How to buy property in Portugal
Buying property in Portugal is relatively straightforward, with buyers being advised to bring onboard reputable agents, lawyers and notaries.
As a first step, buyers sign a promissory contract and pay a 10% deposit, which may be non-refundable if the buyer withdraws. For new developments and off-plan purchases, the buyer is typically required to pay the purchase price in stages, with a lawyer’s assistance.
Once the required checks are complete, a deed or escritura is filed with a local notary, and confirms the names of both buyer and seller, the purchase price, and that all the necessary documentation has been checked.
Golden Visa scheme in Portugal
International buyers can access Portugal’s Golden Visa scheme, which grants a residency permit to those investing €500,000 in real estate or €350,000 if a property is bought for redevelopment in an urban renewal zone. The permit offers residency for a family, including dependent children, and can be renewed every two years providing the holder spends two weeks in the country every two years.
Another scheme is the Non-Habitual Resident tax incentive, which gives foreign nationals moving to Portugal a 10-year tax break. This means income derived from outside the country is tax free for a decade, while those who move for work may qualify for a 20% flat rate on their income.
Financing your property purchase in Portugal
When looking to buy a property in Portugal, it helps to have an Agreement in Principle – an agreement that sets out how much you are able to borrow from a lender. This can have a significant bearing on the acceptance of an offer and puts you in a strong position as a prospective buyer.
Some sellers won’t accept a mortgage clause within the purchase contract. In this scenario, speaking to a mortgage broker like Traverse International Finance, our chosen partner for mortgages in Portugal, early on means they can include a mortgage clause within the Agreement in Principle.
In some instances, it’s possible to borrow up to 100% of the property purchase price using a combination of a mortgage and a Lombard loan. Get in touch with Traverse to discuss the financing options available to you.
Fees and charges buying property in Portugal
Before completion, the IMT tax (Imposto Municipal sobre as Transmissões Onerosas) is payable.
Holiday homes are subject to tax rates of 1 – 8% of the purchase price, or a fixed rate of 6% if the purchase price is above €550,836. Other rates exist for rustic property (5%) and plots of land (6.5%). Purchases by offshore companies in blacklisted tax havens are subject to an 8% rate with an additional 0.8% stamp duty or Imposto do Selo.
After the property is purchased, the annual Imposto Municipal sobre Imóveis (similar to the UK council tax) is based on the declared value of the property. Rates range from 0.2 – 0.8% depending on the location and age of the property.
Other charges include lawyer fees, usually 1% of the purchase price, notary fees, often 1.5 – 2% of the purchase price, and VAT of 23% on estate agent, legal and survey fees.
If you have any further questions, contact us and we’ll provide you with any information you may need.