Once settled on a property you desire to buy: as a non-resident of Portugal you will first need to obtain both a tax number and bank account; if you are not residing in Portugal you can appoint a person to be your fiscal representative. You should also have made a decision about in whose name the property purchase will be made; albeit in joint names, in one name or in the name of a company. It is advisable that these elements are in place as early as possible, as there could be tax consequences if changed between signing a deposit agreement and completing the purchase. It is always best to seek independent advice to best determine a solution.
How does a property purchase work in Portugal?
The preliminary stage in any purchase of property is to determine that the person who is marketing the property for sale has the authority to sell the property. Here the title and planning status of the property must be verified, establishing whether or not the property was built with the correct legal permission and any subsequent extensions carried out have been done so with the correct authority. It will become obvious at this stage if any debt have been charged against the property. In the event that there is a planning problem or unsecured debt is identified it is imperative to determine how it will be rectified before you take ownership of the property.
If all the above goes smoothly the next stage is to negotiate the terms of the deposit agreement with the seller. You need to establish exactly what is included in the sale. If actions are required by the seller to rectify a planning issue or to clear a secured debt it should be stipulated in the contract to ensure that the problem is rectified before you take ownership of the property. Once the terms are agreed upon, the deposit is paid and both parties are committed to the purchase.
The deed must be signed and the balance of funds will be paid along with taxes. If purchasing land the procurement can be completed once you are satisfied with the results of the enquires set out above. If purchasing a villa, apartment or townhouse the deed should only be singed once you (or your agent) have carried out an inspection of the property and the local authority has issued the habitation license. The final meeting must take place in the presence of the notary, a lawyer with notarial powers or in some cases in the presence of a Land Registrar, using the Casa Prontaprocess.
The next step is for the purchase to be registered; this process can take 2-3 days to complete. If the purchase is completed using the Casa Prontoprocess then the purchase and registration will occur simultaneously.
What are the expenses of purchasing a property in Portugal?
IMT (Transmissions Tax) is a one-off tax payment which must be paid at the local tax office prior to the signature of the purchase deed. The tax payable is calculated immediately after the enquiry has been made and you are absolute that you want to proceed with the purchase deed. The payment will be made and the tax office will issue a receipt confirming the payment which must be presented to the notary prior to signature of the completion deed. The total amount of tax payable depends on the purchase price of the property. The tax is charged between 2% and 8% of the purchase prices, each purchase also benefits from a fixed rate deduction from the tax payable. If you are purchasing a holiday home then the deduction from the taxable amount is lower than if you are purchasing property as your primary residence. Properties sold for more than €574,323 tax is charged at 6%, but there is no deduction from tax.
In addition to IMT you also need to pay stamp duty tax, on the amount 0.8% of the property price, prior to signature of the completion deed. You can expect to pay expenses in relation to the Notary’s fee, or the Land register´s fee as well as a fee for the property registry and further disbursements in respect of bank fees, courier fees and minor miscellaneous expenses. These additional disbursements ought to amount to approximately €800-€1000.
After you purchase
Immediately following completion you will need to arrange for the utilities supplying the property to be contracted in your name and in some cases you many need to arrange for the supply to be connected. If you are planning to rent out the property then you are obliged to submit annual tax return declaring the income you have received as a result of letting your property and paying tax on any profit made in Portugal.