What are the taxes when buying real estate in Portugal?

• What taxes can buyers expect in the real estate market in Portugal?

• How to avoid taxes when transferring property in Portugal?

• What are the taxes and expenses for real estate in Portugal?

• What are the main housing and tax expenses in Portugal?

Taxes in the real estate market of Portugal

In the Portuguese real estate market, there are many taxes that are important to know before taking the step to purchase a property. If you are considering investing your capital in this country, it makes sense to understand what tax obligations may arise during the acquisition and subsequent operation of the property. Specific tax rates can vary depending on whether you are a local resident or a foreign citizen who has purchased property or owns a business.

Economic changes in Portugal

The economy of Portugal, which has significantly improved over the past twenty years, has notably strengthened the country's financial situation and positively impacted the real estate market. In recent years, cities like Lisbon and other locations in Portugal have attracted a large number of investors from Europe. It is also worth mentioning the "golden visa" program, which actively draws foreign buyers to the Portuguese real estate market.

Tax obligations of citizens and foreigners

Citizens of Portugal and foreign investors who own assets in the country are required to pay taxes in accordance with local regulations. Portugal is known for its relatively favorable tax system, as well as an agreement with Russia that helps avoid double taxation. This means that residents who spend more than 183 days a year in Portugal are subject only to local taxes.

The process of buying real estate and taxes

When purchasing real estate in Portugal, it is important to pay attention to the tax rates, which are set based on the assessed value of the property and its geographical location. It is also essential to consider whether the property will be used as a primary residence or a second home. To fulfill all tax obligations, potential buyers may consider opening an account at a local bank. This process will require an individual tax number, which can be obtained from the tax authorities, as well as documents such as a passport, birth certificate, and proof of residence in Russia.

The main tax on the transfer of ownership rights

One of the key taxes that must be paid when purchasing real estate in Portugal is called the property transfer tax, or IMT (Imposto Municipal sobre as Transmissões). The rate of this tax can reach up to 8% of the total transaction amount, which can significantly increase the final costs of the purchase. It is important to remember that the tax rates may vary depending on whether the property will be used as a primary residence or a secondary home.

It should also be taken into account that the tax base may differ between the mainland of Portugal and the islands of Madeira and the Azores, which can also affect the amount of tax obligations.

Additional taxes and expenses

In addition to the main property transfer tax, there are also various annual taxes and expenses related to property maintenance that are important. Property taxes in Portugal are mandatory for all owners, and their structure can vary depending on local laws and regulations.

Conclusion and recommendations

Therefore, before making a final decision about purchasing property in Portugal, it is important to pay attention to all the nuances of taxation and associated costs to avoid unforeseen financial difficulties in the future. Understanding these details will not only help in properly planning your investments but also make the process of managing property in this beautiful country easier.

Tax-free situations when transferring property

In some cases, the property transfer tax (IMT) may not be payable. For example, when purchasing a residential property for permanent residence, the value of which does not exceed92,407 euroson the mainland of Portugal. For the islandsMadeiraandAzores Islandsthis limit is increased to115,509 eurosIt is also possible to be exempt from paying IMT if the purchased building is part of a municipal program for urban infrastructure restoration.

Tax rates on the mainland of Portugal

If the property value on the mainland exceeds the specified limit, the tax is calculated according to the following algorithm:

• 2% on objects priced from92 407to126,403 euros;

• 5% for apartments priced between126 403and172,348 euros;

• 7% for properties whose prices range from172 348to287,213 euros;

• 8% for real estate in the range of287 213to574,323 euros;

• 6% if the cost exceeds574,323 euros.

Tax rates for non-residential properties

When it comes to real estate located on the mainland of Portugal but not intended for permanent residence, different tax rates apply:

• 1% on objects up to92,407 euros;

• 2% for apartments between92 407and126,403 euros;

• 5% on objects priced from126 403to172,348 euros;

• 7% for the price category from172 348to287,213 euros;

• 8% if the housing costs from287 213to550,836 euros;

• 6% if the cost exceeds550,836 euros.

Taxes in Madeira and the Azores

In Madeira and the Azores, the IMT tax is classified based on the purpose of the property – residential or investment. The rates are as follows:

• 0% for objects whose value is up to115,509 euros;

• 2% for prices from115,509to158,004 euros;

• 5% for the cost from158,004to215,435 euros;

• 7% for prices in the range of215 435to359,016 euros;

• 8% for objects from359,016to717,904 euros;

• 6% on real estate worth more than717,904 euros.

The necessity of paying the IMT tax

It is important to remember that the IMT tax must be paid before signing the purchase agreement. Portuguese notaries require proof of payment of this tax (as well as the stamp duty, which amounts to0.8%from the value of the property) before the transaction and the transfer of the property to the new owner.

Tax on mortgage loans

Additionally, if the buyer intends to take out a mortgage loan to finance the purchase, a stamp duty will also be applied to that amount. It is withheld at the moment the loan funds are deposited into the borrower's account. The stamp duty rate depends on the loan term:

• 0.5% for loans with a term of up to 5 years;

• 0.6% for longer-term loans.

Conclusion

Therefore, when planning to purchase real estate in Portugal, it is essential to thoroughly research all tax obligations and fees in advance to avoid potential difficulties in the future.

In Portugal, the interest on loans taken for the purchase, construction, or renovation of one's own home is exempt from stamp duty. The process of buying real estate includes additional costs, such as notary and registration fees, which amount to approximately 2.5% of the total property value. Translation services can cost around 100-200 euros. It is also important to note that in Portugal, it is possible to purchase real estate through a power of attorney (procuração), which is issued in the name of a lawyer. The issuance of such a power of attorney takes place at a local notary and will cost between 50 to 75 euros.

Real estate taxes

Property taxation in Portugal requires attention from owners. The main obligation is the payment of the annual municipal property tax (IMI), which must be started in May. The calculation of this tax is based on the actual taxable value of the property (VPT), which is stated in the cadastral documents.