Property Tax in Portugal: How to Pay Property Transfer Tax (2024)

Property Taxes During Property Purchase

When purchasing a Portuguese property, various taxes may apply. The transfer tax, known as Imposto Municipal sobre Transmissões Onerosas de Imóveis (IMT), can range up to 8 percent, accompanied by a 0.8 percent stamp duty. Additionally, an annual tax rate, ranging from 0.3 percent to 0.8 percent, is determined. There is typically a tax on the purchase price, which is usually around 5 percent and is dependent on the property’s location and type. It’s important to note that the seller typically covers this tax

You will need to consider the following taxes during the purchasing process.

IMT Tax Portugal, or Property Transaction Tax

IMT, or Imposto Municipal sobre Transações Onerosas de Imóveis, is a property transaction tax paid by the buyer when there is a real estate property ownership transfer in Portugal. The IMT is a property tax for both locals and foreigners. This is a transfer tax that will need to be paid when purchasing property and will range from 0 percent to 10 percent. This depends on a few factors, including:

• Property purchase price
• Location (properties in rural areas are taxed at 0.8 percent, whereas urban areas can be taxed from 0.3 percent to 0.545 percent)
• If you’ve ever bought a property in Portugal before
• Whether your property has been valued since 2004 (pre-2004 valued properties are taxed at a rate of 0.4-0.8 percent, post-2004 valued properties are charged 0.2 percent – 0.5 percent)

You can estimate the cost of Portugal’s Property Transfer Tax on a real-estate purchase using our IMT Tax Portugal Calculator here.

It’s also worth noting that you must pay Portugal’s property transfer tax or IMT before purchasing any property. You must pay the following month if the transfer occurs outside Portuguese territory.

Stamp Duty in Portugal

The Stamp Duty, or Imposto de Selo, is another property tax that buyers should be familiar with. It’s reportedly the oldest tax in Portugal and is charged for all contracts and legal affairs regarding your real estate.

Stamp Duty can be charged on deeds, contracts, and bank mortgages for the house. The stamp duty is accounted for by the buyer and charged at a fixed rate of 0.8 percent of the property’s registered fiscal value.

Long-term letting or sub-letting contracts are taxed at a 10 percent rate of the monthly rental amount.

Mortgage taxes in Portugal

Mortgages often go hand-in-hand with purchasing a property. There are a few options in Portugal, including fixed-rate or variable-rate mortgages.

Check out this article about mortgages for foreigners in Portugal for more information.

Portugal charges an additional tax called Imposto sobre a Concessão de Crédito or the Mortgage Stamp Duty.

This tax has a fixed rate of 0.6 of the mortgage price and is paid in cooperation with a bank.

Property Taxes Due After Property Purchase

Congratulations! You’ve completed the purchase of your dream home in Portugal. The hard part is over, but you still need to pay some property taxes annually.

Municipal Property Tax (IMI)

The Imposto Municipal sobre Imóveis or Immovable Property Tax is an annual tax that could be compared to the UK’s Council Tax. As of 31 December every year, all property or landowners must pay IMI.

It’s paid annually, and the payable amount is calculated by applying a variable rate between 0.3 percent and 0.5 percent, fixed annually by the municipalities, to the taxable value. This depends on the type of property, its history, and its location (whether it’s in an urban area). In general, property tax rates range from 0.3 percent to 0.5 percent for urban dwellings and up to 0.8 percent for rural properties.

The IMI can be doubled on properties that are left vacant. However, there are ways that properties can be made exempt from IMI. For example, if you’ve purchased the property for a permanent residency, you may be exempt from paying IMI or might be eligible to pay a lower amount. This exemption can range from three to six years, depending on the property’s value.

AIMI

The Addition to the Municipal Property Tax (Adicional ao Imposto Municipal de Imóveis or AIMI) is another tax owed after purchasing real estate.

Introduced in 2017, this is a relatively new tax referred to as the Portuguese Wealth Tax, as it affects those with a total real estate worth above €600,000.

There are three levels of AIMI Tax in Portugal:

• 0.7 percent tax rate on property valued between €600,000 and €1 million
• 1 percent tax rate on property valued between €1million and €2 million
• 1.5 percent tax rate if the total value exceeds €2 million

Despite having similar names, note that the IMI tax and AIMI tax are separate, and both need to be paid. AIMI exemptions apply to municipal enterprises, social housing, construction cooperatives, resident associations, and commercial real estate owners.

NHR Ending: October 2023 Update

The Portuguese Government submitted the State Budget Proposal for 2024, and it includes the changes that determine the end of the Non-Habitual Resident (NHR) regime.

This is the initial version, which will still be subject to debates and votes, but which, given the majority that the Government party holds in the Assembly, cannot and should not be ignored. In effect, the proposed change has the following consequences from 01/01/2024:

• Anyone who already has the NHR at the time of entry into force maintains the regime under the same terms until completing ten years of benefiting from the status
• Anyone who meets the conditions for registration as non-habitual residents on 31 December 2023, as well as holders of a residence visa valid on that date, will be able to register within the deadline available (until 31 March 2024) and benefit from the scheme.

The final vote on the budget law will take place on 29 November 2023. Until then, we will closely monitor the evolution of this topic.You can find more information in our article: Is the Portugal NHR Program Ending?

Rental Taxes

If you’re letting out your real estate purchase, there are certain rental taxes you need to note.

As a rule of thumb, rental income tax is at a flat rate of 28 percent. However, certain tax deductions could apply to your rental income tax. For example, you can deduct fire insurance costs (as this is compulsory for all rental property), value expense costs (such as the IMI), condominium fees, and costs associated with obtaining an energy certificate.

Rental taxes vary depending on whether you’re letting out your property short-term or long-term.

Short-term rentals

If you’re planning on renting your place to tourists for short periods, you’ll need to apply for an Alojamento Local (AL) (Local Accommodation) License. This license allows property owners to rent out their properties for short-term tourism.

This could be a good option if you are considering living in Portugal for only part of the year. Why not generate extra income from renting your property over the winter months?

To acquire your AL license, you must submit your request before the City Council with information about your property, including the type of property you would like to rent out and how many rooms and beds the property has. You will need to hire an insurance company to cover potential damages that could occur on the property.

Most of the old town of central Lisbon is currently locked for AL licenses. This means that you will not be able to request it (for now, at least).

You can deduct any property or maintenance costs in the 24 months before renting from the license cost. To deduct these expenses, use any receipts to prepare an invoice identifying the work carried out on your property and its location.

Long-term rentals

For long-term rentals, you will need to draw up a standard lease agreement and do not need to obtain an AL license.

Capital Gains Tax

Capital gains are the profit you make from selling a property. Whenever you sell Portuguese property, any capital gain you earn from the sale may be subject to tax.

In your tax return, you have to disclose the year the house was purchased and how much you bought it for. The Capital Gains Tax rate varies depending on the duration of ownership, with gains from properties held for more than ten years being taxed at a lower rate than those held for a shorter period.

Exceptions to Capital Gains Tax in Portugal

There may be deductions or exemptions to Capital Gains Tax.

For example, if you had maintenance work done on the house, such as installing a new heating system or insulation, you can present the invoices for this work during your capital gains tax assessment.

You may also be exempt from tax if you invest the total selling price of your property into a new home in Portugal. The house you sell must be your permanent residence and correspond with your tax address. You must also buy a house within 36 months.

After purchasing your new home, the tax authorities will calculate the profit you made from your sale and confirm that you used this amount to buy the new property. Documenting the new home as your permanent residence within 12 months after the reinvestment is also essential.

Inheritance Tax

Understanding the basics of this tax can help you plan ahead and make the most of your assets. In Portugal, an inheritance tax is a tax levied on the transfer of assets from a deceased person to their heirs.

The tax rate varies depending on the relationship between the deceased and the inheritor, with spouses and direct descendants being taxed at a lower rate than more distant relatives. In some cases, there may be exemptions and reductions available, such as for the inheritance of a main residence.

Usually, there is little to no inheritance tax in Portugal. However, stamp tax at a rate of 10 percent is applicable on the assets considered to be located in the Portuguese territory passed on as inheritance. Note that a stamp tax exemption applies whenever inheritance is passed on to spouses or family members such as parents or children.

Agency Fees

When buying property in Portugal, we recommend you go with a licensed real estate agent. You can confirm the agency’s license number and validity through the IMPIC (Institue of Public Markets, Real Estate, and Construction).

Real estate agents usually charge a commission of 5 percent+VAT.

Tax Representation

In Portugal, a tax representative acts as the interface between a non-resident and the Serviço de Finanças (tax office) on tax matters under the tax regime.

If you are a non-EU resident who owns properties, holds a bank account, or has other commercial activities or interests in Portugal will need to appoint a tax representative in the country.

They may charge agency fees but can help you navigate the tax system. Getting a tax representative is required if you are a non-EU resident to obtain the NIF (tax identification number) from the Portuguese tax authorities.

Portugal: Tax Breaks for Foreigners

Regarding property taxes in Portugal for foreigners, if you’re looking for a full breakdown of Portuguese taxes, tax exemptions, and tax breaks available, check out our guide to taxes in Portugal here.

You might also find the following links helpful:

• Personal Income Tax (IRS) in Portugal
• Portugal’s Tax Authority
• Portuguese Social Security department
• Portugal income tax calculator

How Can We Help You Find Your Dream Property?

Our mission goes beyond standard real estate services. Here's how we stand out in making your property dreams come true:

LOCAL KNOWLEDGE: We have offices throughout Portugal, ensuring a strong presence from the mainland to the Azores and Madeira. Additionally, we're recognized members of the AIPP (Association of International Property Professionals).

INDEPENDENT SERVICE: We don’t represent any specific development or project, ensuring our advice remains impartial. By objectively analyzing every opportunity, we focus on maximizing your investment prospects. We partner with various agents, sellers, promoters, and developers, ensuring a broad spectrum of property options. Our goal is straightforward: to help you find the best property at the most favorable price, whether you're buying or renting.

STREAMLINED PROCESS: We provide a dedicated real estate consultant paired with a top-notch client management system for smooth information exchange. With the aid of advanced technology, like metasearch tools, we guarantee expansive market coverage. Our viewing itineraries are tailored to your needs, and we're always ready to assist, be it in-person or on your behalf. When it comes to pricing, we use data-driven analysis to ensure you get the best deal. And, to make your journey smoother, we assign a dedicated onboarding account manager for every client.

ALL-ENCOMPASSING SOLUTION: Navigating financial aspects? We're here to guide you through finance options and manage the required documentation. If you need property management solutions or connections to builders, architects, designers, and gardeners, we have you covered. Relocating? Our concierge services are designed to assist in everything, from securing accommodations to handling utility connections.

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Thinking about buying a property?

Now that you know all about Portugal’s property tax, including the mandatory Property Transfer Tax Portugal, it’s time to start thinking about where to buy.

Our following guides might help you make up your mind:

• Where to Buy Property in Lisbon
• Where to Buy Property in the Algarve
• Where to Buy Property in Porto
• Where to Buy Property in Cascais

Exploring Visa and Immigration Options for Portugal

If you're considering making the move to Portugal, it's essential to be informed about the various visa and residency options available. The Golden Visa Portugal program is an attractive option for many, offering residency to investors and their families. For those eyeing retirement in this beautiful country, the Retirement Visa (D7) is tailored for you. Digital nomads can take advantage of both short and long stay options with the Nomad Visa (D8). Meanwhile, the NHR - Non Habitual Tax regime provides significant tax benefits for new residents.

For the entrepreneurial spirit, Portugal offers the Entrepreneurship/startup Visa (D2) - Start-up Visa (open company) tailored for those looking to establish their businesses in the country. Those with specialized skills can explore the Work visa for highly qualified employees (D3). Additionally, if you have Portuguese ancestry, you might be eligible for Citizenship by descent.

However, moving to a new country isn't just about visas. If you're thinking of buying property, our guide on Buying Property in Portugal can offer invaluable insights. Dive deeper into the immigration process with our comprehensive Portugal immigration guide. For Americans specifically looking to relocate, we have curated information on Americans moving to Portugal. Lastly, one can't forget the importance of the NIF (Tax Registration Number), a crucial step in any relocation process.

Frequently Asked Questions about Property Tax in Portugal