Portugal has become a popular destination for foreign buyers in recent years. With its mild climate, stunning beaches, and friendly locals, it's no wonder that so many people are choosing to invest in property here. If you're thinking of buying a property in Portugal, then this guide is for you. We'll take you through the steps of purchasing a property, from finding the right one to completing the purchase, and we'll also touch on the costs involved. So, without further ado, let's get started.
If you are non- resident in Portugal, before looking for a property, make sure you have your tax identification number (NIF) and have appointed a tax representative. Without these, you will not be able to make an official offer on a property.
The tax representatives are the middleman between you and the Portuguese Tax Department. Their role is to inform you about your tax obligations, laws and any deadlines.
Getting your NIF is rather straightforward, you can apply for it in-person at the closest finanças (Portuguese tax office).
The second step in any property purchase is choosing the right location. Portugal is not a large country but offers a wide variety of regions and districts, so it's important to take your time and do your research before making a decision. Once you've found the perfect location, the next step is to find a reputable real estate agent who can help you navigate the Portuguese property market and assist you with negotiating the price.
The due diligence process is a crucial next step after finding your dream property. Although the Elyseeum team will have verified all seller documents ahead of time, we always advise our clients to hire a lawyer/solicitor to carry out the due diligence and start drafting the promissory contract so they can be sure everything meets legal standards and guidelines.
The lawyer will review all the documents needed for the process including:
Once the due diligence is completed and everything is legal, your lawyer will start drafting the Promissory Contract.
This contract includes the following information:
The promissory contract will be signed by you and the current owner/vendor.
Upon signature of the promissory contract the agreed deposit is paid (usually 10% of purchase price). As this contract is legally binding, the deposit is non-refundable. If either party changes their mind, they lose the deposit to the other (this means that if you change your mind you lose your deposit but if the vendor changes his or her mind you get your deposit back in double).
After the Promissory Contract has been signed, it takes approximately 30 to 60 days for the Final Deed (Escritura) to be completed (in exceptional situations this could be shorter or longer).
This process involves the buyer, the vendor, their respective lawyers, the buyer's bank representative in case of a mortgage, the notary and the real estate agency. The final contract is in Portuguese. The parties can have the notary and lawyers translate it into English or other languages during the signing of documents.
The remaining balance of the agreed-upon purchase price is paid at this stage.
As soon as both parties have signed and the funds have been handed over, you can consider yourself to be the legal owner of your dream property in Portugal!
When buying a property in Portugal it is important to be prepared to pay for other costs, in addition to the purchase price:
The Agency Fees in Portugal are paid by the seller and not by the buyer, so none for you to pay.
A lawyer will check all the documentation and legal side of the property you want to buy. For example, a lawyer carries out a title check and due diligence reports on the property. Using a lawyer, you know exactly what you are buying, without falling into any traps. If you wish, we can introduce you to reliable lawyers with whom we have a longstanding relationship, to help you throughout the buying process.
It's essential to use a notary to legally validate a property purchase in Portugal. Typically you can expect to pay notary fees of €500 to €1000.
0.8% of purchase price, payable at the local tax office Finanças just before the final act of sale.
The Property Transfer Tax (IMT) is a cost to be paid at the transfer of the property into your name. Different rates apply, depending on whether the property is a primary residence, a secondary residence, a holiday property, or a rental property.
Click here to email us in order to receive comprehensive buying guide to get detailed rates for each type of property.
It is important to consider the ongoing taxes you will have to pay after buying your property in Portugal.
The Property Tax (IMI) is the tax to be paid to the council, also known as council tax. It is a percentage of the rateable value of the property (VPT - valor patrimonial tributário), which is set by the tax office. Please note that this value is different from the market value or purchase price. The tax varies depending on the council.
The AIMI (Additional IMI) is an additional property tax applied to the entire rateable value of the property (VPT) on all residential properties and plots for construction valued above EUR 600,000 owned by a taxable person (thus excluding industrial or tourist properties). For couples (married or unmarried) who have opted for joint taxation, AIMI is applied to total asset values of above €1,200,000.
Click here to email us in order to receive comprehensive buying guide with detailed IMI and AIMI rates,
When you own a property that you are renting out, you need to pay tax on the income.
For Portuguese residents, the rental income is added to the wage and together the income will be taxed as a total amount.
For non-residents this is different. A non-resident that rents out a property long term, pays tax on the income of the property, minus costs.
A non-resident that rents out a property short term (holiday let), pays tax on only a percentage of the income, meaning the majority of the income is tax free.
Buying property in Portugal is a complex process, but it can be a rewarding experience if you do your research and work with experienced professionals. By following these steps and being prepared for the associated costs, you can make your dream of owning property in Portugal a reality.
Note: This information is provided as a guideline to clients and, to the best of our knowledge is factually correct at the time of writing. Laws in Portugal are constantly changing - it is advisable to check your personal situation with your financial advisor.