A variety of fees and taxes are associated to the purchase of a property which could amount up to 10% for a second-hand property and 25% for a newly built one.
Most fees are based on the fiscal value (valor tributável) of the property, which is usually much lower than the actual price paid.
Most taxes are paid by the buyer.
The different steps needed to take when buying a property in Portugal are described below:
Since January 2009 the Portuguese government is implementing a reform called SIMPLEX designed to cut the bureaucracy, modernise the public services and lower the administrative burden on companies and citizens.
Various reforms are already implemented, such as the Law n°116-2008 by which Notaries (Notários), Lawyers (Advogados), Bailiffs (Solicitadores), Chambers of Commerce and Industry (Câmaras de Comercio e Indústria) and Registry Offices (Serviços de Registo) have now the competence to deal with, witness, check and control the legality of the acts and contracts of any real estate or mortgage transaction.
Final deeds (Escrituras) are no longer compulsory when buying or selling real estate.
Land registry, payment of taxes or additional formalities were also simplified thanks to an online service called “Casa Pronta”.
In case of purchase of a new property a Value Added Tax (IVA) of 20% is due instead of the Property transfer tax (IMT).
| Value of Residential Property |
% Tax
|
Amount Deductible
|
| Up to 89,700 € |
0%
|
0
|
| From 89,700 to 122,700 € |
2%
|
1,794 €
|
| From 122,700 to 167,300 € |
5%
|
5,475 €
|
| From 167,300 to 278,800 € |
7%
|
8,821 €
|
| From 278,800 to 557,500 € |
8%
|
11,609 €
|
| > 557,500 € |
6%
|
0
|
| Value of Residential Property |
% Tax
|
Amount Deductible
|
| Up to 89,700 € |
0%
|
0
|
| From 89,700 to 122,700 € |
2%
|
897 €
|
| From 122,700 to 167,300 € |
5%
|
4,578 €
|
| From 167,300 to 278,800 € |
7%
|
7,924 €
|
| From 278,800 to 534,700 € |
8%
|
10,712 €
|
| > 534,700 € |
6%
|
0
|
| Value of Residential Property |
% Tax
|
Amount Deductible
|
| Up to 112,025 € |
0%
|
0
|
| From 112,025 to 153,375 € |
2%
|
2,245.50 €
|
| From 153,375 to 209,125 € |
5%
|
6,483.75 €
|
| From 209,125 to 348,875 € |
7%
|
11,026.25 €
|
| From 348,875 to 696,875 € |
8%
|
14,511.25 €
|
| > 696,875 € |
6%
|
0
|
| Value of Residential Property |
% Tax
|
Amount Deductible
|
| Up to 112,025 € |
0%
|
0
|
| From 112,025 to 153,375 € |
2%
|
1,121.25 €
|
| From 153,375 to 209,125 € |
5%
|
5,722.50 €
|
| From 209,125 to 348,875 € |
7%
|
9,905.00 €
|
| From 348,875 to 696,875 € |
8%
|
13,390.00 €
|
| > 696,875 € |
6%
|
0
|
Example: In Mainland, property price is €200,000 for a non-permanent residence, therefore the IMT will be:
200,000 x 7% = 14,000
14,000 - 7,924 (amount deductible) = € 6,076
Exceptions:
Rural plots: Rural plots are subject to IMT at a flat rate of 5%.
Urban plots: Urban plots are subject to IMT at a flat rate of 6.5%.
Offshore companies registered in an approved jurisdiction, e.g. Ireland, are subject to IMT at the same rates as above. If belonging to a ‘black listed jurisdictions’, e.g. the Isle of Jersey, IMT is levied at the flat rate of 15%.
Property stamp tax = 0.8% of purchase price
Mortgage stamp tax = 0.6% of loan amount
Selling Agent’s Fees: Are usually between 3 and 6% of the selling price, depending on the cost of the property and the type of contract, and are paid by the vendor. However, they are usually considered when the asking price is established, so in effect, they are paid by the buyer.
Surveyor’s Fees: If a building or plot of land needs to be inspected, the fee will depend on the type of survey, any special requirements and the value of the property.
A full structural survey and valuation should be charged less than half a percent of the property value.
Lawyers Fees: usually 1 to 1.5% per cent of the purchase price for an average property.
Valuation: around 500 €.
Bank charges (in case of mortgage): around 250 €.
Provisional Registration: around 650 €.
Final Deed Registration: around 750 €.
Assuming a second-hand mainland property financed by a mortgage, the additional costs according the sales value of the property will be:
100 to 150 thousand Euros: 5%
150 to 200 thousand Euros: 5.5% - 6%
200 to 250 thousand Euros: 6.5% - 7%
250 to 350 thousand Euros: 7.5% - 8%
350 to 500 thousand Euros: 8% - 9%
Over 500 thousand Euros: 9% - 10%
Conveyance ensures that the buyer secures the title of the property with all rights associated with it.
It ensures that the title of the property is correct, that the seller is the rightful owner having the right to sell it, and that it does not exist any factors which could obstruct a mortgage or a re-sale.
Get the classification of the property at the National Land Registry Records (Conservatória do Registo Predial):
Check the legal title to the property: it should be registered, at both the National Land Registry Records (Conservatória do Registo Predial) and Tax Department, in the name of the seller and not carry any onuses or liabilities.
Ensure that all building, planning and habitation licences were delivered. All houses built after 1951 must have a municipal habitation licence (Licença de Habitação) and a technical habitation certificate (Ficha Técnica de Habitacão) if built after the 30th of March 2004.
Check the Municipal Master Plan (Plano Director Municipal - PDM) for the existence of any public planned construction which would affect the value of the property and the reasons why you decided to purchase it.
In some cases, like rural land, the neighbours might have priority over the purchasers, so better check that they desisted of their right.
In order to prepare for the promissory contract (Contrato de promessa de compra e venda) some documents showing ownership should be asked to the vendor:
Land and buildings have separate tax documents, therefore one should check if there is a document for the land and another for the building.
The Promissory Contract sets out the terms of the transaction such as the identity of the owner, a detailed description of the property and land boundaries, registration and tax numbers, purchase price, deposit and date of completion.
Usually, the contract is signed within 30 days from the date of reservation. At this stage the purchaser would normally be expected to pay a deposit, which is negotiable (between 10% and 30% is common practice).
In Portugal, the parties become contractually bound with the signature of this Promissory Contract of Purchase and Sale (Contrato de Promesa de Compra e Venda), which sets out the terms of the transaction: property details, price, method of payment, completion date, warranties, penalties, etc.
Until such contract is signed the vendor is not committed and can change his mind. It is useful to remember that conditional clauses can be added in the promissory contract in order to protect you from events being out of your control and to prevent you to loose your deposit. For example: Obtaining a mortgage or obtaining a planning permission and a building licence.
If you have applied for a bank loan, you will need to register the mortgage at the National Land Registry Records (Conservatória do Registo Predial) along with the provisory registration of the acquisition.
Then, and upon payment of the transfer tax (IMT), you will be ready to sign the Deed of Conveyance (Escritura).
It will be signed before a competent entity to legalise the deed (see the 'Simplex' note above) and will be the actual property transfer.
The competent entity will verify the identity of the parties and the validity of the deal, both legally and from a tax point of view. This is the document that gives the purchaser the proper title to the property. Bear in mind that registering your new home is the most important act of buying a property in Portugal because ownership will be enforceable against third parties only after after being registered at the National Land Registry Records (Conservatória do Registo Predial).
Buying a new property still at the planning stage is becoming increasingly popular in Portugal as it provides the purchaser an hefty discount and spread the payment during the construction process.
Basically, everything related with a delayed delivery:
Buying-off plan not only requires some imagination in order to visualise the development when finished but also some prudence. The following questions should be answered before making a decision:
There are usually four basic steps:
Building a new home is a long process and requires preparation before you start the construction. Many topics should be thoroughly analysed in order to avoid costly mistakes.
First, you must determine how much you can spend and to evaluate the whole construction cost. If you need a mortgage, check with a financial institution the amount of the loan, its length and your financial capacity to pay it back.
What do you do first? Do you select the style and plan or do you choose the land first? Both approaches have merit. If you are focused on the style and size of your future house, you will have to search the perfect land matching your home plans. Since it is much easier to design or adapt your house to suit the landscape than to alter a landscape to accommodate the specifications of your house, one usually chooses the land prior to selecting the floor plans.
When both the land and the floor plans have been selected you will need to insert the plan into the chosen lot in order to create the fit. Bear in mind that the configuration of rooms, the placement of windows, the location of the driveway and many other design elements will be affected by the plot you build on.
Another important aspect is that you will have to respect the building regulations of the region. You will also need to investigate factors such as soil condition, drainage and the medium term infrastructure plans for the region (PDM).
At the municipality, you need to check:
You can ask an individual architect to custom-design your house based on your own specifications or use stock plans from a catalogue which meet your needs. A custom designed-house is created specifically for your family at your own taste but will be more expensive to build. When taken from a stock plan, the builder can make small modifications in room size, style or other details at minor cost.
A good way to select an architect (arquitecto), a builder (construtor) or any other professional, is asking the local people who you can trust or owners of properties in the area.
A written contract signed by the buyer, the builder and the architect is mandatory. It includes a detailed description of the project (Caderno de Encargos) and a copy of all the subcontracted contracts (electricity, sewage, ...).
Any alteration to the project should be done in written form, signed and annexed to the contract. Remember to read the entire contract and to have all questions answered. Never pay more than what is stated in the contract. It is wise to have a clause in the contract withholding during 6 to 12 months after completion, a part of the total payment (usually 3% to 5%) as a warranty to ensure that the builder will fix all building defects encountered during that period.
The builder should present an insurance contract which covers the buyer in case of his bankruptcy or in case of non completion of the building.
The contract should contain:
The project and the special works (stability, electricity, gas, sewage, waste water, telecommunications, thermal and acoustic behaviour of the building) have to be submitted to the local municipality which has the authority to grant the approval of the project and the authorisation to proceed with the construction (Licença de Óbras) but has to forward the special works to the relevant entities for approval.
The different steps are:
Under Portuguese law, builders are responsible for small defects during one year after completion and five years for structural defects.
After completion, it is also wise to ask a structural surveyor to have a complete check of the building and a fully detailed report about detection of any problem or building defect.
After completion, the builder should request the Municipality Habitation Licence (Licença de Habitação) confirming that the local authority (Câmara Municipal) has inspected the property and that it complies with planning permission and building regulations. The property should be inspected as well by the tax office (Serviço das Finanças) to fix its value for future payment of Property Transfer Tax (IMT) and Capital Gain Tax when being sold. The property should also be registered at the National Land Registry Records (Conservatória do Registo Predial).
More and more newly built apartments, townhouses and villas are put on the market all over the country.
Fractional ownership might be a good choice for those who will only occupy their property part of the year and do not want the burden of renting it the rest of the time.
The two major schemes are:
Part-ownership - a group of people part-owning a specific property or a consortium of buyers owning shares from the company owning the property. The number of co-owners is a compromise between an affordable price and the length of time each member can use the property. A contract is drawn by an experienced lawyer in order to protect the rights and interests of each co-owner.
Sale and lease back - usually preferred by investors looking for a low-risk and long-term investment. It consists in the purchase of a property (often newly built or buy-off plan) and then lease it back to a management company for an agreed term and price. During the leaseback period, the management company is responsible for letting the property, furnishing, maintenance, and paying all bills. Investors have the option to use their property as well for a number of weeks at a reduced rental price. Properties sold under a leaseback scheme are normally located in popular resort areas such as golf or coastal resorts, where self-catering accommodation are in high demand.