If you intend to purchase in Portugal these are the normal costs & taxes involved in a property purchase. IMT + IS + Registration + Notary (or other legal entity for that purpose). (it is useful to know the name of the important taxes)

At the time of the final deed, the buyer will have to pay two taxes (IMT + IS ) + Registration + Notary (or other legal entity for that purpose).

* IMT (Municipal Tax on Onerous Property Transfers)
* IS (Stamp Duty Tax)
* Registration of the deed (the cost will vary if you use credit to purchase)
* Notary or (other legal entity for the act)

IMT Tax (Property Transfer tax) = IMT (Imposto Municipal sob transferências) Previous known as SISA.

* The IMT is calculated according to the higher amount: the sale value of the property declared in the final puschase deed, or the Patrimonial tax value shown in the land registry (caderneta predial).

* In the case of a property exchange, if there is tax to pay, the burden falls on the buyer who ends up with the more expensive property.

* The IMT (Property Transfer tax) must be paid on the date of signing the final purchase deed, and sometimes it is possible to make the payment at the place where the deed is signed (Notary or other legal entity for the act), or it can be paid directly in any Finances department, through homebanking, at banking institutions that have a protocol with the Tax Authority, at CTT/post offices or at the ATM. (Proof of this tax payment must be delivered at the notary or other legal entity for the act). 

* As of 1st January 2007 there are two separate rates to be applied, depending on whether you are buying a property for permanent living (table I) or a second or holiday home (Table II)

* The amount payable varies with the value of the property and its location, (if on the mainland/Portugal or in the islands/Açores & Madeira).

* Please see the tables below updated by the Portuguese State Budget for 2024 (OE2024), These 2 tables underwent some changes that came into force from January 1, 2024 (Law No. 82/2023, of December 29 

 Table I -  IMT TAX for Permanent Occupation (in the Continent only)

   Table II -  IMT TAX for Non Permanent Occupation (in the Continent only)

NOTE: The above mentioned values only apply to residential properties or apartments (autonomous units) for permanent residence or for second homes/holiday homes. For other properties/building types (rustic land, urban land, businesses, etc.) other rates apply, see table below: 

* One of the last major changes to the IMT tables that were made in the 2020 state budget is the creation of a new type of property, which is actually a new type of buyer, namely if it is a legal person/company with a tax address in a tax haven. 

Acquirers (legal person/company) residing/headquarteres in a tax haven is 10%  (both in mainland Portugal and in the autonomous regions)  

Tax exemption for table I or table II applies to: Purchases below € 101.917,00 are tax exempt 

EXAMPLES:  

The following is an example on how to calculate the amount of IMT (for a Permanent occupation / table I) to be paid on a €250.000 property:

Example: (Value of the property Transaction) X (% to apply) - (Tax amount allowed to deduct) = (IMT to be paid) 

          Ex: €250.000 x 7% = €17.500 - €10.022,42 = €7.477,58 (IMT to be paid)

The following is an example on how to calculate the amount of IMT (for a Non Permanent occupation / table II) to be paid on a €250.000 property:

Example: (Value of the property Transaction) X (% to apply) - (Tax amount allowed to deduct) = (IMT to be paid)

          Ex: €250.000 x 7% = €17.500 - €9.003.25 = €8.496,75 (IMT to be paid)

(we have a simulater below to calculate your IMT and IS) 

IS / Stamp Duty Tax  = Imposto de Selo

• * IS (Stamp Duty Tax) is calculated at the rate of 0.8% (single rate) - both for permanent housing or secondary housing/Holiday homes
• * This IS (Stamp Duty tax) must also be paid by the buyer on all deeds, contracts and financial transactions.
• * This IS tax is calculated on the same basis for IMT purposes (i.e., value declared in the purchase and sale contract or tax asset patrimonial value (VPT), if higher).
• * IS (stamp Duty tax) must be paid on the date of signing the final purchase deed, and sometimes it is possible to make the payment at the place where the deed is signed (Notary or other legal entity for the act), or it can be paid directly in any Finances department, through homebanking, at banking institutions that have a protocol with the Tax Authority, at CTT/post offices or at the ATM. (Proof of this tax payment must be delivered at the notary or other legal entity for the act).

Example:(Value of the property Transaction) x (% to apply) = (Stamp duty to be paid)

• Ex: €250.000 x 0.8% = € 2.000 (Stamp duty to pay) 
• EX. €1.100.000 x 1% = €11.000 (Stam duty to pay) 

OBS.

USE THE SIMULATER HERE TO CALCULATE THE IMT & IS PAYBLE ON A PURCHASE OF A PROPERTY (unfortunately only in Portuguese version- all values updated by the stat budget OE2024)

Notaries  & registration fees = Notario e Registos: 

• These will have to be paid by the purchaser on completion. The Notary charges max of 0.5% of the purchase price for drafting and witnessing the execution of the title deed and a normal registration can cost you minimum of 250 euros.
•  Further information regarding Notaries (portuguese Notaries who speak foreign languages) click here   

•  

• Legal Fees = Honorarios do Advogado:

•  These depends on each lawyer but ussually max. 1% of the purchase price, plus IVA at 23% (the equivalent of VAT).

 IMI Tax (Property Tax similar to Council Tax  = IMI (Imposto Municipal sob o Imovel)

General rates are payable annually or splited, depending on the value of the tax to be paid, and since 2013 it can be paid: 

• * once (April only) if value to pay is below €250,
• * twice (April and November) if value is between €250 and €500
• * or in 3 times (April, July and November) if value is above €500 and are assessed by the local authority (rather like council tax in the UK)
•  
•  
•  
• As a guideline your annual property tax may be levied at up to 0.72% of the market value, but it will depend on the council where your property is located and is assessed based on five components:

The IMI rates (Council Tax) are as follows:

With regard to exemptions of (IMI) Tax for permanent residence and property lease, the exemption period is determined in accordance with the following table:

Obs: The authorities will consider the tax value of the property, the use of the property and the economic circumstances of the owners when making the decision as to whether to grant the exemption. 

• Since 2017: From 2017 onwards to those tax payers whose real estate exceeds €600,000 of "rateable value" will be charged an additional IMI (from 0.4% to 0.7%).
• If the "rateable value" of real estate exceeds €1.000,000, then 1% will be charged additionally together with the normal rates.

• Regarding Offshore Co.: Since 2006 the Portuguese Government, has ajusted the IMI tax (property tax) for the Companies registered in an Offshore base included in a "Black List" to pay 7.5% IMI per annum, properties registered in "white listed"companies are taxed at the same rate as on shore properties (0.8%). There are still a number of ways to alleviate this increase (on black Listed companies) and advice should be sought from your lawyer. 
•  
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• Other extra costs  

Annual maintenance (called a condominium) is payable when buying an apartment or villa on a complex, which covers the upkeep of common areas, gardens, swimming pools, etc. This of course varies from property to property, depending on the level of service provided by the maintenance company. In addition, you will need to pay for insurance and utilities (gas, electricity and water). It is usual to pay for these services monthly.

If you intend to become a resident in Portugal, advice should be taken from a local account.

Contact us for further information or if you would like us to introduce you to:

• Lawyer in Portugal
• Tax Advisors in Portugal
• Banks in Portugal

Buying a property in Portugal it’s a straightforward process provided you stick to the letter of the law and are advised or represented only by competent and reputable specialist;

Use an Estate Agent who is Government Licensed with an AMI number (Mediador Autorizado) and Lawyers or Solicitors (Advogados ou Solicitadores) who are fluent in a language you understand. 

As we say is a procedure that requires proper research and guidance. For this reason we “Vernon” provide a detailed stepped approach of the property acquisition procedure, in order to clarify all the issues relating to the purchase.  

From an offer being accepted to the drawing up of a Promissory Contract (Contrato de Promessa compra e venda) takes between 1 to 4 weeks, depending on whether you, as a purchaser, need a mortgage or finances arrangements and on whether all the vendor’s documents are in order. From the Promissory contract to a final Deed (Escritura), can take as little as 7 days but is normally 30 to 60 maximum 90 days. This is usually defined mostly by the parties financial issues, either related to an eventual mortgage application by the purchaser, or to an eventual mortgage redemption by the vendor

Step 1) Property search and viewing  

Step 2) Make an offer on the chosen property through the agent

Step 3) Select a Lawyer or Solicitor to represent you and act if you wish on your behalf, giving him/her power of attorney to sign any documents on your behalf. Included in their legal fees they will provide with a full search on all legal documentation of the selected property in order to know if you can safely proceed by; checking the Land Registry Certificate (Certidão de Registo Predial), compare it with the Tax Certificate (Caderneta Predial ou Rustica) and the Habitation License (Licença de Utilização/Habitação), among other necessary documents and also provide some tax, inheritance and financial advice, in order to ensure that the process is done in the most efficient way possible

Step 4) Pay reservation fee to the Estate Agent or Lawyer/Solicitor – This Deposit means that the seller agrees to take the property out of the market for an agreed period to provides time to organize and to check legal documentation

Step 5) Clear mortgages requirements or finances arrangements if necessary

Step 6) Agree dates between buyer and vendor for the setting of Promissory contract and final Deed

Step 7) Promissory contract – Upon the signing of the Promissory contract the payment of usually 10% to 20%  of the purchase price is paid to the vendor or vendor´s solicitor– Whereby all conditions for the sale agreed with the vendor will be stated including, price, installments, un-fulfillment regime, inventory, completion date etc. It can be signed in front of a Notary or not and it is legally binding on both the buyer and the seller.

Step 8) Pay IMT tax (Property Transfer Tax) and stamp Duty prior to the signing of the final Deed. The amount payable varies with the value of the property.

Step 9) Completion, payment of the balance of the purchase price to the vendor at the same time that the final Deed is signed in the office of a public Notary.

Step 10) Registration; Finally, register the property in the name of the new owner(s) at the local Land registry (Conservatoria do Registo), and submit the IMI form to the local Finances department (Finanças)

Step 11) Installation of water, gas, electricity, Telephone and others – Applications for installation of the mentioned services where appropriate, are made to the authorities concerned, after the deeds have been affected. 

FAQs About the NIF Number:

1. Does my NIF number expire?  

Your NIF number does not expire and does not need to be renewed either. If you already have one, you don’t need to get another one. The NIF number is permanent)

2. I’ve forgotten or i've lost my NIF Number, what do I do? 

If you are in Portugal, you can go to a Financas office to request a copy of your NIF. If you are abroad, please get in touch with the Portuguese embassy or consulate nearest you. 

3. Will my children need a NIF? At what age does someone need a NIF?

There isn’t a hard requirement on age, but your child will need a NIF in order to enter in school

After the government approved limitations to the Golden Visa scheme  February 2020, here’s what you need to know about the main changes to the Golden Visa programme that has brought in €4.5 billion in real estate alone.

Created in 2012, the Golden Visa scheme enables non-EU residents to obtain Portuguese citizenship if they invest in businesses or at least €500,000 in real estate. However, the rules were changed in February 2020 to reduce property market speculation and encourage investment in low-density regions (The measure aims to encourage investment in low-density regions, as well as “investment in urban regeneration, cultural heritage, environmental or social activities of high value, productivity and job creation”.

So, what exactly has changed?

The main difference, which has drawn both praise and criticism since the proposal was approved, is the restriction of property purchases to inland municipalities and the autonomous regions of Azores and Madeira.

• This means that those investing specifically in properties in Lisbon and Porto (the most popular option since the scheme began) will now not be eligible for Portuguese citizenship. However, there are still advantages.
• The investment doesn’t have to be concentrated on a single property. Investors can buy various properties that amount to the total value of €500,000, which can then be rented out.

With various benefits proposed to those who invest in inland properties or businesses, this still proves to be an appealing option for foreign investors. There are beautiful countryside properties available across the Algarve.

• The strategy involves local authorities (called Câmaras Municipais) offering buildings or land at give-away prices, reducing taxes, and supporting rental costs to fight their low demographic density. Each authority develops its own attraction project.
• The initiative looks to generate jobs in areas that have become more deserted over the years due to the recession, the Portuguese moving to larger cities and abroad, and the drop-in birth rate.

It is worth noting that these changes will only be enforced in 2021. Until then, the rules remain the same during this “adjustment period”.

• Besides investing in property, non-EU citizens can apply to the Golden Visa programme by investing at least €350,000 in investment funds,
• venture capital or in scientific research,
• or investing €250,000 in preserving national heritage, among other options

 For more information about buying property in the Algarve and maximizing your investment, please contact us.

DUE TO BREXIT -  SHOULD BRITAIN BUYERS BE LOOKING INTO THE GOLDEN VISA ?

Portugal’s Golden Visa scheme, which grants Portuguese citizenship to non-EU nationals, will soon be offered to British investors once the transition period of Brexit ends in January 2021.

Until now, it hasn’t been clear whether UK residents have been eligible for the Portuguese Golden Visa, officially called the Residence Permit Programme, during the 11-month transition period of Brexit.

While the UK officially left the EU at the beginning of the year, the country has remained bound to the EU’s rules, meaning it has still technically been ‘part of the club’.

However, this grey area will cease to exist from January 1, 2021, meaning that British nationals should start considering ways to reside in the EU and benefit from border-free travel within the Schengen area.

While there are several Golden Visa programmes offered by EU countries, Portugal’s incentives scheme remains one of the most popular, with investors attracted to its benefits and its flexibility.

With the news that demand for Portuguese citizenship has soared (Pandemics and political shifts are pushing many families and individuals to become citizens of some of the world’s safest countries. Thanks to its incentive programmes, tax breaks and sense of security, Portugal is one of those countries, with citizenship requests at an all-time high), 108 Golden Visas were granted in July alone, according to the national Immigration and Borders Service (SEF).

Of these, 98 were through the acquisition of real estate and 10 through capital transfer, mainly from China, the US and Brazil.

Portugal’s Golden Visa scheme requires an investment of €500,000 in real estate, and in return provides a residency permit for a family including dependent children. The rules were recently reviewed (as mentioned above), but due to the pandemic, all new plans have been put on hold.

For advice on investing in a property in Portugal, feel free to contact the real estate specialists at Vernon Algarve real estate.

NON-HABITUAL RESIDENT STATUS (NHR)

“NHR” in Portugal, is a tax status intended for Portuguese or foreign citizens who already reside legally in Portugal and who cumulatively fulfil the following requirements:

• Have not been considered as residents in Portugal in the last five years;

• Are considered residents in Portugal, which occurs by:

(i) Remaining more than one hundred and eighty-three consecutive or non-consecutive days within any period of twelve months, beginning or ending in the relevant year; or
(ii) In case of remaining for a shorter period of time, having a housing on any day within the twelve-month period in such conditions that will lead to the assumption of intending to be kept and occupied as an habitual residence.

Note: Foreign citizens who need a visa to enter Portugal and residence permit to reside there must carry out such proceedings previously.

Foreigners who decide to live in Portugal can apply for the Non-Habitual Resident Status (NHR), both for work reasons and for retirement purposes, and for Portuguese citizens wishing to return to Portugal after residing in another country in the last five years.

It was created by Decree-Law n.º249/2009 of 23rd of September, the Non-Regular Tax Regime for Non-Regular Residents, which changed the articles 16.º, 22.º, 72.º e 81.º of the Portuguese Personal Income Tax Code (CIRS).
The Ordinance n.º 12/2010 of 7th of January complements the application of that regime and Law. º 20/2012, of 14th May updated its wording.

This regime applies to taxpayers of Personal Income Tax (IRS) who had not resided in Portugal for tax purposes in the last five years, transfer to the Portuguese territory its tax residence from 2009.

And is, generally, the introduction of specific rules for taxation on IRS of earned income.

1. Based on a favorable tax regime, is intended to attract to Portugal non-resident citizens, professionals qualified for activities with high added value, as well as individuals with a high net worth or purchasing power

1. This attraction is based on the application of the exemption method as the preferred method of elimination of international juridical double taxation of foreign source and application of a special rate of 20% (mitigated and proportional taxation) to certain incomes.

In order to qualify as a non-regular resident, it is necessary:

a) To be a tax resident in Portugal:

It is a tax resident in Portugal, among others, who remains in Portuguese territory, in a given year, more than 183 days (consecutively or not), or who, having remained less time, on the 31st of December of that year, has the housing conditions that shows that the person might intend to maintain and occupy it as a residence.

b) Not to have been deemed as a tax resident inPortugal in the last 5 years prior to the application of the regime:

The person will have to state the non-fulfillment of the criteria necessary for being considered a resident on Portuguese territory during the previous five years.

This regime also applies to migrants who want to return to Portugal.

1. The taxable person deemed non-regular resident acquires the right to be taxed as such during a period of 10 consecutive years, from the year of its registration, as a resident in Portuguese territory, having to comply with the requirement of residence every year.

1. The applicant must request to the Financial Services, adherence to the regime of Non-Regular Resident
   when applying to the statue of resident in Portugal or, later, through March 31, inclusive, of the following year.

RECIPIENTS

1. Non-residents in Portugal who are willing to establish permanent residence in Portugal or who wish to return after a minimum of 5 years of absence (eg independent professionals, pensioners, dependent workers)

1. Or even non-residents wishing to establish themselves as temporary residents, result of secondment relations (eg independent professionals, salaried workers, members of statutory bodies).

INCOME TAX REGIME

1. Income from Portuguese sources:

By choice, may not be included income from categories A and B, when these are caused by activities with high added value, such as architects and engineers, artists, actors and musicians, auditors and tax consultants, doctors and dentists, professors, investors, administrators and managers, senior executives, as specified in Ordinance 12/2010, of 7th January.

1. Income from foreign sources:

The income from foreign sources - dependent work - are exempt from taxation in Portugal, since they are actually taxed in the source State and provided they are not deemed obtained in Portuguese territory.

The income from foreign sources – pensions – are exempt from taxation in Portugal, since they are actually taxed in the source State or they are not deemed obtained in Portuguese territory.

OTHER REQUIREMENTS

1.  To obtain the Portuguese Tax Identification Number from the Tax Authority;

1. To open a bank account in Portugal

1. With regard to mandatory enrollment in Social Security, it should be noted that it is only required if the non-regular resident’s income are from category A or B in Portugal.

In this sense, if they are not covered by Social Security, should the non-regular residents carry a valid health insurance, to ensure health and accident protection, or alternatively, have the European health card, in case of European citizens, in order to be adequately protected in case of illness or accident in the country

Useful contacts

Living in Portugal:
www.livinginportugal.com

Finances Portal:
www.portaldasfinancas.gov.pt

Social Security Portal:
www4.seg-social.pt/

Introduction & explanation of common terms, taxes used in the Legal process involved in buying a property in Portugal

This is a quick guide to introduce you to some terms more commonly used and the Portuguese equivalent which you will encounter throughout the buying process:

Property Documentation: (it maybe useful to known the name of the important documents and theior translation in Portuguese)

• Property Registration = Certidão de teor:  Confirms that the seller has title to the property, that it is registered in his/her name and advises whether there are any outstanding mortgages on the property.

• Property Tax Document = Caderneta predial Urbana or Rustica: Is held by the tax office (Finanças) and confirms the size of the property, its location and boundaries.

• Habitation/Utility Licence =  Licença de Utilização/habitação: Is issued by the town council (Camara Municipal) confirming that the property is in accordance with the building project submited to the council. Non- residential licences need to stipulate the appropriate or industrial use.

• Property B.I. = Ficha Tecnica de Habitação: a new document and applies to all properties built from 1st January 2004. This gives all the information about the property such as the builders’ details, the materials used and who supplied them.

• Property floor plans = Plantas de pavimentos e Arquitectura; The seller will provide plans of both the property you are buying and sometimes the whole development too. These allow both you and your surveyor (if instructed) to identify all parts of the property as planned and registered by the town council.

• Seller identification; is the identification document of the seller (B.I., or passport) and his/her portuguese tax number (Cartão de Contribuinte/NIF) that will be provided to your lawyer.

•  Power of Attorney = Procuração: A person can instruct another (a friend/lawyer/solicitor or any other third party) to represent him/her before a Notary, remaining public offices and all the necessary formalities by giving Power of Attorney.

• Reservation = Reserva: It is common to enter into a reservation agreement by paying a reservation value of  between 2.500 € to 5.000€  to secure a property where certain conditions need to be met, such as for example; obtaining a mortgage offer, sorting a financial situation, obtain a surveyor report, obtain outline planning permission 

• Promissory contract = Contrato de promessa compra e venda: This exchange contract is normally executed by the buyer’s lawyer and contains the usual terms and conditions for buying the property together with the evidence of title and the plans provided by the seller.  i.e. (Identification of the parties, Identification of the property, Values agreed and ways of payment, Agreement terms, condition of the contract indicating the completion date.

NOTE: Upon the signing of the Promissory Contract the seller becomes bound to sell the property and the buyer bound to buy. The deposit is then payable to the seller. If the buyer defaults, the seller is entitle to retain the deposit, If the seller defaults the buyer is entitle to receive twice the amount of the deposit.

• Provisional Registration = Registos Provisórios ; This is only required if you purchase a property through a mortgage. The mortgage or the purchase is registered at the Land Registry prior to the purchase of the property. 

• IMT Tax (Property Transfer tax) = IMT (Imposto Municipal sob transacções) Previous known as SISA. This is the Portuguese Property Transfer tax and will need to be paid at the Tax office (Finanças) before the transfer of the property takes place and proof of transfer delivered to the Public Notary. The amount payable varies with the value of the property. For more info. on this IMT tax please go the next section " What additional costs & taxes are involved to purchase a property in Portugal" 

• Stamp Duty  = Imposto de Selo; This must also be paid at the tax office together with the IMT tax by the buyer on all deeds, contracts and financial transactions. This tax is levied on the value of each taxable deed or operation at a tax rate which varies according to the type of deed. For real property, this is assessed at 0.8%

•   Deed = Escritura: Used to refer to the transfer of the property. Proper title to the property comes with the final deed of conveyance (escritura) which is signed in the office of a Public Notary whereby the parties agree to purchase the property on the terms and conditions agreed in the promissory contract. All the relevant documents (from the property and the identification documentation of the parties and powers of attorney etc) have to be checked  before the contract is read aloud and if any of the parties do not speak or understand Portuguese a Translator = Tradutor(a) will be necessary to translate the whole contract and he/she will also sign the deed attesting as to the authenticity of the translation. The Notary always retains the originals and following completion, issues Certified copies.   

•  Notaries  & registration fees = Notario e Registos:  These will have to be paid by the purchaser on completion. The Notary charges +/- of 0.5% of the purchase price for drafting and witnessing the execution of the title deed

• Registration after completion = Conservatoria do registo Finally, register the property in the name of the new owner at the local land registry (Conservatoria de Registro). Do it without any delay. Registration is effective since the day it is applied for (Normally the notary does this after the deed) and a normal registration can cost you minimum of 200 euros, should the purchase is not with a credit/mortgage.

NOTE: here in Portugal ownership is not established by the possession of a document (title Deed) but precisely by updating the records/registration of the title deeds (certidão de registro) reflecting the ownership change. 

•  IMI Tax (Property Tax) = IMI (Imposto Municipal sob o Imovel) ; General rates are payable annually or splited in 3 payments (to be paid in Abril, July and November) and are assessed by the local authority (rather like council tax in the UK). As a guideline your annual property tax may be levied at up to max. 0.72% of the market value, but it will depend on the county where your property is located and is assessed based on five components:

Your Dream Holiday Home at a "Fraction" of the Cost !

The dream of owning a beautiful holiday or retirement home in the Algarve, with its warm climate, the unique and superb beaches and golf courses, may involve a major financial investment and it’s sometimes difficult to justify if the property is only used occasionally. There is an Alternative: The Four Owner scheme, known as the “¼ share properties” a convenient rotating system gives each owner the opportunity to enjoy 13 weeks throughout the year.

For a relatively small investment you become part owner of a freehold property which is yours to enjoy throughout the year on a rotating basis. With three other independent parties, you own a property in some of the best  and luxury resorts in the Algarve. Each quarter secured by individual title deeds. Purchasing through this well proven system considerably reduces the cost of ownership as it is split into four equal parts, each owner using the property for 13 weeks of the year.

This type of ownership is not to be confused with the Timeshare all be it that the two types of ownership may have common factors.

There are successful resorts operating Quarter shares ownership regimes though the whole country especially in the Algarve, such as in Carvoeiro village, i.e. the well known Rocha Brava Complex, Pestana Golf & Spa resorts Gramacho, Vale de Pinta & Palm Gardens and recently the new Vale de Oliveiras Spa resort.

a) In essence each owner may sell, mortgage, gift or otherwise dispose independently of his or her Quarter share or such other shares into which the property has been formally divided. 

b) The property may be owned by a number of persons and each formally agrees to use and occupy the property in accordance with a co-owners agreement. (which is attached to the final deed). The more sensible and usually well drafted agreements provide for the property to be used by each of the co-owners yearly in rotation subject to the payment of a proportion of the annual maintenance and service charges costs as well as contributions to a sinking fund (normal used for painting or any unexpected costs).

c) The ownership of the property may be in the co-owners own name or through the medium of a company. Each has its advantages and disadvantages.    

If you intend to purchase a ¼ share in Portugal these are the typical costs & taxes involved in this type of property purchase. (it is useful to know the name of the important taxes)

  1) IMT Tax (Property Transfer tax) = IMT (Imposto Municipal sob transferências) 

This is the Portuguese Property Transfer tax and will need to be paid at the Tax office (Finanças) or at the notary before the transfer of the property takes place and proof of transfer delivered to the Public Notary. 

As of 1st January 2007 there are two separate rates to be applied, depending on whether you are buying a property for permanent living (table I) or a second or holiday home (Table II).

Please note, Once you purchase this type of property "¼ share" the purchase is always considered second home or holiday home, therefore the tax rate will always be applied as per (Table II)

Attention: The amount payable varies with the value of the ¼ share which you are purchasing. Please see the table below updated in 2023:

                     Table II -  IMT TAX for Non Permanent Occupation

The following is an example on how to assess the amount of IMT (for a non-permanent occupation / table II) to be paid on a €43.000  purchase price for a ¼ share property:

Ex; €43.000 x 4 (parties/owners) = €172.000 (total value of the property) x 5% = €8.600 - €4.953,86 = €3.646,14 : 4 (parties) = € 911,53 (IMT to be paid)

 2) Stamp Duty Tax  = Imposto de Selo

This must also be paid at the tax office or at the Ntary together with the IMT tax by the buyer on all deeds, contracts and financial transactions. This tax is levied on the value of each taxable deed or operation at a tax rate which varies according to the type of deed. For real property, this is assessed at 0.8%  or  1% for residential buildings worth €1m or more.

Example: €43.000 (purchase value of the ¼ share)  x 0.8% = € 348 (Stamp duty to be paid)

*The above details is provided for general information purposes only and is not intended to be, nor should it be construed as, legal or professional advice of any kind. 

Any company, wherever it is registered, is allowed to buy property in Portugal. Some countries offer tax advantages to companies that own property abroad and do not exercise any commercial activity in the country of registration. This is the case of Malta and the state of Delaware and some other states in the USA. Several other countries offer the same benefits but they are subject in Portugal to extra rate taxes.   

There are considerable advantages to owning a home in Portugal through an offshore company, particularly for non-residents, although the Portuguese tax authorities have in the past years introduced new tax measures designed to impose taxes on offshore companies.

Under new legislation introduced in 2002/3 several restrictive measures were introduced meaning that now it isn’t as advantageous to buy through an offshore company.

BUT there are still advantages, however, and you should consult with a fiscal expert if you are considering this option. Owning a property through an offshore company is often an advantage when you’re selling, as the sale can be carried out much easier, quicker and cheaper and it may help to increase the asking price (although a prospective buyer may not appreciate or want the advantages). Some of the advantages include:

• Avoidance (in most cases) of IMT (transfer tax), and notarial and registry charges upon resale of a property. IMT, legal, notarial and registry fees can amount to as much as 15 per cent of the value of a property.
• Ease of the sale of the property, which simply involves transferring ownership of the company shares to the buyer. This also avoids the lengthy and protracted procedures which are necessary to register a title in Portugal, resulting in lower legal fees.
• Avoidance of local inheritance taxes on the property, including any potential liability to double taxation.
• Ease of transfer to heirs in the event of the owner’s death and avoidance of local succession laws, which may stipulate to whom the property must pass. A number of people (e.g. in a family) can be part owners, each holding a number of shares, or a couple can own a property as a joint tenancy (which isn’t recognized in Portugal) and on the death of either partner a simple transfer of his or her shares can be effected.
• The shares of an offshore company can be used to secure a loan for the purchase of the property. The shares are charged to the bank in return for a loan equal to a percentage of the value of the property.
• Confidentiality (In some cases the buyer can remain anonymous), asset protection and limited liability.
• By holding a property through an offshore company, the company shares can also be held on trust.

• A property can be purchase by more than one owner. The shares can be easily divided in proportion to the capital that each of the parties injects in the purchase. If and when one of the partners wants to withdraw the shares can be easily and economically sold to either the remaining partner(s) or to new ones.  

There are a few disadvantages in owning a Portuguese property through an offshore company, one of which is the cost of setting up the company and annual fees (although this is potentially less than the possible savings). The cost varies according to who establishes the company and where it’s incorporated, but there’s usually a set-up fee of between €1,050 and €3,240 plus an annual amount (from €800 to €2,450) for administration fees and taxes. There are a number of companies who can establish an offshore company, Sovereign Trust is one of them, a long established company located in Lagoa, Algarve 

Purchase an offshore registered property with mortgages.

Several banks will grant mortgages for off shore registered properties also known as Corporate ownership; Totta Santander, one of the largest Spanish-Portuguese banking groups, has offices in London and deals in mortgages for Offshore Co. properties

For further information contact the specialist:

Sovereign Trust - ICSL @ Tel:+351 282 340480 or port@SovereignGroup.com and  www.sovereigngroup.com

Please bear in mind that the laws regarding the ownership of Portuguese property through offshore companies are currently in a state of change and all advantages or disadvantage may be affected in the future.

When buying an off-plan property, i.e. a property still to be built or which is partly built only, it is usual to pay a small holding deposit, e.g. €2500, to reserve a property until a promissory contract is signed (usually around four weeks later).

When buying off-plan, payment is made in stages. Stage payments vary considerably and may consist of a 20 to a 30 per cent deposit on the first stage;

Example A:

20% on signing the contract

20% on completion of the roof;

20% on tiling the bathroom and kitchen (or when the doors and windows are installed);

20% when the building is complete;

10% when the exterior work is completed (such as the patio, pool and landscaping);

and the remaining 10%t on completion (5% of these 10% may be withheld with your lawyer for 6 or 12 months as an insurance against defects, provided you can get the builder to agree to this in the contract).

Example B

An alternative may be;

30 % on signing the contract,

20% per cent on the completion of the foundations, and the walls,

20% on the completion of the roof

25% on tiling the bathroom and kitchen, and on installation of doors and windows;

5% on completion.

If a property is already partly built, the builder may expect a higher initial payment, depending on its stage of completion.

The contract must contain the timetable for the property’s completion; stage payment dates; the completion date and penalties for non-completion; guarantees for building work; details of the builder’s insurance policy (against non-completion); and a copy of the plans and drawings. The floor plan and technical specifications are signed by both parties to ensure that the standard and size of construction is adhered to.

The contract should also contain a clause allowing you to withhold up to 5 per cent of the purchase price for 6 to 12 months as a guarantee against the builder not correcting any faults in the property. (if agreed with builder). The completion of each stage should be certified in writing by your own Lawyer, agent or architect before payments are made. It’s important to ensure that payments are made on time, otherwise you could lose all previous payments and the property could be sold to another buyer.

It’s important to verify that the builder or developer has an insurance policy (or ‘termination’ guarantee) to protect your investment in the event that he goes bust before completing the property and its infrastructure.

Are you looking to purchase a property and need a Portuguese mortgage?

Obtaining a Portuguese mortgage for the purchase of your dream home in the Algarve may be a daunting prospect as most foreign property buyers are unfamiliar with the Portuguese banking system and available financing options.

Typical mortgage conditions for non-residents purchasing a holiday home are currently as follows (as per October 2017):-

• Loan to Value of generally 70%
• Mortgage term of maximum 30 years, up to the age of 75 upon maturity of the mortgage
• Capital repayment mortgages
• Mortgages for the acquisition of a property or construction of a villa
• Early redemption penalty of 0.50% for partial or total early repayments

Each of the remaining banks that are currently active in the non-resident mortgage market apply different affordability and eligibility criteria which need to be assessed by an independent mortgage broker.

Our preferred mortgage brokers Quinta Finance have a wealth of experience in banking matters both in the UK, Switzerland and here in Portugal. Not only will you be assured of speaking with someone fluent in your language (English and German speaking) but you will also have the confidence of knowing that you will be dealing with mortgage advisers that have the appropriate financial qualifications as required by the Financial Conduct Authority (FCA) in the UK which will ensure you are getting the best personal advice for your specific circumstances.

As Quinta Finance is based in Portugal you will be guaranteed to be given the most current and up to date information relating to the Portuguese mortgage market and you will also be secure with the fact that every financing option available currently in Portugal will be presented to you in a comprehensive free report with a break down of all the associated taxes and fees that you will need to know about for any purchase here.

Quinta Finance pride themselves as being the market leader and are pleased to have a remarkable approval record and the full support of all the leading banks in Portugal as well as an extensive list of very satisfied customers.

Quinta Finance offers you a full range of services:-

• Mortgage investment strategies
• Access to all available mortgage products in Portugal
• Mortgage affordability calculations
• Impartial advice
• Negotiation of tailor made mortgage structures
• Discounts on current market lending rates
• Opening bank accounts and online facilities
• Bespoke planning solutions to avoid foreign exchange risk
• A comprehensive mortgage report
• Regular updates throughout the process
• A central liaison point between all parties in the process
• Assistance with all the local taxes and mortgage regulations
• Excellent after sales care service

Certificates of the financial qualifications they have achieved are listed below and can be found on their website, along with testimonials from just some of the many clients that they have helped secure financing for a home in the sun.

• Investment Advice Certificate recognised by the FCA
• Investment Management Certificate recognised by the FCA
• Affiliate of the Securities Institute
• UBS Private Banking Diploma
• Securities & Financial Derivatives Representative

If you would like any information on a mortgage in Portugal please click on the logo button below or contact Quinta Finance by e-mail (link to info@quintafinance.com).

Since June 26, 2009 the new law which simplifies the requirements to obtain the touristic licence has entered into force.

Holiday rental licence (Alojamento Local) smaller holiday rental properties such as villas, apartments and guest houses, are now classed as “Local Lodging” or “Alojamento Local” under the new legislation governing Tourist Rental properties.

The following information’s includes all the specific requirements to register this type of property.

Local lodging properties may be classed in one of these three categories:

A)      House = villa, town house, family house

B)      Apartment = self contained apartment or a self sufficient partition of a building

C)      Guest House = property where the rooms are the units to be let.

The lodging properties must fulfil the following requirements:

A)      Be in well preserved buildings (interior and exterior)

B)      Be connected to the water mains or alternatively have a private, licensed water supply system.

C)      Be connected to the mains electricity

D)      Be connected to the main sewage system or have a septic tank

E)       Have running water supply, both cold and hot.

The lodging units must:

A)      Have a window or balcony facing the exterior, with good ventilation conditions.

B)      Be furnished and equipped accordingly

C)      Have any kind of system to allow blocking the light from outside.

D)      Have security equipment on the doors that allows the client’s privacy

E)       Have a minimum of 1 sanitary facility for every 3 rooms, with washing basin, toilet and bath or shower.

Capacity:

Te capacity of the rental properties is determined by the number of fixed beds (individual r double) to rent in the property. There can also be folding beds (extra) as long as these do not exceed the number of fixed beds.

Safety requirement:

The local lodging properties must comply with the general fire safety regulations and the following requirements

A)       Accessible fire extinguishers and fire blankets, a minimum required is one fire blanket in the kitchen by the oven and one large fire extinguisher or 2 medium ones in each floor of a property to rent. In a Guesthouse or small Bedroom and Breakfast establishment, the requirement is a smaller fire extinguisher in each room.

B)       First aid equipment to EU standard

C)       Instruction Manuals of all electric appliances existing in the units, in the absence of these information about the use and functioning of these appliances must be provided.

D)       Visible information of the national emergency number (112).

How to register and to get the holiday rental licence for these smaller holiday rental properties:

The registration starts with a request (a draft of this request can be collected in the Council), to the local Council hall President “ ao Presidente da Camara” along with the following documents:  

A)      A document providing the legitimacy of the person requesting, i.e., owner, representative of the owner, Management Company.

B)      A certificate of compliance issued y a certified technician, stating that the electricity, gas and water heater installations are according to the law in force.

C)      A plan of the property indicating the units for rent

D)      Property rates document “Caderneta Predial Urbana” issued by the local Finance Department

Once submitted, the requirement stamped by the local council is a valid document to open to public.

Within 60 days after presenting the request the local council will do an inspection to make sure that all the requirements are met. In case any of the requirements are not met, the registration is cancelled and the applicant must return the stamped requirement in their possession.

Once you receive the licence:

The publicity, commercial documentation and merchandising of the rental property, must show the name of the place followed by “Alojamento local" or just “AL” and wish to do publicity

The rental properties may have outside the property and near the main entrance, an informative board provided by the local council.

As any place open to the public these properties for rent are also required to have a complains book (livro de reclamações)

All you need to know about the new law on Local accommodation AL with the new law of 2018

Approved in Parliament on the 17th July 2018, the new law of Local (AL) may start to create problems for economic operators of real estate in the coming months. The measure only enters into force after 60 days of its publication in Gazette, but this should happen over the next few weeks. 

Rental property

If you own and rent out a Portugal property, the income is always taxable in Portugal, whether you are resident here or not.

▪ Portugal residents pay tax on rental income at a flat rate of 28%. You can add rental income to your other income for the year so it is taxed at the normal scale rates. However, this is unlikely to be beneficial if you pay tax at anything other than the lowest tax rate, currently 14.5%.
▪ Non-residents also pay tax at 28%; the letting agent must deduct this from the gross rent.
▪ Maintenance expenses and municipal property tax (IMI) may be deducted from rental income if they are documented.
▪ UK residents also pay tax in the UK. Both the UK and Portugal use their own tax calculations, so the amount is likely to be different. You can offset the Portuguese tax actually paid against the UK liability to avoid double taxation, but if the UK tax is higher, further tax will be due in the UK.

Posted by PORTUGALPRESS on April 18, 2016