There are different property taxes in Portugal where property owners should be aware of. Investing in real estate can be a rewarding venture, and Portugal is an attractive destination for property buyers worldwide. However, like any investment, understanding the tax implications is essential to ensure long-term financial success. This complete tax guide delves into Portugal’s intricate world of property taxes. Whether you’re a first-time buyer, a seasoned investor, or simply curious about the Portuguese tax system, this article helps to clearly understand the tax obligations associated with property ownership in Portugal.
Annual property taxes in Portugal
1. Immovable property tax (IMI)
In Portugal, property owners are subject to an annual tax known as IMI (Imposto Municipal sobre Imoveis), which applies to residential and commercial properties.
You calculate the IMI by basing it on the property’s fiscal value and multiplying it by the tax rate. This tax is at a municipal level, meaning the property valuation can vary depending on the specific municipality.
| Property type | Tax rate |
|---|---|
| Rural property | 0,8% |
| Urban property | 0,3% – 0,45% |
| Property acquired by companies in a blacklisted jurisdiction | 7,5% |
You can determine whether your country belongs to those in the blacklisted jurisdiction by clicking this link.
2. Wealth tax (AIMI)
Once your properties reach more than €600.000 ($646.525), you must pay a wealth tax known as Adicional Imposto Municipal Sobre Imoveies (AIMI). Individuals pay at a rate of 0,7%, while companies pay at 0,4%. You impose these tax rates on the total amount of the properties. But once you reach more than €1 million, the IMI tax rate increases to 1%.
When do you pay the IMI and AIMI?
The municipality issues the bill in March, and you must pay on the specified deadline to avoid penalties for late payment. Payment dates may vary based on the total amount, and you can pay via installment:
- Amount lower or equal to € 100: One installment in May;
- Amount from € 100 to € 500: Two installments in May and November;
- Amount over € 500: 3 installments in May, August, and November.
Rental income taxes in Portugal
Rental income taxes vary depending on the rental duration as well as the residency status of the owner.
1. Individuals
In general, non-residents must pay a fixed tax rate of 28% on their rental income, whether the furnishing of accommodation is short-term or long-term. On the other hand, the rental income of residents will form part of their annual income, the total of which is taxable based on the following progressive scale.
| Total income | Tax rate |
|---|---|
| €0 – €7.479 ($0 – $8.059) | 14,5% |
| €7.480 – €11.284 ($8.060 – $12.159) | 23% |
| €11.285 – €15.992 ($12.160 – $17.232) | 26,5% |
| €15.993 – €20.700 ($17.233 – $22.305) | 28,5% |
| €20.701 – €26.355 ($22.306 – $28.399) | 35% |
| €26.356 – €38.632 ($28.400 – $41.628) | 37% |
| €38.633 – €50.483 ($41.629 – $54.397) | 43,5% |
| €50.484 – €78.834 ($54.398 – $84.947) | 45% |
| €78.835 and above ($84.948 and above) | 48% |
Nevertheless, residents furnishing more than one month of accommodation can pay the flat rate of 28% or include it in the computation for their total income tax.
2. Corporations
Resident companies are required to include rental income in their overall revenue and are subject to a corporate income tax rate of 21%. Conversely, non-resident companies are taxable at 25% for rental income.
When to pay rental income tax?
Residents who opt to pay to include their rental profits in their total income must file their tax returns by June 30 and should have paid it already by August 31. Corporations must file their returns on the last day of May and deliver them in three installments, due in July, September, and by December 15.
Taxes on the transfer of property
1. Transfer tax imposed on the buyer
In Portugal, the IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) typically applies to the transfer of real estate based on either the transfer price stated in the deed or the taxable value of the property for real estate tax (IMI) purposes, whichever is higher. The buyer is responsible for paying the IMT, and the tax rates vary depending on the property type.
| Property type | Tax rate |
|---|---|
| Rural property | 5% |
| Urban property | 6,5% |
| Property acquired by companies in a blacklisted jurisdiction | 10% |
When to pay IMT tax?
The buyer must submit the IMT assessment form to the local tax office and pay on the same day of submission or the following business day. The payment must be within the next month if the transfer is through a deed executed in a foreign country.
2. Stamp Duty
In addition to the property taxes in Portugal, a Stamp Duty (Imposto de Selo) of 0,8% is imposed on the acquisition of real estate, calculated based on the property’s taxable value for IMT purposes.
3. Capital gains tax imposed on the seller
The government imposes a capital gains tax on the profit generated from selling a property, which individuals can calculate by subtracting the acquisition costs from the sale price.
If you are a tax resident in Portugal, only 50% of the profit obtained is subject to taxation. This amount will form part of your annual income and be taxable at the applicable progressive rates. For non-residents, whether individuals or a company, the entire amount is taxable at a fixed rate of 28%. Companies whose residence is on the blacklisted list are liable at a rate of 35%.
Residents of another EU country with a bilateral tax treaty with Portugal enjoy the option to avail of the tax laws applicable to Portuguese residents. However, it is crucial to note that, in this scenario, you must declare your worldwide income in Portugal. This option is particularly advantageous for individuals with lower incomes, as residents receive a 50% reduction in the taxation of their profits.
| Type of tax resident | Tax rate |
|---|---|
| Portuguese tax resident | 50% of the profit is taxed as annual income |
| Non-residents | 28% of the entire income |
| Blacklisted-companies | 35% of the entire income |
Conclusion
Whether you plan to relocate or wish to invest in Portugal’s thriving real estate market, understanding property taxes in Portugal is essential for a financially sound venture. It’s worth noting that tax rates and regulations may change over time. Therefore, you must keep updated about the tax news. You can seek advice from a qualified tax professional or legal advisor. They can aid you in completing your yearly tax reports, offer assistance with tax planning and optimization, and help mitigate your tax obligations.
Frequently Asked Questions (FAQs)
What is property tax called in Portugal?
The property tax in Portugal is known as Imposto Municipal sobre Imóveis (IMI). The IMI is a local tax imposed on the ownership of properties in Portugal, and its rates vary depending on factors such as property value, location, and type of property.
How much is property tax in Portugal yearly?
The IMI, calculated yearly, ranges between 0,3% and 0,8% depending on the property type. The rate is multiplied by the property valuation.
Can foreigners own property in Portugal?
Yes, foreigners are allowed to own property in Portugal. No restrictions on property ownership based on nationality make it accessible for foreigners to own real estate in the country subject to specific requirements.
