Tax Properties Guide

AAAA

Here is a summary of the taxes applicable to buying, owning, renting, selling or inheriting properties in Portugal:

IMT – Paid on the acquisition of a property

This tax is payable by the purchaser prior to completion of the transaction. On properties for habitation the rate varies according to the purchase price of the property and can go up to 6%. On rustic land, the rate applicable is 5% and on plots of land or other type of properties the applicable rate is always 6,5%*. The minimum amount on which the IMT can be paid is the VPT even if the sales price is lower.

Notary, stamp duty and registration fees

These have to be paid by the purchaser respectively prior to, at the time of signing the notarial deed and with subsequent registration of the property in the buyer’s name. The stamp duty on the purchase is 0,8% of the sales price; The minimum amount on which the stamp duty can be paid is the VPT even if the sales price is lower. Notary and registration fees and expenses will not exceed 11.000.

IMI – Annual Property Taxes

Payable yearly in arrears usually in two instalments although as from this year it can be paid in three instalments (April, July and November), depending on its value. This tax is based on the rateable value of the property (VPT) and can vary between 0,3% to 0,5%. Within this limit the rate is fixed annually by the council of the area where the property is located. In the Council of Loulé the rate presently applicable is 0,4%. The IMI for rustic properties remains at 0,8%*.

Stamp Tax – (IS)

To increase tax revenue and meet the impositions of international entities controlling Portugal’s economic restructuring, the Portuguese government has introduced temporarily a new annual tax on Portuguese properties with a rateable value (VPT) of over 1 million. These properties will be subject to the already existent IMI as above and to this new tax, on a maximum of 1,5% of its rateable value, which though high, is still substantially lower than other European countries like Spain, Greece and France, where annual property taxes can go up to 3,6%, 2,1% and 2,2% respectively**. This tax has already been applicable in 2012 and will also be applicable in 2013 at the rate of 1% of the VPT for all residential properties*. The payments of this tax will be made in 2013 simultaneously with the payment of the IMI and based on the same VPT used to calculate the IMI.

Capital Gains Tax

On a sale of a property there is capital gains tax to pay presently at a rate of 28% for individuals and 25% for companies (non-residents). This tax is calculated on the difference between the sales price and either the purchase and construction price of the property (if applicable) index linked or its first rateable value index linked whichever is the highest; for this reason it is important when building a property to make sure that you receive proper invoices from the builders of the amounts paid so that you have the possibility to offset these costs against capital gains tax payable when the property is sold. There are other costs that you can use to offset against this tax such as invoices of certain refurbishments made to the property in the past five years, taxes, notary and registration fees paid at the time of acquisition of the property, and the real estate agent fee. If the property you are selling is your main residence and if you reinvest the proceeds of the sale within 36 months of the sale, in the acquisition, construction or refurbishment of another property designated as your main residence, within the EU territory or in a territory belonging to the European economic area with whom Portugal has agreements for the exchange of information in tax matters, you can avoid the payment of this capital gains tax totally or partially depending on the value you reinvest.

Inheritance tax

This tax is not presently applicable in Portugal to inheritance or gifts occurring between close relatives i.e. parents/children and spouses although on gifts you have to count with a 0,8% stamp duty based on the VPT. Any other situations of inheritance or gift will be subject to stamp duty at a rate of 10% of the VPT.

Rental income

All owners renting properties in Portugal should report these rents to the Portuguese authorities even if the payments haven’t been received here. From these rents you can deduct several costs and expenses, namely taxes (IMI and IS), insurance, maintenance and upkeep of the property and such costs can be offset against the gross rental income to calculate the profit obtained which will be taxed at a rate of 25% for companies and 28% for individuals (non-residents).

Please note the values mentioned above for IMT, IMI and IS will increase significantly and will not benefit from limitation of tax payable for the next two years if the property is located in a “blacklisted jurisdiction“.
** In Expresso – economy supplement 02/02/2013.

Please note this is general information and for specific advice you should contact a lawyer or tax advisor.

 

Costs involved in buying a property valued at over €1million & as a non-resident of Portugal
Cost Privately Owned Company White Listed Corporate Ownership of Property Black Listed Corporate Ownership of Property
Property purchase costs, (IMT) 6% Purchase Tax (IMT) No IMT 8% Purchase Tax (IMT)
Stamp duty 0.8% Stamp Duty No Stamp Duty No Stamp Duty
Legal fees on purchase & sale 1 to 2% 1 to 2% 1 to 2%
Capital Gains tax on sale of property 25% on the profit (in Portugal) None to be paid in Portugal None to be paid in Portugal
Annual running costs of company None Between €1500 and €3750 Between €1500 and €3750
Annual property Tax (IMI). This is calculated on the property rateable value Revalued since 2004 (0.2 to 0.4%) | Not valued (0.4 to 0.7%) Revalued since 2004 (0.2 to 0.4%) | Not valued (0.4 to 0.7%) 1.00%. Or 2.00% if the property is not inhabited for more than a year.
Annual Fiscal representation €250 €425 €425

Corporate Ownership Benefits