Updated: October 25, 2023
Perhaps the least glamorous part of buying a property is the taxes and fees associated with the purchase – even more so when buying in a different country. However, property taxes in Portugal are not as daunting to deal with as you may first assume, and it is important that you have your records in order and fully grasp the fees that you’ll need to pay and to whom.
In this article, we’ll provide you with everything that you will need to know concerning taxes on Portugal property. We’ll split this into the property taxes that you’ll need to pay at the time of purchase and those that you will need to pay after you’ve bought your new property on an annual basis.
Following this, we’ll take a look at taxes for rental properties (including potential tax deductions), capital gains tax, and Portugal inheritance tax. Lastly, we’ll inform you of agency fees and tax representation.
As a rule of thumb, foreigners will have to pay the same taxes on properties as locals. However, note that if you are making the purchase through an offshore company, then higher rates can be expected.
Your NIF and Bank Account
To deal with tax matters in Portugal, you will need to have a NIF (Número de Identificação Fiscal or Número de Contribuinte), which you can obtain from your local tax office – Finanças (Finances). This is your Tax Identification number in Portugal that you will need to make financial transactions in Portugal. If you are a non-EU national, you will need to have a tax representative. If you are moving to Portugal, you should also know about social security. You can read more in our article: How to Get Your NISS Social Security Number in Portugal.
Although not mandatory, it is also recommended to have a Portuguese bank account to avoid transaction costs.
Property Taxes in Portugal: Taxes During the Purchase Process
The following taxes are those that you will need to pay at the time of purchasing the Portugal property.
Property purchase tax (IMT)
The Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT) (Municipal Tax on Onerous Transmissions of Real Estate) is a transfer tax levied over the purchase price of the Portugal property. This is paid when buying property in Portugal and can range from 0 -10 percent. The tax will depend on the price of the property, the type of the property (rural or urban), and the location (continental Portugal, autonomous regions). Whether you are going to make your Portuguese property your primary or second home will also have a bearing on the price.
The property purchase tax (IMT) amount charged is levied over the purchase price. Note that this is also referred to as the property transfer tax in Portugal. To work out the rate, the following sum can be used:
IMT = property value x tax rate x tax deduction
Or you can calculate the percentage in this property taxes in Portugal calculator here.
There are three criteria essential to calculate the Property purchase tax (IMT):
- Type of property: Urban property or rural property
- Buying purpose: Principal or secondary residence
- House location: Mainland Portugal or its autonomous regions
The IMT rates for buying private property in Continental Portugal as a main residence are listed below.
Up to €97,064
Between €97,064 and €132,774
Between €132,774 and €181,034
Between €181,034 and €301,688
Between €301,688 and €603,289
Greater than €603,289 and less than €1,050,400
6 (single rate)
6 (single rate)
Greater than €1,050,400
Note that if the buyer intends to use the property as his sole and permanent residence in Portugal, and the property is in a rehabilitation area, then it can be possible to request a refund of the IMT that needs to be paid.
IMT property tax exemptions in Portugal
You do not pay any IMT (Property Transfer Tax) if the property is located on Portugal’s mainland and its price does not exceed €97,064. Likewise, no IMT tax is due if the property is located in an autonomous territory and is worth less than €121,330.
Tax exemptions for IMT payments are also possible under the following conditions under the State Budget for 2023 (OE2023):
- Properties acquired by state bodies, local authorities and associations, and federations of municipalities governed by public law
- Real estate acquired for the headquarters of diplomatic missions, legal persons with public utility status, IPSS, and religious legal persons
- The acquisition of buildings individually classified as of national, public, or municipal interest, as well as the acquisition of venues for holding cultural shows
- The purchase of buildings for resale
- Acquisition, by credit institutions, of real estate in foreclosure proceedings, bankruptcy, insolvency, or in lieu of payment
More IMT circumstances
- No IMT: Purchase of a whitelisted jurisdiction corporation shares
- 5 percent IMT: A flat rate for agricultural and rustic lands
- 6.5 percent IMT: A flat rate for commercial and building plots
- For blacklisted related IMTs, the rate is always 10 percent
- 15 percent IMT: Property acquired by a corporation based in a jurisdiction that is on a blacklist
- Some IMT rates from the table above: Property acquired by a corporation based in a jurisdiction on the whitelist
Said to be the oldest tax levied by the state, the Imposto do Selo (Stamp duty) is an additional transaction cost that is required of the property owner. On deeds, contracts, bank mortgages and loans, paperwork, and titles, as a buyer, you must pay stamp duty. Depending on the kind and worth of the property, the rate varies. The rate ranges from 0.4 percent to 0.8 percent, depending on the type of act or operation.
When purchasing a home, stamp duty must be paid to the notary at the time of the deed of sale (see the next section for more info on the Notary). This stamp duty has a 0.8 percent rate.
You also have to pay stamp duty when you take out bank mortgages. The tax on the stamp duty is 0.6 percent if the repayment duration is longer than five years. It is 0.5 percent if it is less than five years.
Note that corporate property ownership transactions are exempt from stamp duty.
And thirdly, although not a tax, you’ll need to take into account notary fees. The Notary is the private entity responsible for providing you with the official documents that prove you are the owner of the property. This fee usually amounts to €1,200.
Property Taxes in Portugal: Taxes After the Purchase
The following taxes are those that you will need to pay after you have purchased your new property.
Municipal Property Tax, also known as Immovable Property Tax (IMI)
The Imposto Municipal sobre Imóveis (IMI) (Municipal Property Tax or Immovable Property Tax) is an annual tax, and, as a property owner in Portugal, you are required to pay a yearly property tax. Every municipality has a separate tax rate, and the municipal legislatures set their own rates. Note that the IMI is levied on the property tax value (VPT), not on the price you paid for the property.
This takes into account criteria that include the commodities, age, size, and location of the property. The amount is determined each year by the municipality where your property is located.
Generally speaking, the immovable property tax ranges from 0.3 percent to 0.5 percent for urban properties and up to 0.8 percent for rural properties. The IMI is paid on an annual basis. If the property has been re-valued since 2004, then it will fall between 0.2 percent and 0.5 percent. The tax value of the property is normally much lower than the market value of the property, which turns out nicely for the buyer.
Portuguese municipalities receive funding from the property tax, which is also used to maintain public facilities. When you own the property on the last day of the applicable tax year, you are responsible for paying the IMI tax. The value of the tax asset (TPV) must be multiplied by the relevant rate in order to determine the IMI tax.
If your property is located in a rehabilitation area that was subject to rehabilitation works, you are exempt from paying IMI (Immovable Property Tax) for three years if certain conditions are met. The three-year period begins from the year in which the rehabilitation works were concluded. There is also the possibility of extending the IMI to five years should the property be registered as the primary residence.
- Fo properties valued before 2004, the rate ranges from 0.4 percent to 0.8 percent.
- If a property has been re-valued since 2004, the rate is from 0.2 percent to 0.5 percent.
- If the property is owned through a corporation that is located in a jurisdiction that is on the “black” list, the rate will be a flat 7.5 percent of the rateable value.
Exemptions on IMI tax
There will occasionally be exemptions from property taxes (IMI). For three years, the property will not be subject to property taxes if, for instance, you plan to live there permanently or rent it out. The patrimonial worth of the property will also affect the rate. It must be an urban property with a tax registration value of up to €125,000 that is owned by a person who earned up to €153.300 in taxable income the year before the purchase.
In the case of a permanent exemption, the household’s annual taxable income cannot exceed €15,295. To take advantage of the exemption regarding taxable income, you must submit a request to Finanças. Be sure to do this before you buy the home and after the property inspection is finished.
Additional to IMI (AIMI)
Owners of shares in Portuguese real estate with a value of more than €600.000 are subject to the wealth tax (Adicional Imposto Municipal Sobre Imóveis). Regardless of resident status, the rates are stable. The charge is 0.4 percent of the total amount of properties owned by businesses. Additionally, it is 0.7 percent for people. The rate is 1 percent if your property is worth more than €1 million.
Each person is eligible for a €600,000 allowance deduction from the value of all Portuguese properties. In other words, if you and your partner jointly own a home in Portugal and the property is valued at more than €1.2 million, wealth tax (AIMI) will apply.
Wealth tax can be calculated as follows:
- 0.7 percent tax on owning property valued between €600,000 and €1 million
- 1 percent tax on property valued between €1mil and €2 million
- 1.5 percent tax on property if its total value is above €2 million
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 percent. 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 maintenance of the property, such as repairing and replacing items (this needs to be proven legally and cannot be considered as furniture)
- Maintenance and conservation costs that were carried out 24 months prior to renting out the property
Note that you will need to present an invoice to identify the work that was carried out on the property and its location to receive deductions from tax on rental income.
There are certain differences between short and long-term rentals.
For short-term rentals, you will need an Alojamento Local (AL) Local Accommodation License. This allows property owners to rent out their properties and for them to be able to get rental income from their property. This is a very good option if you are looking to stay in Portugal for part of the year. You will be able to rent out your property for the rest of the year, providing you with a good inflow of cash. Indeed, the Portuguese property market can be very lucrative as it’s a popular tourist destination due to the climate, beaches, and rich history.
It is important to note that there may be location restrictions for AL licenses, so be sure to check this before buying a property with the intention of renting it out.
You can read our article here for more information: Alojamento Local Tourist Letting Registration: An Overview.
For property owners looking to put their property up for long-term rentals, you can rent out your property with standard lease agreements, and an AL License is not required.
Capital Gains Tax on Property in Portugal
Portuguese capital gains tax is based on your ownership structure, residency status, and if the asset is your primary residence. Capital gains are the profits that you make when selling a property. When you sell a property, the eventual capital gain that you make from the purchase is liable to tax.
Asset sales are subject to capital gains tax. Personal goods are not subject to taxation, and inheritances are only subject to a limited sort of stamp duty because it only applies to gains made on real estate and investments.
Your whole gain on the sale of a property in Portugal is subject to tax at a flat rate of 28 percent if you are a non-resident of Portugal. Portuguese residents are required to pay real estate taxes on gains from investments and real estate acquired after 1 January 1989. Once all real estate profits have been added to your other yearly income, taxation will take effect. It may range from 14.5 percent to 48 percent, depending on the income tax scale rates, with the income tax rate determined by your earnings.
The owner of the property is required to disclose the tax return, the year in which the house was bought, and the respective price that was paid in acquiring the property. If you had works carried out on the property, then these should be declared. This includes things like installing a new heating system. Present the invoices and the amounts paid for the maintenance, and they will be considered in the capital gains assessment.
An important note is that if you are reinvesting your total selling price into a new home, then the potential capital gain may not be subject to tax. However, this is only applicable if the house that you are selling is your permanent residence address and if it corresponds with your tax address.
The time period is also important – you must purchase a new house and reinvest the total selling price 24 months prior to such a sale or 36 months after the sale. If this is followed, then the owner informs the Portuguese Tax Authorities of their intention to reinvest back into the property market in Portugal.
We`ve created an ultimate guide about Capital Gains Tax in Portugal so you can get all the information you need in one place.
Exceptions to capital gains tax in Portugal
- You are selling your primary residence in Portugal and purchasing a new one there, and you are a resident of Portugal for tax purposes at this time. This rule will apply for sales within three years after the sale or two years before.
- This property was first occupied in your name before January 1989.
- When you decide to reinvest the funds earned from the sale of your primary house in Portugal into a second primary residence in the EU, you can roll over the costs.
There are no inheritance tax in Portugal. Nonetheless, stamp duty (at a rate of 10 percent) is applicable on the assets considered to be located in the Portuguese territory passed on as inheritance. An exemption to the stamp tax applies whenever such inheritance is passed on to spouses, descendants, and ascendants.
In Portugal, there are no agency fees for the buyer, as these fall to the seller to pay. They will usually work on a commission basis for the seller. Therefore, when negotiating the property price, make sure you get a second opinion from a trusted advisor. This is because the seller will get a higher commission for a higher sale. In this respect, it can be worth working with a buyer’s agent, who works solely on behalf of the buyer.
A tax representative in Portugal acts as the interface between a non-resident and the tax office on all tax matters. If you are a non-resident that owns property in Portugal, has a bank account here, or has any other commercial activity in the country, you must have a fiscal representative that is registered with the tax authorities. The tax authorities in Portugal are the Tax and Customs Authority (Autoridade Tributária e Aduaneira, AT).
Goldcrest: How We Can Help You
Goldcrest is a local buyer’s agent based in Lisbon that provides insightful real estate expertise and strategic advice. From sourcing to property acquisition, we offer a tailor-made service for our clients, assisting them in identifying outstanding investment opportunities in some of Portugal’s finest locations, from relocation to investment projects. With us, we make the property purchase as simple and hassle-free as possible. Goldcrest will also ensure that the negotiation phase runs smoothly, ensuring an optimal purchase price for you.
Portugal is one of the most stunning countries in Europe, with affordable property options for expats and investors. From the sun-drenched Algarve in the south to the historic city of Porto in the North, there is something for everyone.
If you are considering buying property in Portugal or moving to the country, the following articles could be of interest to you regarding the real estate purchase.
- 3 Key Essential to Buying Property in Portugal
- Should I Buy Property in Portugal or Spain?
- A Closer Look at Portugal’s Real Estate Market
- How to Buy a House in Lisbon, Portugal
- Cost of Living in Portugal – Everything You Need to Know
- Portugal Real Estate: Everything You Should Know Before You Buy
- Property Surveyor Portugal: An Overview
For more information on property ownership, you can consult our article: Types of Property Ownership in Portugal.
And, if you have just moved to Portugal and are a tax resident in the country, you can enjoy significant tax benefits through the Non-Habitual Residence Program. You can find out more in our article, NHR Portugal Program: All You Need to Know, which delves into the benefits of being a tax resident in Portugal and the NHR program, in addition to going over the countries that have a tax treaty with Portugal.
Frequently Asked Questions About Property Taxes in Portugal
What are the property taxes in Portugal for foreigners?
Property owners should be aware of the real estate taxes owed both at the time of purchase and on an annual basis. The property taxes before the purchase include the Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT) (Municipal Tax on Onerous Transmissions of Real Estate), which is the property transfer tax. The stamp duty will also need to be paid at this time.
The property taxes that you will need to make after the purchase include the Imposto Municipal sobre Imóveis (IMI) (annual Municipal Property Tax) and the Wealth Tax (AIMI) if the property that you are buying is valued over €600,000.
Note that the capital gains tax is important if you are looking to gain profit from a property sale. If you are renting property, you will also need to pay tax on your rental income, normally at a flat tax rate of 28 percent.
What will you need to pay taxes on property in Portugal?
When it comes to doing your taxes in Portugal for foreigners, you will need to have a Tax Identification number – NIF (Número de Identificação Fiscal or Número de Contribuinte) – and a Tax Representative, if you have a NIF number but tax residence outside the EU. It is also recommended that you have a bank account in Portugal to avoid transaction costs.
Is it easy to move to Portugal and navigate property taxes?
As with moving to any country and investing in a real estate purchase, there are many things to consider, and Portugal is no different. You will need to understand the tax system in the country. It is much easier to navigate the market if you have a trusted financial advisor on your side.
Do you pay tax in Portugal when buying property?
Yes, you pay tax in Portugal when you make a real estate purchase in Portugal. Imposto Municipal sobre Transmissôes Onerosas de Imóveis (IMT) of up to 8 percent + 0.8 percent stamp duty are charged when purchasing real estate in Portugal (Imposto de Selo). Stamp Duty is said to be the oldest tax levied by the state.
What taxes do you pay in Portugal?
Personal income tax (PIT) is charged to both Portuguese residents and non-residents who earn money from the country. The income tax rate falls between 14.5 percent and 48 percent, with the income tax rate varying on your earnings. When purchasing property, you will also need to be aware of the taxes to pay at the time of purchase and on an annual basis.
How to compare property tax in Portugal vs in the UK?
Both in the UK and Portugal, you will have similar property taxes when it comes to purchasing property. For example, the IMT tax could be compared with the UK’s Council Tax. Ensure that you understand what property tax you will need to pay both at the time of purchase and annual taxes. You should also ensure that you understand the differences in income tax between the two countries.
The tax system in Portugal can be a little complicated. We recommend seeking expert advice when it comes to dealing with property taxes in the country. Make sure you understand the tax system and what is required of you.
Is there inheritance tax on property in Portugal?
Regarding inheritance tax, in Portugal, there is no gift or inheritance tax imposed. Nevertheless, when engaging in any real estate transaction, property owners are obligated to pay a stamp duty equivalent to 0.8 percent of the cadastral value. Additionally, the immovable property tax in Portugal varies, ranging from 0.3 percent to 0.5 percent of the total value for urban properties.
What residency options are open to move to Portugal.
There are several options for non-EU nationals to move to Portugal, including the D7 Visa, Golden Visa, and Digital Nomad Visa. The right visa for you will depend on your specific personal situation. Depending on the visa type, your residency status can be renewed. Compared with some other European countries, it is quite straightforward to secure residence in Portugal.
Legal Portuguese residents can apply for permanent residency status and Portuguese citizenship after five years in the country, provided they meet the criteria.
If you become a tax resident in the country and pay tax in Portugal, you should consider the NHR program, whereby you can receive significant tax exemptions on tax paid and on tax owed for up to ten years if you meet the criteria. With careful planning, you can significantly reduce your tax liability in Portugal.
How much is rental income tax in Portugal?
As a rule, net rental income tax is a flat rate of 28 percent, although you may be eligible for certain deductions to the amount of tax paid.
What are the tax benefits of buying property in Portugal?
You will still need to pay taxes on property in Portugal, both at the time of purchase and on an annual basis. Ensure you are up to speed with the tax system in Portugal.
If you become a resident of Portugal, you can become a Non-Habitual Resident of Portugal, whereby you can take advantage of significant tax benefits for up to ten years. With careful planning, you can significantly reduce your tax liability in Portugal. For this, we recommend that you speak with a financial advisor who will be able to assist you in optimizing your tax affairs.
Do you pay property taxes annually in Portugal?
There are taxes that you will need to pay at the time of purchase and taxes to pay on an annual basis.
When buying property, you will need to pay the IMT (Property Transfer Tax) and stamp duty.
The property taxes that you will need to make after the purchase include the Imposto Municipal sobre Imóveis (IMI) (annual Municipal Property Tax) and the Wealth Tax (AIMI) if the property that you are buying is valued over €600,000.
How much is property purchase tax in Portugal?
Property proprietors should be mindful of their tax obligations both during the purchase and on an annual basis. Prior to acquiring a property, individuals must take into account the Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT), also referred to as the Municipal Tax on Onerous Transfers of Real Estate or Property Transfer Tax, in addition to the obligatory stamp duty.
Following the property purchase, it is necessary to factor in recurring property taxes, namely the Imposto Municipal sobre Imóveis (IMI), an annual Municipal Property Tax, and, if the property’s value exceeds €600,000, the Wealth Tax (AIMI).
How much tax do you pay when selling a property in Portugal?
There is a Capital Gains Tax, a property tax that you will need to take into consideration when selling property in Portugal. Your whole gain on the sale of a property in Portugal is subject to a capital gains tax at a flat rate of 28 percent if you are a non-resident of Portugal.
What is IMT tax in Portugal?
The Municipal Tax on Onerous Transmissions of Real Estate (IMT) is a transfer tax applicable to the purchase price of property in Portugal. It is similar to the UK’s Council Tax. It varies from 0 to 10 percent and is contingent upon factors such as the property’s value, whether it is rural or urban, and its location within Portugal (continental or autonomous regions). Additionally, whether the property is intended as a primary residence or a secondary home can impact the tax rate. Property owners in Portugal need to stay on top of their tax obligations in Portugal.
How to pay property tax in Portugal?
Property owners or residential properties need to be aware of the taxes they need to pay and when they need to pay the tax bills. You can settle the payment of taxes in Portugal at your local tax office, post office, or any multi-bank ATM. If you are not physically present in Portugal, you have the option to pay taxes through the online portal of the tax authority or via online banking using your Portuguese bank account.
What to consider regarding property tax on vacation homes in Portugal?
When dealing with property tax on vacation homes in Portugal, consider factors like property value, location, and usage (primary or secondary residence). Stay informed about tax rates and payment methods, and ensure compliance with Portuguese tax regulations. In short, be aware of the taxes that you will need to pay and at what stage. Working with a financial expert can help you here.
What are the Algarve property tax guidelines?
Algarve property tax guidelines include the Imposto Municipal sobre Imóveis (IMI), based on the rateable value of the property, and the Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT), a transfer tax based on the property’s purchase price. You should stay informed on the taxes you need to pay and when you will need to pay the taxes. A financial advisor can assist you with this.