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Taxes for residents and non-residents when buying property in Portugal

17 August, 2022 Economy

The difference between buying a house in Portugal being a resident or not depends on the purpose of the house. If you buy a house to live in Portugal, you are buying a permanent home and are a resident, but if you do not live in Portugal and you buy property there it will count as a second home. This affects the property taxes you’ll have to pay.

 

With a little help from Doutor Finanças, idealista/news looks at what taxes exist in Portugal for foreigners when buying a property, whether as a first residence or a second house.

After all, buying a property is one of the most important moments in most people’s lives, not only because it's a long-term financial decision, but also because it always raises some doubts about the expenses and taxes you have to pay. Here we try to answer all the questions you may have about what taxes to pay when you buy Portuguese property.

 

IMT

The IMT municipal real estate transaction taxes in Portugal (Imposto Municipal sobre Transações Onerosas de Imóveis) must be paid whenever there is a financial transaction for the purchase or sale of a property. How much tax you pay varies according to the property type (whether it’s a country house or an urban property), location (mainland or autonomous regions) and purpose of the property (permanent or secondary housing).

To calculate the value of the IMT you should use the following formula:

IMT = property value x tax rate x tax deductions

Both the rate to be applied and the portion to be deducted are values that can be consulted on the Official Portuguese Finance Portal. An even easier way to work out the IMT in Portugal is to use Doutor Finança's specialist IMT calculator.

 

Stamp Duty

Stamp Duty, or Imposto de Selo, is the oldest tax levied by the Portuguese State and, according to the Portal das Finanças, is for "all acts, contracts, documents, titles, papers and other legal situations provided for in the General Table". If you buy your house with your own capital, it’s worth keeping the Stamp Duty in mind. It is charged at a rate of 0.8% of the value of the property.

 

Deeds of sale

The purchase/sale of a property in Portugal also implies some costs for the paperwork, notably the title deed. This can be drawn up and signed in a Notary's Office or in a Land Registry and the cost varies between different service providers.

To make it easier for you to formalise the purchase of your home in Portugal, the government has also created the “Casa Pronta”, where you can create your title deed, as well as all the necessary acts to finalise the purchase of the property, such as paying the IMT.

 

If you get a mortgage...

It’s also important to take into account the tax due on mortgages in Portugal, the Imposto sobre a Concessão de Crédito. This tax is charged by the bank and is levied on 0.6% of the financing value. This means if you get a mortgage loan of 100,000 euro, you will have to pay 600 euro of tax on it.

You can find more information about this tax in the European Standardised Information Sheet (ESIS), which is made available to customers by the bank.

 

Taxes to pay after you’ve bought the house

Although they will only be paid after you have bought the house, there are other taxes that you should bear in mind when buying a house as these will also have an impact on your personal or family budget.

IMI

The IMI Municipal Property Tax (Imposto Municipal sobre Imóveis) is a tax defined and updated by the municipality where the property is located. It is levied on the Taxable Asset Value, i.e. the appraisal value of the property as it is registered with the Portuguese Tax Authority.

Although the value is set individually by the different Portuguese municipalities, it is limited by the State:

  • Urban Buildings: between 0.3% and 0.5%.
  • Country homes: up to 0.8%.

 

Capital Gains Tax

If you sell a house in Portugal to buy another, you should be prepared to pay capital gains tax as part of your income taxes. Simply put, the capital gains are the profit obtained from the sale of an asset, be it real estate property or any other type of good. That is, it corresponds to the difference between the sale value and the purchase value of the next home.

This value is calculated according to the following formula:

Capital gains = Sales value - Acquisition value x devaluation coefficient - charges - procedural costs 

Capital gains, which are known in Portuguese as mais-valias, are taxed in accordance with the purpose of the property you have purchased, namely whether it is as a primary residence or a second home. The Capital Gains Tax Calculator from Doutor Finanças can not only help you to calculate the capital gains but also shows you the approximate value of the tax that you may have to pay in case there are capital gains.

 

Copyright: Idealista News

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