Your Guide to Property Taxes in Portugal
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When you buy a house in Portugal, there are a number of acquisition costs including notary fees and administrative costs. You also need to pay specific taxes for your property. These taxes are obligatory when you purchase a property in Portugal. They are namely the immovable property tax (IMI), property purchase tax (IMT), and the tax on stamps (IS). Each of them is different and has its own calculation methods.
If you are not a resident but you buy a property in Portugal, you still need to pay taxes. This only means that you are not considered a tax resident in Portugal if you spend less than 183 days per year (tax calendar year). Non-residents are subject to taxation on their Portuguese-sourced income. In addition, married couples are subject to taxation jointly.
Below you can see what types of taxes you are subject to when you buy a property in Portugal.
Immovable Property Tax (IMI)
In Portugal, you need to pay a property tax (Imposto Municipal Sobre Imóveis) as an owner of a property. The tax rate differs according to each different municipality. The municipal assemblies determine their own rate. The property tax funds the Portuguese municipalities and it is used to maintain public infrastructures. You are liable to pay the IMI tax when you own the property on the last day of the respective tax year. So, how can you calculate the IMI tax? You basically multiply the value of the tax asset (TPV) with the applicable rate.
Property tax rates range from 0.3% to 0.45%. While properties in rural areas are taxed at 0.8%, properties in more urban areas are taxed within the mentioned range.
If a property has been re-valued since 2004, it will fall between 0.2% and 0.5%. If a property was valued before 2004, the rate will be between 0.4% to 0.8%.
If the property is owned through a corporation that is resided in “black” listed jurisdictions, then the rate will be a straight 7.5% of the rateable value.
Exemptions on IMI Tax
In some cases, there will be exemptions from the taxes on property (IMI). For example, if you will use the property as a permanent home or if you rent it out, it will be exempt from property tax for three years. Also, the rate will depend on the patrimonial value of the property. For this, it should be an urban property with a tax registration value up to €125.000, and it is held by an individual gaining a taxable income of up to €153.300 in the year before the purchase.
A permanent exemption is also possible. In this case, the annual taxable income of the household should not be more than €15.295. You need to make a request to Finanças to benefit from the exemption. The request must be done before the purchase of the house and when the property evaluation is complete.
Property Purchase Tax (IMT)
The IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) tax is collected each time when a house is bought in Portugal. The rate is changeable according to the type and value of the property. The tax is calculated by the value declared in the deeds or on the rateable value. The higher one is maintained. You must pay this tax before you buy the property. You can calculate the IMT rate as follows:
IMT = Value of the deed or net worth tax (the higher of the two) x Rate to apply – tax abatement
The following three criteria are important for the calculation of this tax:
- Property type: Urban or rural
- Location of the house: Mainland Portugal or its autonomous regions
- Purpose of buying: Principal or secondary residence.
You can see the IMT rates for private property purchases for a primary residence.
|Up to €92.407||0%||€0|
|Between €92.407 and €126.403||2%||0,5379%|
|Between €126.403 and €172.348||5%||1,7274%|
|Between €172.348 and €287.213||7%||3,8361%|
|Between €287.213 and €574.323||8%||–|
|More than €574.323||6 (single rate)||6 (single rate)|
Exemptions on IMT taxes
As seen from the table above, if the property is in mainland Portugal, and its value does not exceed €92.407, you don’t pay any IMT. In the same way, if it’s in an autonomous region and its value does not exceed €115.509, no IMT tax applies to the property. Additionally, the following circumstances also allow for tax exemptions.
- Purchase of properties for resale by real estate trading companies
- Purchase of properties aimed at urban rehabilitation
- Purchase of property or autonomous fraction of urban property aimed to install tourism complex to which has been attributed tourism utility
- Purchase of real estate by real estate investment funds for residential letting
- Cooperation arrangements for restructuring operations
- Purchase of buildings regarded as of national, public, or municipal interest
- Eligible investment under the Investment Promotion Tax Regime (RFAI). In this case, either an exemption or reduction of IMT is possible.
Other Circumstances Regarding IMT
- Purchasing shares of a whitelisted jurisdiction corporation: No IMT
- Commercial & Building Plots: A flat rate of 6.5% IMT
- Agricultural & Rustic Lands: A flat rate of 5% IMT
- Property purchased by a corporation residing in whitelisted jurisdictions: Same rates of IMT as in the table above
- Property purchased by a corporation residing in blacklisted jurisdictions: 15% IMT
- Purchasing shares of a blacklisted jurisdiction corporation: 8% IMT.
Stamp Duty (IS)
As a buyer, you need to pay stamp duty (Imposto de Selo) on deeds, contracts, bank mortgages and loans, documents, and titles. The rate changes according to the type and value of the property. The rate depending on the type of deed/operation is between 0.4% and 0.8%.
When buying a house, you pay stamp duty to the notary while signing the deed of sale. The rate of this stamp duty is 0.8%.
When you take mortgages, you also need to pay stamp duty. If the repayment period is more than five years, the tax on the stamp duty is 0.60%. Yet, if it is less than five years, it is 0.5%.
There is no stamp duty required for corporate property ownership transactions.
After you buy a property, if you want to rent it out, you must pay tax on the rental income. The flat rate is 15%, and it applies to the net rental income. This is withheld at the source.
Wealth Tax (AIMI)
The wealth tax (Adicional Imposto Municipal Sobre Imóveis) has been in effect since 2017. It applies to owners with a share in Portuguese property with a value of more than €600.000. The rates are stable regardless of residency status. On the total amount of properties held by companies, the rate is 0.4%. Also, it is 0.7% for individuals. If you own a property valued at more than €1 million, the rate is 1%.
A deduction of €600.000 allowance per person from the value of all Portuguese properties is available. That means, if you and your partner own a Portuguese home jointly, AIMI will be in effect if the property is worth more than €1.2 million.
Capital Gains Tax
Capital gains tax applies to the sale of assets. It only applies to gains made on real estate and investments. So, personal items are not taxable, and inheritances are subject to a limited type of stamp duty.
Portuguese capital gains tax will depend on your residency status, and how you own the asset, and whether it is your main home.
If you are a non-Portuguese resident, your whole gain from the sale of a Portugal property is taxable at a flat rate of 28%. Portuguese residents are subject to taxation gains from worldwide property and investments which they obtained from January 1st, 1989 onwards. All gains on real estate are added to your other income for the year. Then, taxation will be in effect. According to the income tax scale rates, it may range from 14.5% to 48%.
Exceptions to Capital Gains Tax in Portugal
You’ll be exempt from taxes on capital gains if:
- You are a tax resident of Portugal, and you are selling your main residence in Portugal and you are buying another one in Portugal. This rule will apply for sales within 3 years or 2 years before.
- The property was first dwelled in before January 1989 in your name.
- If you decide to reinvest the money received from the sale of your main Portuguese residence into another main residence in the EU, you can roll over the costs.
In Portugal, only sellers pay agency fees, not the buyers. Since July 2008, the deduction of agency fees is possible as a sales cost from any capital gains obtained from a property sale.
No inheritance tax is liable for one’s immediate family since 2004. Yet, a 0.8% stamp duty is imposed. Also, a 10% stamp duty is in effect for non-immediate family members.
Fiscal Representation in Portugal
For all non-resident individuals or companies having assets based in Portugal, it is a legal necessity to assign a fiscal representative. Non-resident taxpayers gaining taxable income in Portugal must also assign a fiscal representative to guarantee that they obey the tax obligations in Portugal.
A fiscal representative is responsible for any tax calculations regarding the individual or company’s tax obligations. They include properties, bank accounts, income, and all tax bills.