Real Estate Taxes in Portugal - Who pays and when
If you are considering buying a property in Portugal, it is important to know the costs. These include not only the price of the property but also specific taxes, administrative costs and notary fees.
One of the things that you need to know about property taxes in Portugal is that each one has its own calculation methods.
When you buy a property in Portugal, you will have to pay IMT Tax, Stamp Duty and notary fees.
The IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is a property transfer tax due whenever a property ownership is transferred.
The IMT is always paid by the purchaser of the property and must be paid before signing the final deed of sale. After all, proof of payment needs to be shown when you are exchanging the property in the notary.
Another thing that you need to know about the IMT is that it is calculated based on the higher value of the property. The property value may vary depending on considering its purchase price or the rateable value attributed by tax authorities. Normally, the rateable value of the property is lower than the purchase price.
Keep in mind that the tax amount you will need to pay depends on whether you are buying a house for permanent residence, a second home, or other purposes.
As for exemptions, you may be exempt from paying IMT if you're buying a property listed as a national/public/municipal interest. You may also be exempt from this tax if you purchase an urban property for rehabilitation.
Stamp Duty (Imposto de Selo) is mandatory in several situations in Portugal. This includes financial transactions, bank mortgages, contracts, deeds, among many others. However, the rate varies depending on the operation.
When you buy a property in Portugal, stamp duty is charged at 0,8% of the highest value of the property.
Keep in mind that stamp duty tax will always be paid by the purchaser. Such as with the IMT tax, this payment must be made before signing the final deed.
Notary and Registration Fees
When you buy a property in Portugal, you will also need to pay notary and registration fees.
Simply put, the deal will only be complete when the purchase is registered at the Land Registry Office.
When you own a property in Portugal, there are two yearly property taxes you may have to pay: IMI and AIMI.
The IMI (Imposto Municipal sobre Imóveis) is charged by your Municipality and used towards maintaining local municipal services and infrastructures.
One of the things you need to know about this municipal property tax is that it is only applicable to homeowners. Even if you buy a property to rent it, you will still be responsible for paying this tax.
IMI tax varies depending on the property's fiscal value. This means you may need to pay a higher or lower tax depending on the property's age, commodities, size and location. The tax rate is determined annually and varies between 0.3% and 0.8%.
This tax is due by anyone who owns the property on the last day of December of the previous year. For example, if you own a property on 31 December 2021, you will have to pay the Portuguese IMI tax in 2022.
To pay IMI, you have three options:
IMI tax under 250 Euros, the full payment is due in April.
IMI between 250 and 500 Euros, you can pay in two instalments: one in April and one in November.
IMI over 500 Euros can be paid in three instalments: one in April, one in July, and one in November.
Paying your taxes in Portugal while living abroad
If you are living or staying abroad and have to pay taxes in Portugal, know that you can do this easily through a bank transfer by following a few simple rules...
Such as with other real estate taxes in Portugal, the IMI tax also has some exemptions. For example, if you buy a property for permanent residency, you may be exempt from paying this tax for 3 to 6 years.
If you own a property or several properties that combined are valued above 600,000 Euros, you will also need to pay AIMI tax (Adicional Imposto Municipal Sobre Imóveis). Overall speaking, the AIMI was introduced back in 2017 and is replacing the older 1% tax on luxury properties.
According to Portuguese law, if you own property valued above 600,000 Euros, you will need to pay a rate between 0.7% and 1.5%, on the amount that exceeds that value. For example, if your property is valued at 800,000 Euros, the AIMI tax that you are required to pay is 0.7% on 200,000 euros.
If you sell your property in Portugal, you will have to submit a tax declaration for Capital Gains.
Capital Gains Tax
Capital gains tax is due whenever a homeowner sells a property in Portugal. This tax refers to the difference between the selling price and the acquisition value. However, this amount still needs to be adjusted according to all the costs that referred to the property acquisition, such as:
the property transfer tax, the notary, and registration fees;
the real estate agent commission;
as well as improvements made on the property carried out in the last 12 years.
The rate of Capital gains tax due also varies, depending on residency status.
You may be able to avoid the payment of this tax if you are selling a property that is your primary residence and you reinvest the amount in the acquisition, improvement or construction of another primary residence in Portugal, within the EU or EEA (European Economic Area), within 36 months from the sale or in the 24 months previous to the sale.
Want to know more about Capital Gains Tax in Portugal?
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Although the tax system in Portugal is more and more simplified, with various resources available online to make investors' and residents' lives easier, it is always advisable to rely on the services of a certified Portuguese accountant experienced in supporting international clients.
This will allow you not only to take full advantage of the tax benefits available in Portugal for your particular case but also to avoid possible delays in payments due or unnecessary complications that may arise from being unfamiliar with tax laws or the language.
It will also allow you to save time so that you can enjoy Portugal to its fullest!
Author: Sofia Cardoso - Senior Accountant at Portugal Accounting