Buying Property in Portugal after Brexit: Updated Insights

With the UK’s departure from the EU in January 2020, buying property in Portugal after Brexit became a topic of concern. However, Portugal has remained a top destination for expats and global investors, including British nationals. The appeal lies in the consistent value of the country’s real estate and the feasibility of owning a holiday home.

British nationals had their rights protected to live in and move to Portugal until the transition ended on December 31, 2020. Since then, new regulations for UK citizens have emerged.

Uncertain or confused about post-Brexit property ownership in Portugal? Dive into this article where we clear up the ambiguities, from the real estate landscape to updates on Portugal’s Golden Visa and more.

What's new on buying and selling property in Portugal after Brexit? 

For British citizens, the process of trading real estate, particularly buying property in Portugal, has experienced minor changes. Here’s a brief overview.

Buying property in Portugal after Brexit

The ability to purchase real estate remains the same; however, some nuances related to relocation and associated protocols have seen changes post-Brexit.

The process of acquiring investment properties or vacation homes continues as usual, plus the potential tax advantages and high rental yields of Portuguese real estate that captivate many foreign investors are very much active.

Additionally, Portugal’s absence of wealth, gift, or inheritance taxes to immediate family stands unchanged.

Selling property

For second homeowners in Portugal after Brexit and others, the selling process hasn’t faced significant changes, including costs and taxes.

Nevertheless, it’s crucial to be apprised of the tax implications based on your residence status and the specifics of the property being traded.

To recap the essentials, we’ve detailed the tax obligations when selling property in Portugal,

The key taxes you’ll have to address include:

Rental income: When renting out your property in Portugal, you’ll be taxed on the net rental income at a flat rate of 28 percent. However, you can reduce this taxable amount with deductions, including:

• Mandatory fire insurance premiums.
• IMI expenses.
• Costs to obtain an energy certificate.
• Condominium fees (if applicable).
• Legally documented upkeep and maintenance costs (excluding furniture replacements).
• Conservation efforts undertaken within the past 24 months.

Always ensure proper documentation for these expenses.

Do note that to claim tax deductions on rental property work, you must provide an invoice detailing the work and property location. Rental rules differ for short and long-term rentals.

Short-term rentals:

• Require an Alojamento Local (AL) License
• Ideal for those staying in Portugal part-time, allowing rental income for the rest of the year
• Portugal’s climate, beaches, and history make it a lucrative rental market.

Check for AL license location restrictions before purchasing property for short-term rental.

Long-term rentals:

• Standard lease agreements are used.
• No need for an AL License.

Capital gains tax: Portuguese capital gains tax varies based on ownership type, residency, and whether the asset is your primary residence. Essentially, capital gains are the profits from selling a property, and these gains are taxable.  

Key points: 

• Asset sales, excluding personal goods, are taxable.
• Inheritances face a unique stamp duty, primarily for gains from real estate and investments.
• Non-residents pay a flat 28 percent on property sale gains.
• Residents pay tax on gains from assets bought after 1 January 1989. After adding real estate profits to annual income, tax rates vary between 14.5 percent and 48 percent based on total earnings.
• Property owners must disclose the purchase year and price on tax returns. Renovations, like a new heating system, should be declared with invoices; these are factored into capital gains calculations.
• If reinvesting the sale’s full amount into a new home, the potential gain might be exempt. This applies if the property sold is your permanent, tax-registered address. The reinvestment must occur within 24 months before or 36 months after the sale. Notify the Portuguese Tax Authorities of your reinvestment intentions.

Capital gains tax exceptions in Portugal: 

• If selling and buying a primary residence in Portugal within 2 years before or 3 years after the sale, and you’re a tax resident.
• Property first registered in your name before January 1989.
• Reinvesting sale proceeds from your primary home in Portugal into another primary residence in the EU.

Inheritance tax: Portugal doesn’t charge inheritance tax. However, a 10 percent stamp duty applies to inherited assets within Portugal. This doesn’t apply to assets passed to spouses, descendants, or ascendants.

Agency fees: In Portugal, buyers don’t pay agency fees; sellers do. Agents earn commission from the seller, so it’s wise to consult an independent advisor when negotiating. Consider a buyer’s agent, who advocates solely for the buyer.

Tax representation: Non-residents with property, bank accounts, or business activities in Portugal need a tax representative. They liaise between you and the Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT).  

Having covered the tax nuances for homeowners in Portugal, let’s explore its residency pathways in detail.

Residency in Portugal after Brexit: Is the Golden Visa still viable?

The Golden Visa program offers a pathway for individuals to reside in Europe for five years.

Following this period, they may be eligible for Portuguese nationality and a passport. What stands out about the Golden Visa is its minimal residency stipulation: Holders must spend an average of 14 days in Portugal every two years.

This means one doesn’t need to relocate their family to secure EU residency. If you’re considering a move to Portugal post-Brexit, other visa types are available, including.

2023 developments in Portugal’s Golden Visa

In a surprising move, Portugal announced in February 2023 that it would phase out the Golden Visa scheme, largely due to housing concerns. Specifically, they highlighted an end to the real estate investment route for new applicants.

But the program wasn’t destined for total cessation. By July 19, 2023, the Parliament decided to revamp the scheme, leading to a redefinition of qualifying investments. 

Following the enactment of the Mais Habitação bill, all real estate investments, direct or indirect, will be eliminated from the program. However, other investment avenues remain accessible for those still interested in the Golden Visa.  

What hasn’t changed: Investment alternatives after legislation

If real estate gets excluded, other investment channels will remain, including:

• €500,000 in collective investment entities
• Investments generating jobs with a €500,000 minimum.
• Contributions to arts or sciences

Benefits of Relocating from the UK to Portugal

Post-Brexit, many UK citizens have looked towards Portugal not just as a holiday destination but as a place to call home. It’s a trend backed by statistics.

British nationals have become the second-largest group to relocate to Portugal, trailing only Brazilians. Data from the Portuguese Chamber of Commerce in the UK indicates a substantial 34.6% surge in British expatriation to Portugal during 2019-2020, with the population of British expats reaching a record high of 46,238. This marks the most significant increase in British expat numbers in Portugal.

Now, if you’re considering such a move, understanding the tangible benefits, especially in terms of real estate and residency, is crucial. Here are ten compelling reasons why relocating to Portugal might just be the ticket to your new life chapter.

Affordability of real estate

In Portugal, the property market is a beacon of affordability compared to the UK’s soaring prices. Even in sought-after areas, the purchase price of a Portuguese property can be significantly lower, which means you can get more bang for your buck. For instance, property prices in the Algarve region are attractive; you could find a villa with a sea view for the price of a one-bedroom flat in London.

Quality of life

Portuguese life is synonymous with long, leisurely lunches and a less frenetic pace than you’re used to. The focus on family, food, and festivities creates an enviable social environment. It’s the perfect setting for those seeking to trade the rat race for a more relaxed lifestyle.

Tax advantages

While the NHR regime will be off the table for discussion starting 2024, it’s still noteworthy that the property tax and local tax office requirements in Portugal can be more favorable than in the UK. Property transfer tax and annual taxes are competitive, and with the right advice from a local accountant, your tax bill could be significantly reduced.

A welcoming expatriate community

You won’t be the first Brit to find a new home in Portugal. A thriving community of British expats means you’ll have a support network from day one, easing the transition and offering guidance on everything from the legal process of buying a property in Portugal to finding the best schools. Here’s an article from which you can learn more about living in Portugal as an expat.

Real estate investment potential

The real estate market in Portugal has shown resilience and a steady increase in property value, making it a solid choice for investment. Whether you’re looking for commercial properties to diversify your portfolio or property rental for passive income, opportunities abound.

Business-friendly environment

Portugal is fostering a startup culture, with Lisbon and Porto becoming hubs for innovation and entrepreneurship. If you want to start a new business or expand your horizons, the real estate sector offers ample opportunities for office spaces and commercial ventures.

Excellent healthcare system

Portugal’s healthcare system ranks highly on a global scale, offering both public and private options. By obtaining a permanent residence permit, you gain access to healthcare that is both affordable and of high quality.

Mild climate and diverse landscapes

The Portuguese climate is a big draw, with mild winters and sun-soaked summers. From the rolling waves of the Silver Coast to the tranquil hills of the Alentejo, the country offers a smorgasbord of landscapes to suit any preference.

Safety and stability

Portugal is consistently ranked as one of the safest countries in the world. For those looking to raise a family or retire in peace, this can be a deciding factor. The sense of security when walking the streets or leaving your home unattended can be a breath of fresh air.

Accessible path to residency

For non-EU citizens, gaining a foothold in Europe can be challenging, but Portugal’s straightforward legal pathways to residency are a silver lining. By purchasing property and fulfilling straightforward requirements, you can secure your stay in the country.

Relocating to Portugal is not just about finding the right property; it’s about crafting a lifestyle that aligns with your aspirations. With these benefits in mind, the Portuguese mosaic of culture, affordability, and quality of life might be the canvas for your next big adventure.

Navigating property investment in Portugal post-Brexit

UK citizens can still buy property in Portugal after Brexit. The Golden Visa’s real estate option is no longer viable, but avenues like job creation or arts and sciences contributions remain open.

If you are seeking Portuguese residency without having to contribute significantly to the country’s economy, the D7 or Digital Nomad Visa are perfect options. The Digital Nomad Visa suits remote workers earning overseas, while the D7, also known as the Passive Income Visa or Retirement Visa, is for those with stable incomes like pensions, rentals, or dividends.

After obtaining legal residency in Portugal, consider exploring properties in Lisbon, Porto, and the Algarve. These cities offer various living options, from coastal homes to apartments, studios, and townhouses.

We recommend consulting with a real estate specialist. At Goldcrest, we’re not just another real estate agency; we’re dedicated buyer’s agents focused on meeting your specific requirements.  

Unlike real estate agents who typically represent sellers and market their properties, we exclusively represent the buyer’s interests, helping you find and negotiate the best deal for a property. We handle everything from the initial process to post-purchase care.