Property Taxes in Portugal

Getting to Grips with Property Taxes in Portugal

Article by Global Citizen Solutions - Official Relocation Partner to KipperTree.

While probably not many people’s favourite topic, there’s no getting away from taxes. And, when it

comes to buying property in Portugal, it’s essential to have clarity on what you need to pay, when

you need to pay, and any exemptions that you may be able to access.

In Portugal, taxes will fall both at the time of purchase and on an annual basis. Just as foreigners

need to pay the same taxes on properties as locals, expat buyers are charged the same property

taxes as Portuguese citizens.

Below, we’re going to provide you with a clear picture of what taxes you will need to be aware of if

you are considering snapping up your dream home in Portugal both at the time of purchase and on

an annual basis. We’ll also offer an overview of Capital Gains tax and taxes on rental income in

Portugal.

Taxes to Pay During the Property Purchase

If you are looking to buy property in Portugal, it’s essential to understand the taxes that you’ll need

to pay upfront so that you can factor this into your initial costs. The taxes shown below are the ones

you’ll need to consider at the time of purchase.

Property Purchase Tax (IMT)

The first tax that you’ll need to pay attention to is the Imposto Municipal Sobre as Transmissões

Onerosas de Imóveis (IMT), or Municipal Tax on Onerous Transmissions of Real Estate. This is a

transfer tax that is applied to property purchase in Portugal and ranges from 0 to 10 per cent,

depending on factors such as property type, value, location, and whether it will be the primary or

secondary residence of the buyer.

Stamp Duty

When buying property in Portugal, you will also need to consider Stamp Duty (Imposto do Selo), one

of the oldest taxes in Portugal that is needed for various transactions. When it comes to buying

property in Portugal, property transfer transactions are subject to stamp tax at a rate of 0.8 per cent.

Annual taxes to Pay After the Property Purchase

Once you’ve successfully purchased your ideal property in Portugal, perhaps a lovely beach house

with stunning views of the Atlantic in the Algarve, a quaint townhouse in Porto, or a modern

apartment in Lisbon, you’ll be glad to know that there are not too many annual taxes to pay on your

property. Below, we’ll delve into the ones that you’ll need to be aware of.

Municipal Property Tax (IMI)

The Municipal Property Tax (Imposto Municipal sobre Imóveis) is an annual tax that you will be

required to pay as a property owner in Portugal. Each municipality has a separate tax rate, and the

municipal legislatures set their own rates. Generally, the IMI ranges from 0.3 to 0.5 per cent for

urban properties and up to 0.8 per cent for rural properties.

It’s also important to note that the IMI is levied on the property tax value (VPT) and not on the price

you paid for the property. This works out nicely for the buyer, as the tax value is normally much

lower than the market value of the property.

Also, should your property fall in a rehabilitation area subject to rehabilitation works, you can be

exempt from paying IMI for three years, which can also be extended to five years if the property is

registered as your primary residence.

Additional to IMI (AIMI)

If you are splashing out on a property worth more than €600,000, then you will be subject to

Portuguese Wealth Tax (AIMI). This is a post-purchase tax that has three different levels:

For properties valued between €600,000 and €1 mil: 0.7 per cent tax

For properties valued between €1 mil and €2 mil: 1 per cent tax

For properties valued above €2 mil: 1.5 per cent tax

Capital Gains Tax

If you’ve already bought a Portuguese property and are looking to sell it, the profits that you make

when you sell a property are liable to tax.

Your entire gain on the sale of a property is subject to a flat rate of 28 per cent if you are a non-

resident, while Portuguese residents are required to pay real estate taxes on gains from investments

and real estate acquired after 1 January 1989. Once all profits have been added to your other yearly

income, you’ll then be taxed, ranging from 14.5 per cent to 48 per cent, depending on the income

scale rates.

When you disclose the tax return, in addition to providing information on when the house was

bought and the price paid for the property, you should also make sure you present invoices of any

work done on the property, such as installing a new heating system of maintenance works, and

these will be considered in the capital gains assessment.

There are, however, exemptions to capital gains tax, such as if you are selling your primary residence

in Portugal and reinvesting in Portuguese property within three years after the sale or two years

before, if the property was first occupied in your name before January 1989, or if you decide to

reinvest the funds earned from the sale of your primary house in Portugal into a second primary

residence in the EU.

Tax on rental income

Given Portugal’s dynamic real estate market and increased demand year-on-year from tourists and

expats, renting out your property can be a lucrative option. In Portugal, if you are renting out

your property, rental income is taxed at a flat rate of 28 per cent.

Summing Up: Property Taxes in Portugal

If you are looking to move to Portugal and secure your dream home, you’ll be glad to know that

getting to grips with taxes in Portugal is not as complicated as it is in many other countries.

Probably the best way is to differentiate between taxes that you’ll need to pay at the time of

purchase and factor this into the initial costs. Following this, you’ll simply need to keep track of the

taxes you’ll need to pay on an annual basis, and, with the IMI being levied on the property tax value,

this is advantageous to you, the buyer.