Guide to consult: Real Estate investment in Portugal

Why invest in Portugal?

A stable, inexpensive country with an advantageous tax system:

• A cost of living that is one of the lowest in the EU countries, guaranteeing an easy standard of living.
• No significant financial risks (exchange rate, inflation, interest rates are all controlled by the European Central Bank.)
• Facilitated procedures and full transparency in purchasing procedures for foreign buyers.
• An advantageous tax system: there is no tax on inheritance and donations for residents of Portugal, and there is also a special exemption system or reduced income tax rate for non-habitual residents.

An investment that is still considered a top priority by international investors today:

• Real estate opportunities with a very dynamic real estate market in recent years and potential for significant capital gains;
• A good profitability: holiday destination with a strong attractiveness in tourism and consequently, a rental market and sale of second home residence. Moreover, it’s a rental market of very market-sensitive new expatriates and a very good potential for rental investment in both tourist as well as traditional properties along the coast and in the capital.
• A search for quality housing that is not available on the rental market. At a time when the market is expanding, it may be very wise to buy even if you have to resell later if you wish to settle elsewhere.

All these benefits contribute to a very pleasant quality of life when selecting Portugal as a permanent residence or a holiday destination.

Real estate taxation

Taxes and duties when buying a property in Portugal

Taxes and legal fees are levied on the purchase price of the property. Such fees are the obligation of the buyer. This applies to the payment of the property registration and notary fees.

In Portugal, there is no VAT effect on the purchase of a property.

Property tax

Municipal Property Taxes

After the acquisition of property, the payment of property taxes is due annually.

The Municipal Real Estate Tax is levied on the value of the tax asset of rural and urban properties located in Portugal. This asset value is generally lower than the purchase price.

The tax rate for recently assigned asset values varies between 0.3% and 0.5%. Mayors determine their respective rate between these ranges on an annual basis.

Taxes on rental income:

If you rent your property, the income received will be subject to the payment of an income tax at a fixed rate of 28% on the annual yield if the income is paid by an individual or 25% if it is paid by a person with an organized accounting system. In both cases, maintenance, handling and property taxes can be deducted from income in the calculation of taxes.

Taxes on property capital gains:

When you resell your second home, you will have to pay a fixed rate of 25% tax on the capital gains earned. For a primary residence, you may be exempted under certain conditions.

Note: These taxes and duties are likely to change annually. Please consult us and ask for an actual calculation if you are buying a property.