Buying a property in Portugal may be an option if you want to live your life to the fullest. Why? Portugal is a lovely, warm country with 1,794 kilometers of coastline. Imagine living in a hot climate with constant access to the sea wind. That’s exactly what we mean.
It is necessary to understand the legal processes, registrations, charges, and taxes, as well as other relevant tactics when looking for houses for sale in Portugal. Do you want to buy a dream property in Portugal? This post will provide you with some important information.
How do you buy property in Portugal?
First, you must discover a path that will take you to the acquisition of real estate in Portugal. Finding someone to assist, such as a real estate agent, is one of the suggestions. In Portugal, real estate is known as imobiliária. Make sure you consult with a law firm that is a member of the Associacao de Mediadores Imobiliarios (Portuguese Association of Real Estate Agents). If you have an agent but are unsure about their reliability, you may verify it on the website of IMPIC (Instituto dos Mercados Públicos).
Let’s go over the procedure after you’ve decided on the property you want to buy. The NIF (Portuguese Tax Number) is necessary to purchase a Portuguese property. To get it, locate any government finance office and properly visit it. Then you must complete the following steps:
- if you intend to take out a mortgage, consider which one will work best for you;
- no one says you can’t haggle or negotiate. Begin by discussing the price with the seller;
- once the price is agreed upon, give a down payment (about $6,600);
- there is a CPCV (Contrato-Promesa De Compra e Venda) to sign and get two-sided guarantees;
- sign and notarize the property deed or Escritura Publica de Compra e Venda.
Taxes when purchasing a house in Portugal
Because Portugal is a country of fines, obtaining property taxes is an important topic. There is a possibility of receiving penalties if these taxes are not paid correctly. Obligations must be met while acquiring property in Portugal, and this should not be disregarded.
Taxes are unavoidable, thus there is no way to avoid them. In Portugal, there are three property-related duties:
The municipal property tax IMI
This is a tax charged on the property’s worth that must be paid yearly beginning with the day the customer purchases the dwelling. These money are used to finance municipalities in Portugal and to support public infrastructure.
IMI = TPV (value of the asset) x applicable rate
The rate is defined by Portuguese municipalities individually. There goes the IMI calculation too. It is built on interval charts, which are given in CIMI (Municipal Real Estate Tax Code). The IMI for city properties is 0.3-0.5%.
The IMI is scheduled to be paid in April, although it can be expedited in the following ways:
- less than 250 euros: it is mandatory to pay in April;
- 250-500 euros: there are 2 installments;
- more than 500 euros: 3monthly payments possible.
You can exempt paying the IMI in two ways.
Temporary. If a property is purchased as a principal residence and its worth is less than 125,000 euros, and also the household’s taxable income is less than 153,300 euros, the latter may be exempt from paying the IMI for three years.
Permanent. This one demands an annual taxable income of no more than 15.295 euros for the household. This is 2.3 times the annual value of the monthly benchmark social support index of 475 euros.
The municipal real estate transfer tax – IMT
This is a tax that is charged to the property’s tax cost or the cost mentioned in the deed of sale whenever housing is acquired in Portugal.
Before purchasing real estate, remember to pay IMT. Here include property type (urban or rural), the rationale for purchasing (primary or secondary dwelling), and the location.
IMT = Value of the deed or net worth tax (choose the higher of the two) x Rate to apply – tax reduction
The residence must be used primarily for clean and permanent occupancy in order to qualify for the IMT exemption. Its value cannot exceed 92.407 euros in the continental part of Portugal and 115.509 euros in the autonomous areas.
The tax on stamps – IS
There are two ways the tax on the stamp duty to be applied:
- IS on mortgages
In the event of a housing loan, the buyer is required to pay stamp duty on the amount financed. The IS should be paid when the financing money is sent to the client’s (who is purchasing a property in Portugal) bank balance. That is, 0.60 percent IS for mortgages with a repayment period of more than 5 years, and 0.5% IS for mortgages with a repayment period of fewer than 5 years.
IS = Value of the house loan x 0,60% (when repayment time is more than 5 years)
- IS on the purchase and property`s sale
Real estate acquisitions and transactions in Portugal necessitate the payment of stamp duty. The buyer of a house must go to the notary and pay this tax while the deed of sale is being signed. Stamps will be subject to a 0.8% charge.
IS = Cost of the tax asset (highest one) or Write cost x 0,8%
The closing note
You can assess the cost of your ideal house after you are aware of the factors involved in the purchase of the real estate in Portugal. Make good judgments and, above all, avoid being caught off guard by unexpected charges.