Portugal Property Tax Guide

Portugal Property Tax Types

Property taxes in Portugal differ depending on different factors: the value of the property, rental income or capital gains. Enjoy our quick guide to understanding Portugal’s Property Tax System.

We can't emphasise enough how important it is to work with a brokerage you can trust and who will support you and guide you through the entire buying process. Edison Fraser is committed to becoming your closest ally when looking to buy property in Portugal.

Property Transfer Tax

Property Transfer Tax, otherwise known as 'Imposto Municipal sobre Transmissoes' (IMT). This is a municipal tax on the purchase of the property that is paid in a single payment. The tax rate is often revised and depends on the value, type, purpose and location of the property.

IMT must be paid at the local tax office after signing the preliminary contract, but not less than three days before the final transaction.

Stamp Duty

Stamp duty. A one-time tax on the purchase or sale of the property. The standard rate is 0.8% of the transaction amount.

Annual municipal tax, IMI

Annual municipal tax, IMIPaid after the purchase of the Property. The rate is 0.3—0.5% for urban property and up to 0.8% for rural property. Please note Municipalities independently calculate the tax rates, which vary from location to location.

The deadline for payment is the last day of the tax year, which ends in April. If the amount of tax exceeds €250, it is permitted to be paid twice a year, in both April and November.

Exemptions from payment:

1. Low-income households: up to €15,295 if the value of the building does not exceed €66,500.
2. Owners of buildings that are to be renovated at the expense of the city. But they will be taxed after 3 to 5 years.

Wealth Tax

Wealth Tax. Property worth more than €600,000 is subject to the AIMI (ImpostoMunicipal Sobre Imóveis) tax. It is an additional tax, the rate is on average 0.7% of the value of the property.

For married couples who file a general tax return, the calculation of the wealth tax begins on properties worth €1.2 million or more.

Income Tax

Income tax. In Portugal, income tax is made up of the different incomes of a citizen or resident, such as salary, pension, and rental income. The tax rate is calculated on a progressive income scale.

Investors that have received a residency permit in Portugal can apply for an exceptional tax regime, this allows them to pay income tax at a flat rate of 20% for the first 10 years of residency.

Capital Gains Tax

Capital Gains Tax. When selling Property, residents of Portugal pay tax on 50% of the profits. For example, if a resident sells an apartment for €80,000, the tax will be charged only half of €40,000.

The amount of profit is also added to the total annual income of the citizen. The entire income is then taxed at the appropriate rate of the income tax scale.

No tax is due if the citizen or resident sells his or her primary residence and invests all of the income into the purchase of a new property, which will become the new primary residence. But if it turns out to be cheaper, the tax must be paid on the difference between the sale and purchase price.

Pensioners and residents who are over 65 years old can also reinvest the capital gains into a pension fund or insurance company within 6 months of selling the property.

Inheritance tax

Inheritance tax was abolished for spouses, children, parents, and grandchildren in 2004. If an inheritance is received by a distant relative or a person who is not a family member, the tax applies and is charged at the rate of 10%.

Conclusion

In addition to property taxes it's beneficial to have a good understanding of all the costs involved in buying property in Portugal, that's why we've pieced together this short guide.

It's important to note that the Edison Fraser in-house sales progression team will be with you every step of the way to ease you through the buying process and make it as seamless as possible. They coordinate between you as a buyer, the seller, the developer and the banks involved and with all the experience they have gathered over the years they are extremely proactive and know the process inside out. Your sales progressor will make sure you have a full and complete understanding of any and all costs involved before any property purchase.

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