What are bank fees for real estate financing?

Article by Viv Europe - Official Legal and Relocation Partner to KipperTree.

07 02 2024

For advice about moving to Portugal cont Viv Europe here.

If you want to buy a property in Portugal, be aware that you will have to pay taxes.

Below are the taxes that are related to real estate in Portugal:

Municipal Tax Related to Property Transactions (IMT): This is a tax that must be paid whenever there is a financial transaction related to the purchase and sale of property.

It must be addressed to the Portugal government before the execution of the Deed of Purchase and Sale, and its value varies according to the type of property, location and purpose.

The value will correspond to the result of the following equation: Value of the property (property value or deed value, whichever is greater) multiplied by the rate published by the State, subtracted from the portion to be deducted.

Check out the simulated table for calculating the IMT, as published by the APEMIP portal:

Stamp Tax: This tax must also be paid to the State if the property is acquired through bank financing and corresponds to a rate of 0.8% on the value of the transaction.

This tax is applicable in many other cases, such as opening bank credit and other financial transactions.

Municipal Property Tax (IMI): This is a tax related to the ownership of a property and must be paid annually.

This tax rate varies from 0.3% to 0.8% and is applicable on the property’s value.

Therefore, buying a property worth 475,000€ would incur in the following costs:

Property: 475,000€

IMT: 26,040.60€

Stamp Tax: 3,800€

What is the tax burden for renting a property?

For each property rent the owner will have to pay Stamp Tax.

This amount corresponds to 10% of the monthly rent.

As mentioned before, the owner needs to pay the annual IMI (Municipal Property Tax), which reflects the multiplication of the tax rate stipulated (by the government) for the current year by the Property Tax Value.

Also, the income obtained through leasing is taxed depending on the duration of the contract:

Less than 2 years: 28%

From 2 to 5 years: 26%

From 5 to 10 years: 23%

From 10 to 20 years: 14%

Over 20 years: 10%

In specific situations, it is possible to withhold IRS or IRC on the rents paid by the tenant and then make the adjustment in the annual Income Tax Return.

If the property is an apartment or a house located in a closed condominium, you must also include the condominium value as an expense.

What is the quality of the properties in Portugal?

The magic answer is: It depends.

I will not lie, most properties in Portugal are old, especially those located near downtown.

Let us emphasize that being old is not the same as being uninhabitable. Some properties are old but are in great condition to receive people, others may need some renovations. Only a few of them are not habitable.

If you leave downtown, you’ll be able to see new buildings prepared for the hot or cold weather, modern, and so on.

Let’s say you chose an old apartment to live in. These are the main concerns I would have:

What is the energetic certificate of the place?

How thick is the wall with the neighbours?

Can the construction material keep the winter cold away?

How is the apartment heater? (yes, it can be really cold in the winter)

Also, a general analysis of the property by an electrician and a plumber may be in good taste.