits regarding the construction and the use of the property
  • The existence of pre-emption rights over the property should be verified during the due diligence
  • Energy certificate
  • Technical specifications document

The Land Registry certificate

The most important document in the purchase of a property in Portugal is the Certificate issued by the Land Registry Department.

All property in Portugal is required to be registered with the Land Registry Department and Tax Authorities. There is a legal presumption that the registered fact matches with the reality.

Just like in the UK and other European countries are no restrictions on public access to the land register as everyone has access.

Property Purchase Taxes

The acquisition of a property in Portugal is subject to Property Transfer Tax (IMT) and Stamp Duty (IS) to be paid by the purchaser prior to the execution of the public deed.

Taxes (IMT and IS) are due on the Transfer Price or on the Tax Value of the property (“Valor Partrimonial Tributáve”), if higher.

Property Transfer Tax (IMT)

For permanent residences
Property value IMT rate Deduction
Up to €92,407

€92,407 – €126,402

€126,403 – €172,348

€172,348 – €287,213

€287,213 – €574,323

Over €574,323

0%

2%

5%

7%

8%

6%

€0

€1,848.14

€5,640.23

€9,087.19

€11,959.32

€0

 

For second homes/holiday homes
Property value IMT rate Deduction
Up to €92,407

€92,407 – €126,403

€126,403 – €172,348

€172,348 – €287,213

€287,213 – €550,836

Over €550,836

1%

2%

5%

7%

8%

6%

€0

€924.07

€4,716.16

€8,163.12

€11,035.25

€0

Exceptions:

  • Other urban property, such as building plots or land to build an urban dwelling: 6.5%
  • Rustic property (agricultural land): 5.0%
  • When a company listed in one of the black-listed jurisdictions acquires a property in Portugal: punitive tax rate of 15%. (Note that if a company listed in a white-listed jurisdiction acquires a property, the same rates apply as shown in the table above)

Stamp Duty (IS)

The IS rate applicable is always of 0.8%, independently of the price and the purpose of the property.

Example: For the acquisition of a primary residence for a property of €400,000 the purchaser would pay IMT of €20,964.70 and IS of €32,000.00.

Ongoing property taxes

Ongoing property taxes (Key Legal And Tax Aspects) on real estate owned in Portugal are calculated on the Tax Value of the property (and not on the Transfer Price). Property is subject to an annual tax, called the “Imposto Municipal sobre Imóveis” (IMI) due by the property owner. This tax is due on the Tax Value of the property and the rate could vary between 0.3% and 0.5% depending on the municipality where the property is located. If the owner is an off-shore company the rate applicable is much higher at 7.5%

As a general rule new-build or sufficiently renovated properties may be exempt from payment of IMI for a period of 5 years from the conclusion of the renovation process. Depending on its location a property may also be subject to a small Sewage Tax. In the Municipality of Lisbon for the year of 2015 there is a sewage tax corresponding to 0.8% of the IMI tax.

A property with a Tax Value superior to €1,000,000.00 is subject to an annual tax stamp at the rate of 1%.

Tax on rental income:

Non-resident:

  • Individual: 28%
  • Company (including off-shore companies): depends if the company is carrying out a commercial activity which is deemed to have tax exposure in Portugal
  • If so: 21% + 1.5%
  • If not: 25%

Resident:

  • Individual: 28%
  • Company: 21% + 1.5%

Tax on capital gains:

Non-resident:

  • Individual:
  • If resident in the EU: 14% (50% x 28%)
  • If not: 28%
  • Company (including off-shore companies): 25%

Resident:

  • Individual: normal tax rate (between 14.5% and 48% ), but only on 50% of the gain
  • Company: 21% + 1,5%