Your Complete Guide to Property Taxes in Portugal

Dreaming of owning a charming villa on the Algarve coast or a modern apartment in the capital of Lisbon? Portugal’s vibrant cities, picturesque villages, and stunning scenery make it a top destination for property ownership. 

But before you take the plunge, it’s crucial to understand each tax liability that comes with property ownership in Portugal. This comprehensive guide will equip you with all the essential information on property taxes in Portugal. Whether you plan to make it your primary residence, a holiday getaway, or a lucrative investment property, we’ll share everything you need to know about Portugal property taxes.

Understanding Property Taxes in Portugal

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Regardless of your residency status, property owners in Portugal are required to pay taxes. Understanding Portuguese property taxes is vital before embarking on your real estate purchase journey. In the sections below, we’ll equip you with the essential knowledge you need to register and pay taxes in the country. We will provide a brief overview of property taxes for foreigners, the essentials of tax registration in Portugal, and the necessity of fiscal representation.

An overview of property taxes in Portugal for foreigners  

When purchasing property in Portugal, besides notary fees and administrative costs, specific taxes must be paid. These include the annual Municipal Property Tax, also known as Immovable Property Tax (IMI), the Property Transfer Tax (IMT), which is rate dependent on the total real estate value and location, and the Stamp Duty known as Imposto de Selo (IS) in Portugal which is a fixed percentage of the property value. Understanding how each is calculated is crucial for budgeting your Portuguese real estate transaction.

Essentials for registering for taxes in Portugal  

Essential to registering on the Portuguese tax system and navigating tax matters is obtaining a NIF (Número de Identificação Fiscal or Número de Contribuinte) from the local tax office, Finanças. The NIF will serve as your tax identification number required for financial transactions within the country, including purchasing property and applying for bank mortgages. While it is not mandatory, opening a Portuguese bank account is also recommended, as this can streamline the process by reducing transaction fees. 

Do I need fiscal representation in Portugal? 

According to the Portuguese Public Services Portal, the requirement for non-residents to appoint a tax representative in Portugal became optional as long as the individual or entity adhered to the electronic notifications from the Portuguese Tax Authorities.

However, it is still advised that non-EU and non-Portuguese citizens appoint a fiscal representative when applying for a NIF number in Portugal. They will be able to assist you with any dealings you have with the Portuguese Tax Authorities, help you understand and navigate the process, and help with your tax department correspondence if there is a language barrier.

Property Taxes and Fees During the Purchase Process

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Besides the high quality of life and the possibility of making a profitable Portuguese real estate investment, life in Portugal offers a number of key advantages, such as no restrictions on non-EU citizens considering renting or buying property in Portugal, a low cost of living compared to other European countries and a dynamic and diverse property market. Below, we will explore the fees and tax obligations that you will be responsible for at the time of purchase when buying property in Portugal.

Property Purchase Tax (IMT) 

The Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT) (Municipal Tax on Onerous Transmissions of Real Estate) is a property transfer tax levied over the purchase price of property in Portugal that property owners must pay. This is paid during the real estate transaction and can range from 0 – 7 percent. The tax will depend on the price of the property, the type of the property (rural or urban), and the location of the property. 

Whether you plan to make your Portuguese property your permanent residence will also affect the price. Note that if the buyer intends to use the property as a sole and permanent residence in Portugal and the property is in a rehabilitation area, it will be possible to request a refund of the IMT payment. 

There are three criteria essential to calculating the property purchase tax (IMT):

Type of property: Urban property or rural properties

Buying purpose: Principal or secondary residence

House location: Mainland Portugal or its autonomous regions

You can also use the following formula to work out the Portugal tax rate:

IMT = property value x tax rate x tax deduction

IMT property tax exemptions and refunds in Portugal

You do not pay any IMT (Property Transfer Tax) if the property is located on Portugal’s mainland and if the price does not exceed €101,917 in 2024. Likewise, no IMT tax is due if the property is in an autonomous territory and is worth less than €121,330.

Tax exemptions for IMT payments are also possible under the following conditions under the State Budget for 2024:

  • Acquisition of properties by real estate trading companies for resale
  • Acquisition of properties that have been subject to urban rehabilitation
  • Business restructuring or cooperation arrangements
  • Acquisition of buildings classified as national/public/municipal interest
  • Acquisition of properties regarded as an eligible investment under the Tax Regime for Investment Support (RFAI)
  • Acquisition, by credit institutions, of real estate in foreclosure proceedings, bankruptcy, insolvency, or in lieu of payment

Stamp Duty 

The Imposto do Selo, also referred to as Stamp Duty, is an additional transaction cost required of the property owner of residential properties. The buyer must pay Stamp Duty on deeds, contracts, bank mortgages and loans, paperwork, and titles. The rate varies depending on the type and worth of the property. The rate ranges from 0.4 percent to 0.8 percent, depending on the kind of act or operation. Stamp Duty must be paid to the Notary at the time the deed of sale is notarized. 

You will also need to pay Stamp Duty when you take out bank mortgages valued over €5,000. According to Portugal’s Public Services Portal, the Stamp Duty rate for mortgages is 0.6 percent if the repayment duration is longer than five years and 0.5 percent if it is less than five years. Additionally, it is important to note that corporate property ownership transactions are exempt from Stamp Duty.

Notary fees 

Not to be confused with taxes, factor in Notary Fees. A notary, a private entity, will provide the official documents confirming your property ownership. Expect this fee to be around €1,200.

Agency fees 

While collaborating with a real estate agency isn’t mandatory, it’s recommended for international investors in Portugal. These agencies typically charge a commission of 5 percent plus VAT on the property’s sale price which is paid by the seller in Portugal. This fee reflects the various services provided, including sharing it with external parties and covering the agency’s accreditation and insurance. Keep in mind that this is the maximum you’ll pay, though luxury property specialists may charge up to 6 percent (plus VAT). When negotiating the property price, make sure you get a second opinion from a trusted advisor. This is because the seller’s real estate agency will get a higher commission for a higher sale. Considering this, working with a buyer’s agent like Goldcrest who will have your best interests in mind as the buyer, can prove to be beneficial.

Property Taxes and Fees After the Purchase

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Once you have finalized the purchase of your new Portuguese haven, new property owners need to be aware of real estate taxes. These include the Annual Municipal Property Tax, Capital Gains tax, and even Inheritance Tax, which will be explored in detail below.

Immovable Property Tax (IMI) or Municipal Property Tax  

The Imposto Municipal sobre Imóveis (IMI) (Municipal Property Tax or Immovable Property Tax) is a tax paid annually by property owners in Portugal. Portuguese residents and foreign property owners are obligated to pay IMI, which typically ranges from 0.3 to 0.5 percent of the total real estate value for urban properties and up to 0.8 percent for rural properties. 

In Portugal, each municipality has a separate tax rate because the municipal legislatures set their own rates. Additional factors that affect the IMI tax rates include the commodities, age, size, and location of the property. The IMI tax rates are based on the property tax value (VPT) and not on the property price, and the tax can be paid on the last day of the applicable tax year. Listed below are the general guidelines for the IMI property tax rates range: 

  • For properties valued before 2004, the rate ranges from 0.4 percent to 0.8 percent
  • If a property has been re-valued since 2004, the rate is from 0.2 percent to 0.5 percent
  • If the property is owned through a corporation in a jurisdiction on the “black” list, the rate will be 7.5 percent of the rateable value

Exemptions on IMI Tax 

Exemptions on IMI Tax can provide relief for property owners under certain circumstances. For a period of three years, individuals intending permanent residency in their property may be exempt from property taxes. The tax registration value of urban properties, capped at €125,000, and the owner’s taxable income, not exceeding €153,300 in the preceding year, are factors influencing the exemption eligibility. 

If you qualify as a low-income household, you can apply for a permanent exemption from IMI tax through Finanças. It’s crucial to submit your request prior to purchasing the property and post-property inspection completion to ensure a smooth process.

Other expenses for property maintenance in Portugal 

When considering property maintenance expenses in Portugal, it’s essential to account for various costs beyond the initial purchase. Property management and rental services can be invaluable for properties owned by foreign investors seeking convenience and peace of mind. Whether your property serves as a second home or an investment for holiday rentals, you can delegate tasks and alleviate burdens. Utility bills, contingent upon property size, construction materials, occupancy, and daily usage, constitute a significant ongoing expense. 

Additionally, securing home insurance is prudent to safeguard your investment against unforeseen events. In Portugal, insurance premiums depend on factors such as property type, location, and value. For those overwhelmed by administrative tasks, hiring a property manager can streamline processes and alleviate language barriers. 

Rental Income Tax

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Understanding the tax implications is crucial when venturing into property rental. Rental income, whether from housing or other types of properties, is subject to taxation at rates of either 25 percent or 28 percent, depending on the nature of the rental agreement. Notably, the 25 percent tax rate applies to long-term rental income starting from 2023, as per the Mais Habitação law implemented in October of that year. While these tax rates may undergo slight adjustments, they consistently fall within this prescribed range. 

It’s imperative to be aware of potential deductions available for net rental income, including expenses for fire insurance, IMI, energy certificate acquisition, condominium fees (if applicable), and property upkeep and maintenance costs. To qualify for deductions, documentation such as invoices identifying property-related work undertaken within 24 months prior to renting must be provided. Distinctions exist between short-term and long-term rentals, necessitating careful consideration of tax implications based on the rental duration.

Wealth Tax (AIMI)

Wealth Tax (AIMI) imposes obligations on owners, both residents and non-residents, of shares in Portuguese real estate exceeding €600,000 in value. Individuals benefit from a €600,000 allowance deduction from the total value of Portuguese properties they own. If you and your partner jointly possess a home valued at over €1.2 million, AIMI tax becomes applicable. However, the double tax treaty Portugal has with the USA and the UK offers further considerations for taxpayers navigating international tax obligations.

Wealth tax can be calculated as follows:

  • 0.7 percent tax on owning property valued between €600,000 and €1 million
  • 1 percent tax on property valued between €1mil and €2 million
  • 1.5 percent tax on property if its total value is above €2 million

Capital Gains Tax

In Portugal, the Capital Gains Tax intricately weaves through various factors, shaping its impact on property transactions. Determined by ownership structure, residency status, and the property’s role as a primary residence, this tax system imposes a 28 percent flat rate on gains for non-residents. For residents, real estate acquired post-1989 will be subject to tax ranging from 14.5 percent to 48 percent, contingent upon income brackets. Crucially, the disclosure of the property’s purchase details, including any renovations, is obligatory, with invoices serving as evidence for capital gains assessment. 

Notably, exemptions exist for those reinvesting proceeds into a new permanent residence, shielding potential gains from taxation under specific conditions. However, adherence to strict timelines is crucial, mandating property purchase within 24 months preceding or 36 months succeeding the sale, alongside formal notification to the Tax Authorities. In this labyrinth of regulations, understanding the nuances becomes paramount for navigating Portugal’s Capital Gains Tax landscape.

Exceptions to Capital Gains Tax in Portugal 

Exceptions to the Capital Gains Tax in Portugal offer relief under specific circumstances. If you’re selling your primary residence in Portugal and purchasing another while being a tax resident there, exemptions apply within three years or two years before the sale. Additionally, properties occupied before January 1989 qualify for exception.

Reinvesting proceeds from the sale of your primary residence in Portugal into a second primary residence within the EU allows for cost rollover, providing a pathway for tax-efficient property transitions. These exceptions allow homeowners to navigate the tax landscape strategically, facilitating smoother transitions in the real estate market.

Inheritance Tax

In Portugal, the absence of inheritance tax is a notable feature, offering relief to beneficiaries. However, assets within Portuguese territory transferred through inheritance incur Stamp Duty, set at a rate of 10 percent. Exemptions from this duty are granted when the inheritance passes to spouses, descendants, and ascendants. This exemption is a safeguard that ensures familial transfers remain unburdened by additional taxation.

Find Your Dream Property with BE Global

BE Global Properties is the discerning property investors’ gateway to meticulously curated properties that transcend ordinary listings. Look no further when searching for your next dream home or investment property in the Portuguese luxury real estate market.      

Explore our exclusive listings and work with our experts who offer market insights for smart investment choices and exceptional customer service to find the property investment perfectly tailored for your lifestyle ultimately. 

Contact BE Global Properties today and start your journey to find your global haven.

Frequently Asked Questions About Property Taxes in Portugal

What taxes do you pay when buying a property in Portugal? 

Portuguese residents and non-resident property owners pay real estate taxes at the time of purchase and annually. Property taxes at or before the official purchase include the Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT), also referred to as Municipal Tax on Onerous Transmissions of Real Estate) and property transfer tax as well as Stamp Duty.

Property taxes paid after the property purchase include the Annual Municipal Property Tax (IMI) and Wealth Tax (AIMI) if the property is valued at over €600,000. Capital Gains Tax is also a tax obligation for those looking to gain profit from a property sale. If you are renting property, you will also need to pay tax on your rental income, generally at a flat tax rate of 28 percent.

Is it worth buying property in Portugal? 

Yes, Portugal offers a high quality of life and presents a profitable opportunity for real estate investment. Plus, there are no restrictions on non-EU citizens regarding property rental or purchase, making it an attractive option for international buyers. Portugal also has a relatively low cost of living in comparison to other European nations. You can discover more in our insights for buying property in Portugal 2024 guide.

What are the taxes for foreigners in Portugal? 

Foreigners residing in Portugal for more than 183 days or owning a permanent residence are considered Portuguese taxpayers. Non-residents face a flat income tax rate of 25 percent on all earnings, translating to €12,500 owed on a €50,000 income in 2023. Additionally, the income tax scale rates ranged from 14.5 to 48 percent in 2023.

Certain incomes, like capital gains from share sales, might be exempt. Portuguese residents are taxed progressively on worldwide income, whereas non-residents are taxed solely on Portuguese earnings, usually at a fixed rate. 

Is there inheritance tax on property in Portugal? 

There is no inheritance tax in Portugal. However, property transferred through inheritance within Portuguese territory is subject to Stamp Duty, set at 10 percent. 

What residency options are open to move to Portugal? 

If you are interested in moving to Portugal, the Portuguese government offers a selection of visa and residency options. These options include the Portugal Golden Visa program for investors and their families, the D7 Visa for retirees and those earning a passive income looking to settle in this scenic country, the Digital Nomads Visa, and the D3 Work Visa for highly skilled workers. Discover more from our migration and residency partner, Global Citizen Solutions.

How much is rental income tax in Portugal? 

Rental income in Portugal, whether from housing or other properties, is taxed at rates of either 25 percent or 28 percent, depending on the rental agreement’s nature. The 25 percent rate applies to long-term rental income since 2023 under the Mais Habitação law enacted in October of that year. Although there might be slight adjustments, tax rates generally remain within this range.

What are the tax benefits of buying property in Portugal? 

You will still need to pay taxes on property in Portugal, both at the time of purchase and on an annual basis. Portuguese residents who became part of the Non-Habitual Resident tax scheme enjoy significant tax benefits for up to ten years. Although the tax regime ended in January 2024, it is still possible to apply for the NHR regime until 31 March 2025, but the eligibility requirements for this deadline are stricter.

What are the deadlines for paying property taxes in Portugal? 

The 2024 deadlines for property taxes in Portugal for foreigners and citizens are as follows, according to the Portuguese government:

  • 31 May: First property tax (IMI) installment due.
  • 30 June: Last day to submit personal income (IRS) statement.
  • 31 August: Second property tax (IMI) installment due (for amounts exceeding €500).
  • 30 November: Second property tax (IMI) installment due (for amounts below €500).
  • 30 November: Third property tax (IMI) installment due (for amounts exceeding €500).

How much tax do you pay when selling a property in Portugal? 

The tax system imposes a 28 percent flat rate on gains for non-residents when selling a property in Portugal. Residents selling real estate acquired post-1989 face a range of taxation, from 14.5 percent to 48 percent, depending on income brackets. 

What is IMT tax in Portugal? 

IMT Tax, also known as the Municipal Tax on Onerous Transmissions of Real Estate, is applied to property purchases in Portugal. Similar to the UK’s Council Tax, it ranges from 0 to 10 percent based on factors such as property value, location (continental or autonomous regions), and whether it’s rural or urban. The intended use of the property, whether as a primary residence or secondary home, can also influence the tax rate. 

How to pay property tax in Portugal? 

Residents can pay property tax in Portugal through various channels including local tax offices, post offices, or multi-bank ATMs.

How do non-residents pay property tax in Portugal? 

Non-residents pay property tax in Portugal through various channels. Payments can be made at local tax offices, post offices, or multi-bank ATMs. For those residing outside Portugal, tax payments can be processed through the tax authority’s online portal or via online banking using a Portuguese bank account.

How is property tax calculated in Portugal? 

Property tax in Portugal is calculated based on various factors. The tax amount hinges on the property price, its type, and location. Whether it’s in Lisbon or the Algarve and whether it’s a primary home or an investment property also affects the calculation of property tax.

Are there any exemptions from IMI in Portugal? 

In Portugal, property owners can enjoy IMI exemptions in certain situations. Buildings undergoing rehabilitation in designated areas qualify for a three-year IMI tax break, possibly extended to five years if used as a primary residence. However, meeting additional conditions may be necessary.

What is AIMI (Adicional ao Imposto Municipal Sobre Imóveis), and who is subject to it? 

AIMI, or Adicional ao Imposto Municipal Sobre Imóveis, is Portugal’s wealth tax. It applies to owners of shares in Portuguese real estate valued over €600,000, irrespective of their residency status in the country.

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