Portugal is a fantastic place to live or visit, and owning a property is an aspiration of many British visitors who fall in love with the thriving, cultural cities, tiny villages tucked in the countryside, or luxury villas with incredible views of the turquoise sea.
Whether you’re planning on buying property in Portugal as a retirement home, holiday residence, investment or for any other reason, you need to understand all the costs and taxes involved – and your real estate ownership rights as a foreign national.
Let’s talk property taxes, the property purchase process, and ensuring you have the appropriate visa or permit, depending on the length of time you expect to spend in Portugal.
Foreign Property Ownership Rules in Portugal
Portugal has long attracted foreign investment, and although the golden visa scheme is not now accepting further applicants on the basis of property investment, real estate remains in high demand.
There are no specific limitations or restrictions, and you can buy property in Portugal as a non-EU citizen, irrespective of whether you intend to live in the country or wish to purchase Portugal real estate as a second home or investment.
As a non-EU citizen, you will normally need to obtain a Portuguese tax number called a Numero de Contribuinte or Número de Identificação from the local tax office. This registration number is required when you enter into any formal transaction, such as opening a Portuguese bank account.
However, it is important to be mindful of the visa-free travel limitations enforced by the Portuguese government. UK citizens can travel to Portugal up to 90 days per 180 days, as with all European countries. Those buying property in Portugal as a permanent residence may need to apply for a visa, residency permit or other authorisation to live in the country before they proceed with their real estate purchase.
Portuguese Property Taxes
While most British citizens buying a property in Portugal will research areas, property types, average listing prices, and estate agent fees, it’s also important that all foreign buyers factor taxation into their budgets.
There are several potential types of property tax you may need to pay as part of the initial property purchase process and on an ongoing basis.
Paying Property Purchase Tax
The Imposto Municipal sobre as Transmissões Onerosas de Imóveis or IMT is the Portuguese property transfer tax. How much tax you pay will depend on the property’s value, whether you are buying a primary home or a second residence, and the municipality.
IMT transfer tax is assessed based on the value of the property deed multiplied by the applicable rate, less any tax deductions, and is payable at the following rates:
- Rural properties: 5%
- Residential properties in towns and cities: Up to 7.5%
You may also be liable for the Imposto de Selo or stamp tax, a levy applied to formal loans, contracts and other agreements. If, for example, you are taking out a mortgage loan to finance a Portuguese property purchase, you would incur a rate of between 0.5% and 0.6% against the value.
Municipal Property Tax in Portugal
The Imposto Municipal Sobre Imóveis, or IMI, is another municipal property tax most comparable to the UK council tax. Most regions charge IMI based on 0.3% to 0.45% against the property’s assessed value, although rural property owners usually pay a higher 0.8% rate.
Annual Property Taxes on High-Value Assets
The Adicional Imposto Municipal Sobre Imóveis, or AIMI, is applied to individuals who own properties valued above €600,000, with rates assessed by the Portuguese Tax Authority and normally levied at 0.7% for individual owners.
Rates applied to properties owned through a company, particularly for commercial entities based in a country Portugal considers a tax haven, vary.
The Process of Buying Property in Portugal
The exact process of purchasing a Portuguese property may, in part, depend on whether you intend to finance the acquisition in cash or need to take out mortgage lending to cover the initial costs. In every instance, lenders will require down payments, and you should account for the interest costs, arrangement fees and other application expenses.
Portugal requires all property buyers to appoint a notary – normally not the same professional you use to check the purchase contracts and organise property surveys. The notary works as an intermediary, ensuring that property purchases have been correctly registered through the Conservatória de Registo Predial or Land Registry.
Notaries also take responsibility for verifying that the residence is the legal property of the seller, assessing any restrictions that affect the usage of the site, and submitting records to the Repartição de Finanças – the Portuguese tax authority.
When both parties have agreed to an offer, you must sign a sales contract called a Contrato de Promessa de Compra e Venda, which the notary must witness. At this stage, down payments become payable, and you or your solicitor can negotiate a date for the sale to complete.
IMT becomes payable once the sales contract has been signed, followed by completion of the deed of purchase, known as an Escritura Publica de Compra e Venda – after which the notary will register the property in your name.
Understanding the Tax Obligations Linked With Purchasing Portuguese Real Estate
There are several taxes you may be liable for when purchasing a property in Portugal and as part of your annual tax obligations. These will also depend on your tax residency status and should be included in your total purchase cost budget.
British citizens who buy and live primarily in a property in Portugal are normally categorised as tax residents. In effect, a tax resident is taxed as any other citizen and is usually liable to pay taxes against their worldwide income and assets.
Foreign property owners who have a residence in Portugal but live mainly in the UK or another country are typically non-tax residents – which means your overseas assets remain declarable within the UK. However, most Portuguese property taxes are payable regardless of your residency status.
It is, therefore, important to consult a financial adviser who can assess your circumstances, advise on the accurate tax liabilities associated with your property purchase and subsequent ownership, and ensure you have clarity about which taxes you are obligated to declare and pay and in which jurisdiction.
For more information about buying property in Portugal, please contact the Chase Buchanan team in Portugal, or submit an enquiry to our UK Administration Centre to arrange a convenient time to talk.
*Information correct as at February 2024