GUIDE TO BUYING REAL ESTATE IN PORTUGAL

What to consider before buying a property in Portugal?

---

A property should not be brought without a minimum of organization and preparation. You will go through different phases during the purchase process. Each requires choices to be made and steps to follow. Here is a guide on how to buy real estate while limiting risks.
Clearly defining the property that you want to buy is a step that should not be overlooked. The more defined your requirements and wishes, the more efficient you will be when searching for the ideal home.

---

Whether you are searching on your own or through an estate agent or notary, the answers to the above questions will help you save time during the selection process. You may also be able to avoid unnecessary visits.

The answers to these questions are not always obvious, particularly if you are buying as a couple. You will need to find a compromise between both your personal wishes.

Have you now defined the house of your dreams, the one matching all your criteria?

You will be able to move to phase 2: determining your financial capacity.

What is your budget to finance this purchase?

---

House prices are very high. Before you start searching for the type of house that matches your criteria, you need to check if you have the necessary budget for this purchase.

In the article “How to finance the purchase of my house?”, we detailed the 3 main existing funding sources:

• Your personal deposit
• Funding support
• Mortgaging

By calculating the amounts available to you through these three sources, you will get a clear idea of ​​your budget.

To increase your financial resources and learn how to reduce their cost, use our guides to improve the financing of your real estate.

At this point, you now know what you want, you know how much money you have available for this purchase, you must now find out as much information as possible on the real estate market of the town or the district you are targeting.

Financial solutions to buy a property in Portugal

---

Several of our partners can assist you to finance your purchase project in portugal.

It is not easy for a foreign buyer to find financing for a property purchase in Portugal. Banks are often reluctant to accept this idea, the majority of cases this is due to the fact that they cannot mortgage property abroad.

The best solution is therefore to apply for a loan from a Portuguese bank.

That is why TAGUS PROPERTY works with partners who are used to this type of request and who help foreign buyers and investors to buy in Portugal.

OUR PARTNER BANK IN CHARGE OF LOAN APPLICATIONS IS ENGLISH-SPEAKING!

All your financial needs
Acting in a transversal way in all areas of financial services provision, as a bank for individuals, companies, investment, asset management and insurance, our partner ensures a wide coverage of our clients’ financial needs.

Advice, availability, all in English
By opening an account with our partner, you will have access to a dedicated English-speaking manager who works with you to find the best solutions to plan your future and manage your daily financial activity. Your new advisor has the tools and knowledge to give you the best advice on your investments. Always available, whether by phone, mobile or email.

APPLY FOR A LOAN / MORTGAGE IN PORTUGAL
Mortgage Loans
Our partner offers mortgage loans to finance your real estate purchase in Portugal:
– Repayment period of the loan up to 30 years, maximum age of the borrower on the last maturity date: 75 years;
– Minimum contribution: 25%;
– Minimum loan amount: €75,000;

Contact us to find the best mortgage offers in Portugal

“The Portuguese real estate market is characterized by good quality supply and relative price stability. It represents a solid investment option especially in the residential tourism sector.”

Tagus Property

Legal Process For Buying A Portuguese Property: Documents & Costs In Portugal

---

Steps To Buy A Property In Portugal

The process to buy a property in Portugal may differ from the process in your own country. The laws and regulations may be different. Without knowledge of this Portuguese process, you could be facing unexpected risks.

The procedure in Portugal is as follows:

• The reservation;
• Hiring a lawyer;
• The signature of the promissory contract;
• The establishment of the deed of sale.

Each step must be followed one at a time. We guide you through this process from beginning to the end. We will now explain each step one by one to give you a better understanding of this procedure.

Step Nº1 – Reservation

Once you have found your ideal property, and your offer has been accepted, you can then reserve the property. This reservation is made with an amount of roughly €5,000 (depending on the value of the property).
This amount will be paid into an escrow account (owned by your lawyer) until the signature of the “CPCV – Contrato de Promessa de Compra e Venda” (preliminary contract).
If you do not reserve the property prior to the signature of the preliminary contract, it remains on sale. This reservation stops the sale of the property to any other interested party until the signature of the preliminary contract.
During this reservation period, your lawyer should look in detail at some aspects of the property in question (for example: existing mortgage, limiting clauses, required building warrants). It is important that your lawyer completes these checks prior to the signature of the preliminary contract so that the information you have on the property is up to date.
To prevent that the property from being sold to others, a reservation is a possibility.

Step No. 2 – Lawyer

If you decide to buy a property, you will need a competent lawyer. Your lawyer is responsible for particular checks on the property in question: has it been seized, are there limiting clauses, is a building warrant in place (if buying land). The lawyer also checks that the Local Urban Plan (PLU) for the property held at the “Câmara Municipal” (City Hall) correspond to the current situation.
This check must take place prior to the signature of the preliminary contract. This will prevent you from buying a property built without permit or under seizure.
It is possible to give your lawyer a “Procuração Pública” (power of attorney) detailing the conditions under which he can act on your behalf. If you have not arranged the power of attorney in Portugal, it can be arranged in your own country with a lawyer and the Portuguese embassy. We recommend that you arrange it directly in Portugal – it will be quicker and cheaper. Lawyers and legal fees vary generally from 1% to 1.5% (+ VAT).
If you need a recommendation for a lawyer, we will be delighted to help you.

Step No. 3 – Promissory Contract

The promissory contract will generally be signed within a month of the reservation. When there is an agreement on the price and the documents are approved, the two parties sign a “CPCV – Contrato de Promessa de Compra e Venda” (preliminary contract). Thereon, both parties are committed. All the conditions that have been accepted by both parties are included in this promissory contract.
It is up to you to decide if you want to register this preliminary contract with the notary.
The purchaser makes a down payment of 10% to 30% to the seller. The remaining part of the purchase price will be paid during the transfer of ownership.
This down payment also acts as a penalty for the purchaser if he does not respect the conditions set out in the preliminary contract. If the seller fails to respect the contract, he must pay twice the amount of the deposit back to the purchaser as a penalty. This rule is not explicitly included in the preliminary contract, but it is indeed the law in Portugal.
If both parties agree to it, a suspensive clause for obtaining a mortgage can be added to the preliminary contract.
We recommend that you register the preliminary contract with the notary to prevent any possible seizures after the signature of the preliminary contract. If the preliminary contract is recorded with the notary, the property can no longer be seized.

Step No. 4 – Transfer Of Ownership

There is a date set in the preliminary contract for the signature of the “Escritura Pública” (deed of sale). Generally, this takes place 3 to 12 weeks after the signature of the CPCV (preliminary contract).
Once signed, the deed of sale and the property are recorded in the “Conservatoria Do Registo Predial” (land registry), and the legal transfer is complete: you are the owner of your dream home!

Careful: your lawyer must register this transfer with the land registry.
To complete the transfer of ownership, the change of ownership must also be passed on to the electricity and gas supplier(s), the town hall and other institutions.

“Information provided for guidance only.
We cannot be held responsible for any errors or incorrect information.
We strongly recommend that you carefully seek advice prior to the purchase or the sale of a property in Portugal.”

Tagus Property

Status and Role of the Notary in Portugal

Portugal has been a member state of the European union since 1986 and the Portuguese civil law is similar to many other European countries.

---

What can I expect from my notary in Portugal?

A Portuguese notary has a duty of integrity and rigour in terms of legal requirements, particularly in terms of authenticity.

The notary is subjected to an obligation of professional secrecy: information given to him in the exercise of his public functions should not in any way be revealed.

A notary also has a duty to advise: clients expect their notaries to be able to explain the different options available to them and the consequences of the acts that they will sign.

This duty implies neutrality and impartiality: the notary chosen by one of the parties has a duty of loyalty towards ALL parties to the transaction.

As a result, the Portuguese law does not allow him to represent one of the parties involved nor to participate in potential negotiations.

The Notary, a public official

The notary is a public official, involved in all areas of law: family, real estate, wealth, business, rural.

Acting on behalf of the State, nominated by the minister of Justice, he imparts the acts that he writes with a stamp of professionalism and authenticity. He has true prerogatives of public power that he receives from the State.

The Notary, a professional in the authentication of acts

He has the power to authenticate acts with his own signature. He officially records the will expressed by the persons who sign them and personally commits himself on their contents and the date of the act. Using a notary allows to undeniably prove the authenticity of acts as his acts have the same power as a final judgement.

The Notary, guarantor of the security of real estate transactions

The notary has a vital role in terms of proof and security. Nevertheless, to reinforce the strength of real estate transactions, any transfer of ownership must also be published to the official register (Conservatoria do Registo Predial).

The notary must perform this publication.

TAGUS PROPERTY has been working with Portuguese notaries for years.

In Portugal, the Notary is a legal professional, vested with a mission of public authority who prepares authentic contracts and exercises his duties independently.

Tagus Property

Property Taxation In Portugal

---

Tax Convention EU – Portugal

• No double taxation through a tax agreement.
• Capital gains and income from immovable properties are taxed in the country where the property is located.
• Capital gains and income from movable properties are taxed in the country of residence (subject to potential taxation at source).
• Salaries: taxable in the country where the work is performed, except in special cases.
• Private pensions: taxable in the country of residence.
• State / public pensions: taxable in the country that pays them.
• Foreign dividends and royalties: tax exemption under certain conditions.
• If both countries consider the person as a tax resident, the residence is determined by the provision of a permanent home. If the individual has a home in each country, personal and economic relations are considered (centre of vital interests). Alternatively, other criteria apply.

The NHR (Non-Habitual Resident) Status

---

• The NHR (Non-Habitual Resident) status is valid for 10 years, non-renewable, and available to individuals who have not lived in Portugal in the last 5 years:
• No taxation on foreign private pensions.
• Benefit from an income tax rate of 20% (+ temporary surcharge of 3.5%) for income from “high added value” professions exercised in Portugal.
• Other activities: progressive rate taxation.

Property Transfer Tax – Taxes on Property Acquisition

---

PRIMARY RESIDENCE

VALUE OF PROPERTY	PERCENTAGE	REBATE
Up to 97.407€	1%	No rebate
Between 92.408€ and 126.403€	2%	with a rebate of 1848,14€.
From 126.404€ to 172.348€	5%	with a rebate of 5640,23€.
From 172.349€ to 287.213€	7%	with a rebate of 9087,19€.
From 287.214€ to 574.323€	8%	with a rebate of 11959,32€.
Above 574.323€	fixed rate of 6%	–

SECOND HOMES OR PROPERTIES FOR RENT

VALUE OF PROPERTY	PERCENTAGE	REBATE
Up to 97.407€	1%	no rebate.
Between 92.408€ and 126.403€	2%	with a rebate of 924,07€.
From 126.404€ to 172.348€	5%	with a rebate of 4716,16€.
From 172.349€ to 287.213€	7%	with a rebate of 8163,12€.
From 287.214€ to 574.323€	8%	with a rebate of 11035,25€.
Above 574.323€	fixed rate of 6%	–

• For building plots, shops, offices, parking, fixed rate of 6.5%.
• For agricultural land, 5%.

Note

THE IMT AND STAMP DUTIES ARE ONLY PAID ONCE AT THE TIME OF PURCHASE.

Stamp Duty (Imposto Selo – IS)

---

This is a fixed tax of 0.8% calculated on the value of the purchase, or the tax registration value, when the latter is higher.

IMI Property Tax (Immovable Property Tax)

---

On ownership:

IMI (Property Municipal Tax): between 0.3 and 0.8% of the tax registration value of the property.

You will pay IMI annually.

This property tax is calculated on the tax registration value of the property.

The rates are:

• Agricultural land: 0.8 %
• All other properties: between 0.3% and 0.8%, set by each municipality.

(IMI was 0.3% in 2019 in Lisbon for example)

This tax is paid as follows:

• Once a year in April, when the amount due is less than or equal to €250.
• In two instalments, in April and November, when the amount due exceeds €250 or is less than or equal to €500.
• In three instalments, in April, July and November, when the amount due exceeds €500.

Some councils also charge a fee for the maintenance of sewerage networks. The amount is set by each municipality.

(The above-mentioned rates are those in force in 2019)

IRS (Individual Income Tax)

---

• The applicable rate is 28%: Income received by non-residents
• from 28% to 48%: Income earned by residents

Wealth Taxation in Portugal

---

• No Wealth Tax in Portugal
• No inheritance tax between spouses and for descendants or ascendants

Inheritance

---

There is no inheritance tax in Portugal between spouses and direct ascendants and descendants. However, planning your inheritance requires the consultation of a professional to check the applicable inheritance law and, if necessary, set your marital regime.

Note that if your heirs reside abroad, they may still be taxed on the value of the estate in their own country.

Transfers between individuals are subject to stamp duty at the rate of 10%, except for those made to spouses, descendants or ascendants, which are exempt from this tax.

Short-Term Rental Taxes in Portugal for Non-Residents

---

Taxes in Portugal (AL) – tax treaty EU – PT – SIMPLIFIED REGIME FOR NON-RESIDENTS

Taxation on the rent of furnished property(ies) to tourists when the activity is ran by non-resident individuals:

Activity subject to VAT (6%) if the turnover is above €10,000

Possible adoption of a simplified regime for calculating the income tax, up to a maximum turnover of €200,000 / year

• Tax basis: 35% of turnover
• Tax rates for non-resident:  25% (so 25% x 35%: effective rate of 8.75% on turnover)

Procedure:

• Declaration of your intention to start renting furnished property(ies) to tourists (before the activity begins), tax return type 3
• Annex B in May of the following year.

Income from properties is taxable in the Country in which the property is located.

 Example:

• Turnover over 1 year = €10,000
• Tax calculated on 35% of €10,000 so on €3,500
• You therefore pay 25% tax on €3,500, so €875

Taxes for short-term rent = €875

Figures for guidance updated in 2019

---

“We are a dedicated team of experienced Property Finders in Portugal to guide you through every stage.”

---