Real estate taxes have a way of sneaking up on you, especially when you buy Portuguese property. After all, who wants to consider property taxes when buying a new home?
However, if you’re thinking about buying a home as an investment or because you plan to move back in after paying monthly rent for several years, it is something you need to consider.
We all know property taxes are unavoidable for real estate investors. However, an experienced real estate tax specialist and an informed real estate agent can significantly reduce them. They understand the unique benefits of hiring an expert.
If you’re planning to buy or sell real estate as part of your investment strategy, here are some tips on how to reduce your real estate tax bill.
Taxes can get complicated pretty quickly. There are lots of tax rules that apply specifically to certain types of income or assets, such as real estate investments or art collection investments.
Tax laws for buying property as a non-resident are very different in Portugal than in other countries. They also vary on whether you’re buying directly from a seller or through another type of intermediary. You need to be aware of the potential tax implications before you buy.
This article explains:
- taxes when buying property in Portugal as a non-resident
- the property purchase options are available to non-residents
- and what to consider before you buy
Investing in property in Portugal is gaining popularity among digital influencers and their followers. This article provides an overview of what you should know if you’re considering buying property in Portugal.
There are variety of property options for those interested in influencer marketing, social media influencers, or living in Portugal. Whether you want to invest in real estate that’s in a Lisbon or Porto by buying a city apartment or a picturesque villa on the silver coast, there is something for everyone.
The costs of buying Portuguese Property
When buying a house in Portugal, there are some costs and taxes which it is vital to know beforehand since they may have some impact:
Municipal Tax on Property Transfers
This tax is called IMT. The buyer pays it with the transfer of the property. Its value is capped at a maximum of 8% of the property’s value or the value declared in the deed of purchase and sale.
A person pays whichever is the greater of the two.
You must present the proof of payment on the day of the final deed.
The IMT rates vary according to the purpose of the dwelling:
- the rates are lower if the property is the principal dwelling
- Or they are higher if it is for a secondary dwelling or rental property
Additionally, the IMT values also vary depending on whether the property is located on the
mainland or on the islands.
Stamp Duty when buying Portuguese Property
The buyer pays this tax when purchasing the property and is 0.8% of the property’s value. Stamp duty is a standard real estate tax throughout Europe. It is also levied in the US but on a State and not Federal level.
It’s a tax that governments place on legal documents, usually in the transfer of assets or property. Governments seek stamp duties on the paperwork that legally documents and records particular types of transactions.
Beyond real estate, there could be stamp duty for recording marriages and even military commissions.
Municipal Property Tax buying Portuguese Property
Every year the municipality charges all owners to Property Tax. This is known as IMI. It is an annual tax levied on the value of the property in Portugal. However, the rate varies by each municipality.
In some cases, there may also be some exemptions from this tax, so it is always important to check with the Tax Authority about the existing exemptions to see if you qualify for any.
If you require a mortgage to finance the property purchase in Portugal, consider other costs
Stamp duty – The government charges this on the value of the mortgage or loan, and the current rate is 0.6%.
Bank charges – Some additional costs may apply. These include bank charges or commissions, such as:
- Opening commission.
- Commission for the evaluation of the property.
- Commission for the preparation of contractual documentation.
- Solicitor’s service.
These costs vary according to the credit institutions, and the institutions should detail their values in the mortgage offer.
This is usually presented through the FINE form, which is a European standardized information sheet that accompanies the mortgage credit simulations and the bank’s proposal.
Insurance when buying Portuguese Property
Portuguese law requires all homebuyers to take out an insurance policy against the risk of fire on the property. This is mandatory, and there are no exceptions.
Unlike some European countries, life insurance is not compulsory for foreigners when applying for a mortgage. However, in some cases, it may be taken out for non-residents.
Public Notaries and buying Portuguese Property
The purchase and sale deed confirms the property transaction. A Notary usually does this and it is mandatory if the buyer uses a mortgage.
This step also incurs a fee, and that may vary depending on the city where the transaction takes place, the price of the property being purchased, and even the Notary’s own expenses.
Conclusions and reflections when buying Portuguese Property
With some of the most beautiful views on Earth, it’s no surprise that Instagram influencers and other social media platform enthusiasts are thinking long-term about all things real estate. Whether it’s calculating mortgage payments, diversifying assets from the stock market or even hiring a property manager and earning rental income after investing in property.
If you would like to have more information about the process of purchasing a property in Portugal, you must see Part I of How Influencers Can Buy Portuguese Property, where we explored the process. However, if you are wondering about how to get a mortgage in Portugal, then take a look at the final part of our three-series guide for influencers.
If you have any questions, please let us know. Our lawyers will happily assist you with your case and needs.