Investing in foreign real estate can be exciting, especially with Portugal’s picturesque landscape and favorable incentives for foreigners. However, knowing the taxes on buying property in Portugal is essential. This article aims to provide an overview of taxes on buying property or land in Portugal to help mitigate any risk and inform you about government regulations.
What are the taxes on buying property in Portugal?
Buyers should be aware of the following taxes when buying property in Portugal:
- Transfer tax (IMT)
- Stamp Duty
- Immovable property tax (IMI)
- Wealth tax (AIMI)
Transfer tax (IMT)
In Portugal, the transfer of real estate is typically subject to the IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis), based on either the transfer price mentioned in the deed or the taxable value of the property for real estate tax (IMI) purposes, whichever is higher.
It is the buyer who pays the IMT. The rates vary depending on the type of property.
| Property type | Tax rate |
|---|---|
| Rural property | 5% |
| Urban property | 6,5% |
| Property acquired by companies in a blacklisted jurisdiction | 10% |
Check here to see countries considered as blacklisted jurisdictions. In cases where the property is exclusive for residential use, the rate increases as the taxable value of the property increases. It can go for as low as 1% and as high as 8%, depending on whether it is for primary or secondary use.
When to pay the transfer tax in Portugal?
The buyer must submit the IMT assessment form to the local tax office. You should pay on the same day of submission or the next business day. You must pay within the next month if the transfer is through a deed executed in a foreign country.
Stamp Duty
A Stamp Duty (Imposto de Selo) of 0,8% is also imposed on the acquisition of real estate, calculated based on the property’s taxable value for IMT purposes.
Immovable property tax (IMI)
Be careful to avoid being confused with IMI and IMT. While IMT refers to the transfer tax made when you buy a property, IMI (Imposto Municipal sobre Imóveis) is an annual tax for owning property in Portugal.
The IMI is based on the registered tax value of the property and is paid to the local municipal councils by the property owner, so if you buy real estate in Portugal, you have to take note of this.
| Property type | Tax rate |
|---|---|
| Rural property | 0,8% |
| Urban property | 0,3% – 0,45% |
| Property acquired by companies in a blacklisted jurisdiction | 7,5% |
Wealth tax (AIMI)
If your properties in Portugal are worth over €600.000 ($646.525), you are liable for wealth tax (Adicional Imposto Municipal Sobre Imoveis). For properties owned by companies, the applicable rate is 0,4% based on the total value of the properties held. On the other hand, the rate is 0,7% for individuals who own properties. However, if an individual owns a property valued at more than €1 million ($1.08 million), the IMI tax rate increases to 1%.
Need help with property taxes?
When buying property in Portugal as a foreigner, we highly recommend assisting a reputable lawyer or property agent. Collaborating with professionals can offer invaluable guidance throughout the process, ensuring compliance with legal and tax obligations. Knowing and paying tax requirements is also part of ensuring due diligence. It simplifies the experience for you and mitigates the potential for liabilities.
Conclusion
Staying updated with the latest tax regulations is crucial, as tax laws can change over time. Awareness of new developments will help you effectively plan your property investments in Portugal. Therefore, you should always have a tax expert, lawyer, or property agent ready to help you with tax obligations. You can confidently invest in the Portuguese real estate market by clearly understanding the tax implications and seeking professional guidance.
Frequently Asked Questions (FAQs)
What are the taxes on real estate in Portugal?
The taxes on real estate in Portugal include the IMT and IMI. The IMT is a one-time tax paid on the transfer of property ownership, while IMI is an annual tax paid on owning a property.
How much tax do you pay when buying property in Portugal?
The IMT is a tax paid when purchasing a property. It is 5% if the property is rural, 6,5% if urban, and 10% regardless of the property type if the company acquiring is in the blacklisted jurisdiction list.
Do foreign residents pay taxes in Portugal?
It depends on specific circumstances. Foreigners not classified as tax residents are only liable for income tax for income sourced in Portugal. However, foreigners are still responsible for payment of real estate taxes once they acquire property in the country.
