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Guide to consult: Real Estate investment in Portugal

Real Estate investment in Portugal is on the rise. After the years of depression, Portugal is the target of small and large foreign or domestic investors since the end of 2013.

Portugal is a country of land ownership. The Portuguese prefer buying rather than renting. They were cautious during the crisis but now property deals account for 80% of the number of transactions.

Foreigners who are very keen on luxurious lifestyle as well as real estate investors have helped to boost the coastline, historical centres and residential area. A brief overview of real estate investment in Portugal: its characteristics, profitability and taxation.

5
"I saw Portugal as a real estate opportunity; I now realize it's much more than that. I bought an apartment two years ago but I come here very regularly for holidays or just a weekend. The diversity of the regions is remarkable."
Hervé, 39 years old

The tax impact of using the residence on the investment is low, except for real estate gains when reinvesting in another principal residence.

If you would like to know more about the rental investment, visit:
/real-estate-investment-in-portugal

Buying a new or an old property does not confer any special tax advantages. However, buying new property from a recognized developer offers the advantage of living or investing in a property that meets the latest construction standards and performance guarantees.

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.

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