Portugal - Buying Guide Tax & Finance

It is important for those of you who will be purchasing a property in Portugal in the near furture to understand the buying process and the buying costs of the unique Portuguese system.

I would like to introduce myself as the resident FA (financial adviser). I have been living in Portugal fo the last 6 years and have been running a independant financial consultancy business in Portugal for the last 3 years supporting non-resident individuals and companies in rasing finance, providing fiscal representation and developing tax efficency structures.

The great team at MovePortugal have kindly let me put a simple but informative buying guide together for their prospective clients and allowing me to respond to your questions relating to tax & finance in Portugal.

STEP BY STEP

1. Use a Portuguese licensed real estate like MovePortugal.com
   
2. Obtain a fiscal number using a professional fiscal representation company.
   
3. Find a regulated qualified lawyer


4. Make a reservation offer to take the property off the market. This is normally non-refundable and made on the basis that a 'Promissory Contract' will be drawn up in the next 30 days.


5. The lawyer will then collect all the house documents to check everything is in order and if you are applying for a Portuguese mortgage it is advisable that you get an offer from the bank before the Promissory Contract is made.
   
6. Promissory Contract: this is drawn up by your lawyer and signed by the seller and the buyer. The conditions are negotiable, if you are taking finance I reccommend that the contract is made for 90 days until the deed of purchase.


7. Provisional Registration: this is only made when a mortgage is being used for financing the purchase. This means that the bank will make their first legal charge on the property at the local notary.


8. Property Transfer Tax (IMT): this tax is paid normally by the lawyer on your behalf a few days before the final deed.


9. Final Deed: this is made at the local notary and the seller and buyer (or the lawyer with a power of attorney) are present along with a bank representative (only when there is a mortgage).
   

PROPERTY TAXES

Property Transfer Tax (IMT)

>85,500 1%............0

85,500 – 117,200 2%............855

117,200 – 159,800 5%............4,371

159,800 – 266,400 7%............7,567

266,400 – 511,000 8%............10,231

511,000 + 6%............0

Example: Property price is €200,000 therfore....

200,000 x
7% = 14,000

14,000 - 7,567 = €6433

Stamp Duty
Property stamp duty = 0.8% x purchase price

Mortgage stamp duty = 0.6% x loan amount



LEGAL FEES
Provisional Registration (notary & registration of banks first legal charge, mortgage only)€650 (approx.)



Final Deed Registration (notary & registration of final deed) - €750 (approx.)



Lawyers Fees
1% - 1.5%


BANKING FEES (applicable for mortgages only)........


Valuation & arrangement fee
€500 (approx.)


Bank legal fee
€250 (approx.)

IN CONCLUSION

Property value from
€100,000 - €150,000
5% Buying costs (including
mortgage)



Property values from €150,000 - €200,000
5.5% - 6%
buying
costs (incl. mortgage)

Property Values from €200,000 -
€250,000
6.5%
- 7% buying costs (incl. mortgage)

Property values
from
€250,000 -
€350,000
7.5% - 8% buying costs (incl. mortgage
costs)

Property
values from €350,000 - €500,000
8% - 10% buying
costs
(incl. mortgage)

Coming soon a Glossary of important house documents that you should know the name of.

_________________

Steve Clarke

Mortgage Adviser (CeMAP)