Tips for Buyers
You found a place you want to call your home?
Follow these steps to buy a property in Portugal
- Agree on the price with the seller
- Get a Personal Fiscal Number (Numero Fiscal de Contribuinte) from the local Tax office (Finanças). You only need proof of identity and address to get one if you are from a member state of the EU. If you are from outside the EU, you need a Fiscal Representative for this.
- Contact a solicitador (does conveyancing, has no degree) or advogado (lawyer with a Dr. title) to help you with the process. He/she will collect all necessary papers and make sure that the property is registered and free of all liens.
- Open a bank account in Portugal.
- Have your lawyer draw up a Promessa de Compra e Venda (Promissory Contract).
- Pay the agreed deposit (10-20%) and agree on a date to complete the purchase. The deposit is non-refundable! If the seller does not keep his side of the bargain, he must repay double the deposit value.
- For completion of the sale (Escritura Publica de Compra e Venda) you sign the deed at a Notary or give power of attorney to your legal representative or somebody else, to sign on your behalf. Also this is the time to pay the balance of the purchase price.
- The signed contract has to be registered at the Land Registry Office (Conservatoria do Registo Predial) and the local Tax Office. Usually your legal representative will do this. Now you are the official owner of the property.
What does it cost to buy a property in Portugal?
- A lawyer charges about 1,5 to 2 % of the selling price as a fee
- Stamp Tax - 0.8% of the selling price
- The Transfer Tax (Imposto Municipal sobre Transmissçao Onerose de Imóveis - IMT) depends on the selling price as well as on the fact if you will use the property as your permanent residency or not. If you are coming to live here and register as a resident, these are the numbers:
- until € 92.407 - 0%
- until €126.403 - 2%, with a deduction of €1.848,14
- until €172.348 - 5%, with a deduction of €5.640,23
- until €287.213 - 7%, with a deduction of €9.087,19
- until €574.323 - 8%, with a deduction of €11.959,32
- Over €574.323 - 6% flat rate
- For non-permanent occupation, the amounts for deduction are lower.
- For land only it is 5% and for urban property, not for habitation, it is 6,5%
What documents do you need?
The owner of the property needs to provide your legal representative with the following documents:
- Certidão de Teor from the Conservatoria do Registo Predial (Land Registry) - valid for 6 months
- Cadernetta Predial from the Tax Office - valid for 1 year
- Licença de Habitação from the Council (Camera) for houses built after 1951. If the house (or ruin) is older you need a document from the Camera that states this and exempts you from a habitation license.
- Ficha Tecnica de Habitação for houses built after 30.03.2004
- Energy certificate (valid for 10 years)
Good to know:
- If the property costs less than €236.000 AND you are resident in Portugal, you may claim exemption of Local Council Tax (IMI) for up to 7 years. You have to claim this within 60 days after purchase at the local Tax Office.
- Although your legal representative will check the legal title of the property, it is recommended that you make sure that papers and reality are matching. Make sure you know where the borders of the property end. It is very important that the property is registered at both the Conservatoria do Registo Predial and the Finanças (Fiscal Office) in the name of the seller and that it does not carry any onuses or liabilities.
- If you buy rural land - prédio rustica or misto(urban in rustic land) - the neighbours have priority in buying this land. Make sure they have been given this opportunity by the seller, before you buy.
- Land and buildings have seperate tax documents.
- If the buying process is very straight forward and there are no doubts on the legal status of the property, then it is also possible to skip the lawyer and notary office. You can go to Casa Pronta at the Conservatoria do Registo Predial. There they do all the checks a lawyer normally does and if all documents are correct, you can sign the deed right at their office. The Head of the Conservatoria acts as a notary. All fees are paid there and then and the only thing left to do is go to the Finanças afterwards with the purchase document and have it (for free) registered at the Tax Office. This procedure is a lot cheaper.
Mais-Valias - tax to be paid by the seller
When you sell real estate in Portugal, you are dealing with Mais-Valias, or the increase in value of your property. Tax must be paid on this. In Portugal you do have to pay tax on the profit you have made with capital, and this includes real estate.
If you already owned the property which is being sold, before 1 January 1989, you are exempt from this capital gains tax. This does not mean that you do not have to report it to the Finanças. This must be done in the G1 appendix of the IRS assessment.
How much tax you have to pay, depends in the first place on whether you are officially registered in Portugal. A difference is being made between:
Then the Finanças (tax authorities) demands 28% of the total net increase in value. You will not have an official permanent home in Portugal, so you will not have a tax benefit on reinvestment.
As a tax resident in Portugal, you have a tax advantage if you reinvest the capital released from the sale of your own home. This is only possible if the house sold was your main residence, and the newly purchased real estate is also used as your main residence. The new home must be purchased within the EU, from 24 months before the sale to 36 months after the sale, and the entire released equity must be used for it. If less is spent on it, it will be settled proportionally. The money may also be used for construction, extension or improvement of a new home, as long as it serves as the main residence.
If you do not want to reinvest the released capital, 50% of the increase in value will be added to your taxable income for that year. Depending on your total taxable income, you pay a maximum of 48% tax on this.
how do you calculate the increase in value?
You take the difference between the selling price and the purchase price (corrected for inflation) minus costs incurred. The outcome is the increase (or decrease) in value.
which costs can you deduct?
- IMT, transfer tax and stamp tax, paid at the time of purchase;
- purchase costs: notary, lawyer and registration costs;
- commission of the broker of the sale, if mentioned in the sales contract;
- all costs that have increased the value of the property (so no maintenance) and that are demonstrable with invoices by name and with tax number and that have taken place during 5 years before the sale.
how and when should I declare the sale to the Finanças?
You are obliged to submit a tax return. This can be submitted in the calendar year following the year of sale. You must file a declaration in all cases, even if you have reinvested everything. The Finanças expects you to prove this.
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