When you decide to move abroad and buy a house or other property in Portugal, it is essential to weigh all the costs associated with it. In addition to notary fees and administrative costs, you should pay particular attention to taxes on the purchase of goods. Indeed, Portugal is famous for its “hidden” taxes that everyone should take seriously before to decide to buy a house. While putting aside the financial weight of a home loan, it is true that all the other costs associated with buying a home in Portugal mean that the total amount of the purchase of the property becomes much higher. The first step will be to find financing tailored to your needs and your payment capabilities. What are the taxes when buying a house in Portugal ? What taxes to pay when you buy a property ? Lisbob, the expatriate assistant in Portugal, tells you everything about real estate taxes in Portugal.
What are the taxes on the purchase of real estate in Portugal ?
Have you found the house of your dreams ? Congratulations. After having visited many properties and having received the agreement of the bank for the mortgages, it is necessary to take care also of the administrative steps : to gather all the required documentation, to sign the bill of sale and to pay the associated taxes when you buy your property
These taxes are mandatory when you buy a property in Portugal. They are precisely three in number: the municipal property tax (IMI), the municipal real estate transfer tax (IMT) and the tax on stamps (IS). Each tax is different and has its own characteristics and methods of calculation. Bob will explain below what they are and how you should calculate them, so that you know exactly how many will have to pay. This subject is important because as you already know, Portugal is the country of fines. In case of omission or error in the settlement of these taxes you expose yourself to high fines. To fulfill these duties when you buy your property in Portugal is a legal obligation that should not be neglected.
1. Municipal Real Estate Tax (IMI)
IMI tax (Imposto Municipal sobre Imóveis) is a tax that is levied on the property tax value of property and must be paid each year from the moment the consumer acquires the house in question. This is the equivalent in France of the housing tax. It finances Portuguese municipalities and serves to maintain public infrastructures.
How to calculate the IMI tax ?
IMI = Value of the tax asset (TPV) x Applicable rate
The rate to be applied is defined by each municipality in Portugal but should take into account the calculation of the IMI. This calculation is based on a table with intervals, which is available in the Municipal Real Estate Tax Code (CIMI). The IMI tax on urban properties (houses and land for housing) varies between 0.3% and 0.5%.
All owners in Portugal must pay this tax in April. Payment in installments is authorized to facilitate the payment of higher amounts as followed:
• If the IMI does not exceed 250 euros, the payment must be made in full before the end of April ;
• If the value is between 250 and 500 euros, the citizen can choose to pay in two installments ;
• If the amount exceeds 500 euros, it is possible to pay the IMI in three monthly installments.
Is it possible to have an IMI exemption ?
Yes, it is possible to be exempted from paying this tax in two different situations.
On the one hand, it is possible to have a temporary exemption. In the case where a property is purchased as a principal residence, if the value does not exceed 125,000 euros and the household's taxable income is less than 153,300 euros, the latter may have an exemption from payment of the IMI for a period of three years.
On the other side it is also possible to benefit from a lifetime exemption. For this, it is necessary that the annual taxable income of the household does not exceed 15.295 euros, which represents 2.3 times the annual value of the benchmark social support index of 475 euros (per month).
In order to obtain this exemption, it is necessary to make a request to Finanças before the purchase of the house and when the evaluation of the property is completed. Requests made after the purchase of the property are not eligible for exemption from the IMI tax.
2. Stamp duty (Imposto do Selo IS)
Another tax on the purchase of real estate in Portugal is the tax on the stamp duty. When it comes to a home loan, the tax on the stamp duty can be applied in two different situations that you absolutely must know. We must do well attention because the amount can sometimes be high and inflate the final note. Living in Portugal is also paying attention to all existing taxes.
- Stamp duty on the purchase and sale of the property :
First of all, there is the payment of the stamp duty on the purchase and sale of any property in Portugal. It is necessary that the buyer of the house pays this tax to the notary at the time of signing the deed of sale. In this case, the tax on stamps is 0.8%.
How to calculate the stamp duty (imposto do selo) in Portugal ?
IS = Write value or Value of the tax asset (the highest) x 0, 8%
- Stamp duty on mortgages :
Secondly, if a home loan is granted, the buyer must also pay the stamp duty on the amount financed. This tax must be paid when the amount of financing is transferred to the bank account of the customer who will buy a property in Portugal. In this case, there are two different possibilities, namely:
- For mortgages whose duration refund is greater than five years, the tax on the stamp duty is 0.60% - If the repayment period is less than five years, the rate is 0.5%.
How to calculate the stamp duty (imposto do selo) on real estate credit in Portugal ?
IS = Value of home loan x 0.6% (if repayment period greater than 5 years)
3. Municipal tax on real estate transfer (IMT)
The last tax on the purchase of real estate in Portugal is the IMT, the municipal tax on the real estate transaction (Imposto Municipal sober as Transmissões Onerosas de Imóveis). This tax is collected each time a purchase of a house is made in Portugal. It is applied to the tax value of the property or the value declared in the deed of sale. The higher of the two is retained. You must also subtract the tax deduction corresponding to the characteristics of the property and the acquisition. You can consult this page to know the amount of this abatement.
How to calculate the IMT tax in Portugal ?
IMT = Value of the deed or net worth tax (the higher of the two) x Rate to apply - tax abatement
This tax must be paid before purchase of housing and its calculation takes into account three specific characteristics:
• Type of property : rural or urban ;
• Location of the house: mainland Portugal or autonomous regions ;
• Purpose of purchase: Residence principal or secondary.
Can I benefit from the exemption from the payment of the IMT tax?
It is possible to benefit from a tax exemption concerning the IMT in Portugal. In order to obtain it it is necessary that the house is intended only for clean and permanent housing. Its value must also not exceed 92.407 euros if the property is in mainland Portugal, and 115.509 euros for the autonomous regions.
Now that you know all the taxes and duties related to the purchase of real estate in Portugal, you have all the cards in hand to accurately calculate the cost of your ideal home. You will be able to make a wise decision and, above all, not be surprised by unforeseen costs.
Photos © beunephotography