Portugal: What Are the Taxes I Have to Pay When Buying a New House?
Investing in properties in Portugal. What are the taxes?
In order for you to become a real estate investor in Portugal, one should take into consideration all taxes as well as administrative fees related to buying properties.
This becomes particularly relevant because the final amount you will have to pay can become substantially different from what you saw listed in the real estate agency.
In Portugal, there are three mandatory taxes you always pay when buying properties.
- Municipal real estate transfer tax (IMT)
- Municipal property tax (IMI)
- Tax on stamps (IS)
In this article, I will explain all these taxes (IMT, IMI and IS) in more detail and calculation methods to assure you get the real cost of purchasing properties in Portugal
Municipal tax on real estate transfer (IMT)
IMT is the municipal tax on the real estate transaction (In Portugal is called Imposto Municipal sobre as Transmissões Onerosas de Imóveis).
Every time a purchase of property is made this tax is applied. The tax is applied to the value declared in the deed of sale or tax value of the property, depending on which is higher.
Besides, a tax deduction is subtracted taking into consideration the characteristics of the property and acquisition purpose.
Below you can find the most updated tables that will help you calculate the value of IMT you have to pay.
The applied taxes are the following:
Building or apartment destined solely for the personal and permanent residence:
Value
| Tax
| |
|---|---|---|
Marginal Tax
| Value to deduct
| |
(in Euros)
| ||
0- € 92.407
| 0%
| 0
|
> € 92.407 - € 126.403
| 2%
| 1.848,14
|
> € 126.403 - € 172.348
| 5%
| 5.640,23
|
> € 172.348 - € 287.213
| 7%
| 9.087,19
|
> € 287.213 - € 574.323
| 8%
| 11.959,32
|
> € 574.323
| 6%
| -
|
Building or apartment destined solely for residence:
Value
| Tax
| |
|---|---|---|
Marginal Tax
| Value to deduct
| |
(in Euros)
| ||
0 – € 92.407
| 1%
| 0
|
> € 92.407 - € 126.403
| 2%
| 924,07
|
> € 126.403 - € 172.348
| 5%
| 4.716,16
|
> € 172.348 - € 287.213
| 7%
| 8.163,12
|
> € 287.213 - € 550.836
| 8%
| 11.035,25
|
> € 550.836
| 6%
| -
|
Rural Properties - 5%
Urban Properties that is not exclusive habitation use and other
Urban property not exclusively for residential purposes and other onerous acquisitions - 6,5%
Property (urban or rural), or other acquisitions, in which the purchaser is resident in resident in a country, territory or region subject to a clearly more favourable tax regime - 10%
Stamp duty (Imposto do Selo IS)
The stamp duty can be applied in the purchase and sale of the property and in mortgages.
Contrary to IMT, the Stamp Duty does not have in its formula a value to deduct so it can become quite high if you go for a luxurious property.
Stamp duty when you purchase a property:
IS = Write value or Value of the tax asset (the highest) x 0,8%
The payment of the stamp duty occurs when you will be signing the deed of sale and is paid to the notary. A 0,8% tax is applied.
Stamp duty when you ask for a mortgage:
IS = Value of home loan x 0.6% (if repayment period is greater than 5 years)
IS = Value of home loan x 0.5% (if repayment period is less than 5 years)
In case a home loan is approved by your bank, it is also required to pay the stamp duty on the amount financed. The tax is paid as soon as the financing amount is deposited in the purchaser bank account.
Depending on the time of repayment the tax can be slightly different. In case you repayment period is greater than five years then the tax is 0,6% otherwise is 0,5%.
Municipal Real Estate Tax (IMI)
IMI tax (In Portugal called, Imposto Municipal Sobre Imóveis) is an annual tax that is levied on the property tax value of a property. The use of this taxes is to maitain public infrastructures.
The formula that will help you how to calculate the IMI tax is fairly simple:
IMI = Value of the tax asset (TPV) x Applicable rate
The applicable rate is defined by each municipality in Portugal. Most of the municipalities tax on urban properties (houses and land for housing) a tax that ranges between 0,3% and 0,45%. It can go to 0,5% if is under a program that supports the local economy.
All property owners have this tax due in April. Depending on the amount, it is allowed to make the payment in installments.
• 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, there a number of scenarios in which you become exempt from paying this tax.
If it is your principal residence, the value does not exceed 125,000 euros and the household's taxable income is less than 153,300 euros, you are exempt from paying IMI for three years.
If the household income is not more than 15.295 euros you will are not required to pay this tax. However, to be eligible for this benefit you should request the Financial Entity responsible to evaluate your current financial situation (Finanças) before the purchase of the house and after the evaluation of the property is completed.
Note: If you request after the purchase of the property you will not be eligle for this benefit.
© 2019 Flavio Lopes
