Property Related Tax

These notes are intended as a guideline to income tax in Portugal and should not be used as a substitute for proper professional advice. Please contact us and we will be happy to assist you.

1.

Sale of Portuguese property by non-residents

Non-resident individuals pay tax on 100% of the gains from the sale of their property in Portugal at 28%. Current tax rates and allowances.

Use the following formula to calculate the capital gains, in Portugal:.

Sale Price = (acquisition costs x currency devaluation coefficient) - costs incurred during the transfer of ownership - property improvement costs (within the last 5 years).


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2.

Sale of Portuguese property by residents

For Residents in Portugal any gains on real estate are added to your other income for the year and taxed at the income tax scale rates, ranging from 14.5% to 48%. As a resident, only 50% of the gain is liable for tax. As an example, if the capital gains of property are €10 000.00, the charge will be, in broad terms, €5 000.00.

Current tax rates and allowances.


Capital Gains Exemptions


This is available when the proceeds of the sale are reinvested, within 36 months of the sale, in the taxpayer's new main residence and become exempt from the payment of the capital gains tax. However, it is mandatory to communicate your intentions to reinvest to the Tax Office so that taxation is suspended for that period. You have to live in the new property within six months of the end of the three-year limit for it to be considered as your main residence.


If invested in a house before the sale of the current one, you have 24 months to communicate to the Tax Authorities that the profit obtained was channeled into the new property. This is possible by declaring the amount of the sale and purchase of the dwelling in the year you dispose of the first one. If you have resorted to a bank loan to purchase the current house, you must inform the loan amount to determine the profit obtained.



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3.

Taxation of Portuguese rental income of non-residents

Net rental income earned by nonresidents is taxed at a flat rate of 28%, withheld at source. Taxable income is gross rent less maintenance costs, repairs, and other related expenses (such as insurance premiums and municipal tax). Mortgage interest costs incurred when the property was purchased are not deductible.


Further information on non-residents tax in Portugal.


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4.

Wealth Tax- Imposto Sobre o Património

Portugal's version of wealth tax affects those whose ownership of Portuguese property is worth over €600,000, regardless of where they are resident. Rates are 0.4% for properties held by companies, 0.7% for individuals and 1% for those whose share in Portuguese property goes over €1 million.

An allowance of €600,000 is deducted from the value of all Portuguese properties owned by individuals, but not companies.


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5.

Local property tax- Imposto Municipal Sobre Imóveis (IMI)

IMI is computed on the tax registration value of urban and rural properties located in Portuguese territory. It is due by the owner, the usufructuary, or the holder of the surface right of a property with reference to 31 December of the year that it concerns. The tax registration value is determined by means of valuation, based on the type of property.


IMI - Rates

Property Rates (%)
Urban property 0.3 to 0.45
Rural property 0.8
Property owned by residents in offshores (except individuals) 7.5


IMI - Payment dates

  • Amounts up to €250 - 1 instalment in April
  • Amounts from €250 to €500 inclusive - 2 instalments in April and November
  • Amounts exceeding €500 - 3 instalments in April, July and November

  • IMI - Exemptions

  • For permanent place of residence this exemption applies for a three-year period, in case of urban properties with a Tax Registration Value up to € 125 000, held by individuals which obtained a taxable income in the year prior to the acquisition, of up to € 153 300.

  • Additional to the IMI (AIMI)

    Started in 2017

  • This additional tax is for real estate held by individuals and corporations, as well as by structures or collective bodies, whose Tax Registration Value (VPT) has a high value.
  • Urban properties classified as "trade, industry, or services" and "others" are excluded from AIMI.

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    6.

    Property Transfer Tax - Imposto Municipal Sobre a Transmissão Onerosa de Imóveis (IMT)

    This is a municipal tax levied on the transfer for consideration of real estate located in the Portuguese territory. Such transfers may also be subject to Stamp Duty. IMT is due by the purchaser and levied on the purchase price or on the property tax value, whichever is higher.


    IMT - tax rates

  • Rural property: 5%;
  • Urban property exclusively used as a permanent place of residence – range between 0% and 6%;
  • Urban property exclusively used for residential purposes – range between 1% and 6%;
  • Urban property not exclusively used for residential purposes and other acquisitions – 6.5%;
  • Urban and rural property acquired by a resident in a blacklisted jurisdiction – 10%;

  • IMT - exemptions

  • Urban property subject to rehabilitation;
  • Restructuring operations;
  • Acquisition of properties for resale by qualified companies;
  • Acquisition of real estate by open-end real estate investment funds or by closed-end of public subscription (tax rates reduced to 50%);
  • Acquisition of buildings individually classified as of national/public /municipal interest;

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