Below, we have outlined the taxes payable by each party during the property transfer process in Portugal, along with the corresponding annual tax linked to ownership.
IMT – Property Transfer Tax: Property Transfer Tax (IMT) is charged when property ownership is transferred. It is paid prior to signing the final deed of sale, as proof of IMT payment will be required at the notarising of the title deed. For habitational purchases the IMT rate is paid on the purchase price or the VPT depending which one is higher. The VPT of the property is calculated and issued by the local tax authority and based on the construction costs, age, location and use of the property. The rates differ dependent on if the property is urban or rural and slightly higher IMT rates can be charged for the purchase of a second home.
– Up to €97,064 : IMT is 0% and €0 is deductible
– €97,064 to €132,774 : IMT is 2% and €1,941.28 is deductible
– €132,774 to €181,034 : IMT is 5% and €5,924.50 is deductible
– €181,034 to €301,688 : IMT is 7% and €9,545.19 is deductible
– €301,688 to €603,269 IMT is 8% and €12,562.06 is deductible
– €603,269 to €1,050,400: IMT is 6% and €0 is deductible
– Over €1,050,400 IMT is 7.5% and €0 is deductible
Follow this link to use the calculator: https://www.apemip.pt/simulador-de-imt-e-is/
Stamp Duty, Notary and Registration Fees: In Portugal stamp duty is applicable to many bureaucratic processes and transactions. For a property purchase, the buyer will have to pay stamp duty at a rate of 0.8% of the sales price or tax asset value – whichever is the highest. As with IMT, the stamp duty is paid prior to the signing of the final deed as proof of payment is required at the notarising of the title deed. Registration of the acquisition in the Land Registry Office costs EUR 250 and is ON usually actioned by the lawyer. Notary fees are fixed by law and work on a sliding scale dependent on sale price. Legal fees will vary depending on the value of the property and the complexity and scope of the deal but are generally around 1-2% of the property price.
IMI – Annual Property Tax: This yearly levy is determined by the local council and can range from 0.3% to 0.45% for properties in urban areas. IMI is calculated based on the tax asset value of the property, not its market value. The municipality of Loulé enforces a minimum IMI rate of 0.3%. Rural properties in AL AX have an IMI rate of 0.8%. Properties owned by white-listed companies incur a flat IMI rate of 0.4%, while those held by offshore entities in locations blacklisted by the Portuguese government face a higher IMI rate of 7.5%. IMI payments are typically made annually in two or three installments, depending on the total amount owed.
AIMI – Additional Municipal Property Tax: Introduced in 2017, AIMI is applicable to the combined VPT of all urban properties owned by an individual or couple. This tax is triggered for values exceeding EUR 600,000 (per person, or 1.2 million for a couple), with the following progressive rates:
– Between EUR 600,000 and 1 million: 0.7% rate
– Over 1 million: 1% rate
– Over 2 million: 1.5% rate
For corporate structures, AIMI is calculated at 0.4%, unless the property is designated for the personal use of its shareholders, directors, or their immediate family. In such cases, the rates mentioned above still apply, but there is no exemption threshold, and the 0.7% rate is applicable from EUR 0-1 million. If the organization is based in a territory blacklisted by the Portuguese government, a higher rate of 7.5% applies. AIMI does not apply to non-habitual or rural properties. In the event of owning multiple properties and being subject to AIMI, you have the option to offset the tax paid against any IMI payments associated with those properties.
Capital Gains Tax: When selling a property, the Capital Gains Tax (CGT) is calculated based on the difference between the purchase and sales prices. Expenses incurred during ownership, such as refurbishment costs and fees, can be deducted.
– For Non-Residents: The tax rate is 28% of the profit made.
– For Portuguese Residents: 50% of gains are tax-free, while the remaining 50% is taxed as part of the annual income tax return.
– Corporate Ownership: Foreign companies face a flat CGT rate of 25%.
Exceptions to capital gains:
1.When a primary residence is sold and the proceeds of the sale are reinvested into another primary residence in the EU/EEA territory within the following 36 months.
2. The property was first occupied in your name before January 1989.
Inheritance Tax: In Portugal, there’s no inheritance tax between immediate family members (spouse, ascendants, and descendants). However, for gifts to close family members, a 0.8% stamp duty, based on the VPT, is applicable. Gifts or inheritance to individuals outside this immediate family circle may have different tax considerations.
For renting out your portuguese property, there are certain taxes that you will need to consider. As a rule, net rental income is taxed at a flat rate of 28%. However, there are possible deductions on rental income for the following:
– Deductions for fire insurance, as it is compulsory for rental properties.
– Expenses such as the IMI
– Costs associated with obtaining an energy certificate
– Condominium fees (if applicable)
– Expenses for the upkeep and the maintenance of the property, such as repairing and replacing items (needs to be proven legally and cannot be considered furniture)
– Maintenance and conservation costs
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