Brief description of the underlying expenses and taxes on the acquisition or disposal or even monetization of real estate in Portugal
What are the property taxes in Portugal?
Income Taxes Received:
If you rent your property you will be subject to a tax on your income, which has a fixed percentage of annual income of 28% (25% if the beneficiary is a legal person). Maintenance and upkeep charges (which include condominium expenses) may be deducted.
Taxes on Acquisition:
IMT (Municipal Property Transfer Tax)
Taxes, as well as legal fees, are levied on the purchase price of the property, and its payment, as well as the registration of property and notary costs, to the buyer. In Portugal there is no VAT on the purchase of a property, instead there is a tax called IMT. This amount depends first on whether the acquisition is for your own permanent residence or not.
The calculation of this tax varies depending on the type of property (urban or rustic), the location (Continent or Autonomous Regions) and the purpose (permanent or secondary housing). The calculation of the IMT is based on the higher of two values: the property's taxable equity value or the value stated in the deed of sale. The higher of these two values is subject to a rate, defined each year in the State Budget.
For other types of acquisitions:
Acquisition of rustic buildings: 5%
Acquisition of other urban buildings and other costly acquisitions: 6.5%
Offshore: The fee is always 10%, and no exemption or reduction applies whenever the acquirer has a residence or head office in a country, territory or region subject to a more favorable tax regime.
This tax has a broad scope, covering all acts, contracts, documents, books, papers and other facts provided for in the General Table of Stamp Duty.
On the onerous acquisition value of the property - 0.8%
For guarantees with no term or term of five years or more, such as mortgages, the rate is: 0.6%.
Property with a property value exceeding 1,000,000 euros will be subject to a stamp duty of 1% of that amount or 7.5% in case of tax residence of the owner in a tax haven.
Deed and Land Registration
Once the act of purchase is completed, the definitive conversion of the provisional registration with the Land Registry Office is done automatically after the deed, although it must be confirmed later.
The deed of a property for a single registration, the registration cost is 375 €. However, it should be noted that the total cost of the deed varies according to the price of the property, the purpose of the property (whether first or second habituation), among other factors, so that there is no previously established cost schedule.
IMI (Municipal Real Estate Tax)
Following the acquisition of the property, the Municipal Tax is paid each year to the local tax office. IMI is levied on the Tax Asset Value (VPT) of rustic and urban buildings located in the municipality of the property, and in general, properties are valued at values lower than the purchase price. The applicable rate varies depending on the county where the property is located and varies between 0.3% and 0.5%.
Capital Gains Tax on Property Sales:
When you resell your property, you will have to pay a capital gains tax (positive difference between the sale price and the purchase price). On the value of real estate gains, a personal income tax (IRS) is imposed corresponding to 50% of the profit obtained.
Taxable persons not resident in Portuguese territory are taxed at a special rate of 28% on capital gains. Those who qualify as residents of another EU or EEA Member State (provided that tax information is exchanged) may choose to tax property gains (whether or not attributable to a permanent establishment situated in Portuguese territory) at the rates provided for residents. For the purposes of determining the rate, their worldwide income should be considered under the same conditions as resident taxable persons.
Ideally, you should be properly informed before “D-Day” with one of Villas Key's legal partners so as not to be caught off guard.