Portuguese Property Taxation

We have summarised the taxes payable by each party when ownership of property is transferred in Portugal. We always recommend using a lawyer for a successful and risk-free transaction, but we have included some links that could be useful when forecasting your taxes.

 

IMT – Property Transfer Tax

Property Transfer Tax (IMT) is charged when property ownership is transferred. It is paid prior to signing the final deed of sale, as proof of IMT payment will be required at the notarising of the title deed. For habitational purchases the IMT rate is paid on the purchase price or the VPT depending which one is higher. The VPT of the property is calculated and issued by the local tax authority and based on the construction costs, age, location and use of the property. The rates differ dependent on if the property is urban or rural and slightly higher IMT rates can be charged for the purchase of a second home.

 

The flat IMT rates are below:

• For properties with a tax asset value of over EUR 1 million a 7.5% IMT rate applies
• For construction plots and other urban non-habitational properties under EUR 1 million a 6.5% IMT rate applies.
•  For rustic land a 5% IMT rate applies
•  If buying a property via share purchase in a non-resident company, ed IMT does not apply.
•  It is also worth noting that a 10% IMT rate is applied to properties acquired (directly or indirectly) by offshore entities that are in territories included on the Portuguese blacklist. Due to favourable tax regimes in these jurisdictions a higher IMT rate is enforced. The list includes countries like Barbados and Gibraltar.

 

Stamp Duty, Notary and Registration Fees

In Portugal stamp duty is applicable to many bureaucratic processes and transactions. For a property purchase, the buyer will have to pay stamp duty at a rate of 0.8% of the sales price or tax asset value - whichever is the highest. As with IMT, the stamp duty is paid prior to the signing of the final deed as proof of payment is required at the notarising of the title deed. Registration of the acquisition in the Land Registry Office costs EUR 250 and is ON usually actioned by the lawyer. Notary fees are fixed by law and work on a sliding scale dependent on sale price. Legal fees will vary depending on the value of the property and the complexity and scope of the deal but are generally around 1-2% of the property price.

 

IMI – Annual Property Tax

This annual tax is fixed by the local council and can vary from 0.3% to 0.45% in urban areas. IMI is levied against the tax asset value of property, rather than market value. The municipality of Loulé currently enforces the minimum IMI rate of 0.3%. AL AX Rural properties have an IMI rate of 0.8% Properties held by white listed companies have a flat IMI rate of 0.4% while properties held by offshore entities in locations blacklisted by the Portuguese government pay a higher IMI rate of 7.5%. IMI is usually paid annually in two or three instalments, depending on the amount owned.

 

AIMI – Additional Municipal Property Tax

This tax was introduced in 2017 and applies to the combined VPT of all urban properties owned by an individual or couple. AIMI is only paid on anything over the value of EUR 600,000 (per person, so 1.2 million if a couple) when the following rates apply:

Between EUR 600,000 EUR 1 million - 0.7% rate

Over 1 million - 1% rate

Over 2 million - 1.5% rate

For corporate structures, AIMI is calculated at 0.4% unless the property is attributed to the personal use of its shareholders, directors, or their immediate family. In the case of the latter, the above rates still apply but there is no exemption threshold and the 0.7% rate is applicable from EUR 0-1 million. If the organisation is based in a territory blacklisted by the Portuguese government a higher rate of 7.5% applies. AIMI does not apply to non-habitual or rural properties.

 

Capital Gains Tax

Capital gains is calculated on the difference between the purchase and sales price of the property. Some of the expenses accrued during ownership can be offset against this tax such as structural refurbishment costs and notary, registration, and estate agency fees. For non-residents, capital gains are taxed at 28% of the profit made. Portuguese residents are not taxed on 50% of their gains while the other 50% is taxed as part of their annual income tax return. There is a possible exemption from CGT when a primary residence is sold and the proceeds of the sale are reinvested into another primary residence in the EU/EEA territory within the following 36 months. For corporate ownership, there is a flat CGT rate of 25% for foreign companies.

 

Inheritance Tax

In Portugal there is no inheritance tax between immediate family (spouse, ascendants & descendants). A 0.8% stamp duty based on the VPT must be paid on gifts for close family members. Gifts or inheritance to other individuals