Guide to Portugal property taxes

If you’re planning to buy a home in Portugal then property taxes are going to be something you’ll need to factor into the final cost.

It doesn’t matter if you’re buying a property to live in yourself, or if you’re looking for a second home or an investment opportunity, there’ll be specific costs you’ll have to pay and others related to your particular situation.

This quick introduction to Portugal property taxes should give you a basic understanding of what you can expect to pay.

Immovable Property Tax (IMI)

Portugal’s IMI is the equivalent of council tax in the UK and is something you’ll have to pay as the owner of a property.

What you’ll pay depends on a couple of factors such as where the house is located or what kind of house it is.

Similar to the UK, each municipal area in Portugal has a different rate of IMI set locally with the funds used to finance local infrastructure or community projects.

The tax is collected annually at the end of the tax year and rates typically vary between 0.3% and 0.4% of the property value, unless you buy property in a rural area, in which case it will be more like 0.8% of the total property value.

Stamp Duty

Like in the UK, you’ll pay stamp duty on your property purchase on deeds, contracts, loans and documents.

Like other property tax in Portugal, the amount of stamp duty you’ll pay will depend on the type and final value of the property you buy.

Generally you’ll be paying between 0.4% and 0.8% of the property value in stamp duty.

You’ll pay this tax when signing the deed of sale if you buy the house outright. If you’re taking a mortgage to buy the property then you’ll also need to pay stamp duty, usually at a rate of 0.6%, although it could be less if your mortgage will be paid off sooner.

Property Purchase Tax

Portugal’s Property Purchase Tax (IMT) is paid when you buy your house. Like stamp duty, the rate of purchase tax you’ll pay depends on the type and value of the property.

The tax is worked out based on the value of the property declared in the deed or the rateable value - whichever is more.

There are three basic criteria to consider that will help you work out how much purchase tax you’ll pay:

• The property type
• Where it is
• Whether it’ll be your main residence or a second home

There are some circumstances when IMT won’t be payable. For example, if you’re purchasing the property with the intention of renting it out.

Wealth Tax

If you own or have a share in a Portugal property worth more than 600,000€ then you’ll be liable to pay a wealth tax.

If you’re an individual then you’ll pay a rate of about 0.7%, or 1% of the property value on homes worth more than 1,000,000€.

There are some exemptions you could apply for.

Tax on rental income

If you’ve bought a property in Portugal as a holiday home and plan to rent it out during some parts of the year, then you’ll pay tax on the rental income you make.

You’ll pay this regardless of whether you live in Portugal or remain in another country.

This tax is charged at a flat rate on the net rental income you earn.

Capital Gains tax

If you sell a property in Portugal then you’ll pay Capital Gains based on the final sale price.

This is only applicable to any gains made on property deals or investments.

If you own the property but aren’t a permanent resident in Portugal then you’ll usually pay  a flat rate of 28% on the value of the sale. These gains will be added to your other income made throughout the year (like your taxable salary) and then you’ll pay based on the level of income tax you fit into.

You can, depending on your circumstances, be exempt for all or part of the capital gains liabilities from selling a property.

For example, if you’re a resident and pay tax in Portugal and are selling your main home to fund the purchase of another property.

Looking for the best property investment in Portugal

This guide should have given you a good idea of what you can expect to pay when you buy a property in Portugal when it comes to taxes.

Obviously, the final amount you’ll pay will be determined by the house you buy and your individual circumstances.

If you’re looking for a house in Portugal, either as a new home or something as an investment property, have a look at the latest properties we have available and get in touch if something takes your fancy.