TAXES DIRECTLY RELATED WITH THE ACQUISITION OF PROPERTY
IMT – MUNICIPAL TAX ON THE TRANSFER OF PROPERTY
This tax is paid by the purchaser at the time of the transfer of ownership of the property. The tax is applicable to all property transfers of ownership and is applied after calculation by the Portuguese State. It varies according to the value of the purchase. On property with a value greater than Euro 500,000, a tax of 6% is currently applied. For rural property and other types of property, the taxes stand at 5% and 6.5% respectively.
IS – STAMP DUTY
There are two types of stamp duty relating to the acquisition of property:
- Stamp duty on the transaction (sale and purchase) which corresponds to a tax of 0.8% of the value of acquisition of the property as stated in the Title Deed;
- Stamp duty on the loan should a mortgage be taken out for the purchase of the property which corresponds to a tax of 0.6% of the value of the loan.
IMI – MUNICIPAL TAX ON PROPERTY
An annual tax referring to the year just ending based on the calculation of the Valor Patrimonial Tributârio (VPT) (Patrimonial Value of Property Tax) – a value attributed by the Financas (Finance Department). This can vary between 0.3% and 0.5%, a figure which is fixed annually by the Municipal Authority where the property is located (eg.: Cascais — 0.39%, Oeiras — 0.34%, Sintra — 0.39%, Lisbon — 0.3%. The IMI relating to rural property remains a 0.8%.
NOTARIAL AND REGISTRATION FEES
These are paid by the purchaser, after the signing of the notarial title deed, together with the property registration fee which are at a fixed cost. The property registration fee is Euro 250 and online is Euro 225.
In Portugal this tax is not currelntly applicable on inheritances or donations from parents to children or from one spouse to alnother, although a stamp duty is levied, the value of which is 0.8% of the CTV (Cadastral Tax Value) of the property. Other inheritances or donations are subject to a stamp duty of 10% of the CTV (Cadastral Tax Value).
CAPITAL GAINS TAX – ADDED VALUE
After the transaction of a property, the seller is obliged to declare the sale and, if necessary, to pay capital gains tax which is an average of 25% for corporate bodies and 28% for private individuals (non-residelnt). This tax is based on the difference between the price of sale and the price of purchase so the account of tax due call be calculated. Should the property for sale be their main place of residelnce and the resulting profit from the sale be reinvested with 36 months from the date of the acquisition, construction or renovation of another property designated to be for their main place of residence within the territory of the European Union or territory belonging to the European Economic Community with which Portugal has agreements relating to the exchange of information in fiscal matters, they could be exempt in whole or in part from capital gains tax depending on the value of the investment.
PROFIT FROM RENTALS
All proprietors who rent out their property in Portugal must declare the rents to the Portuguese authorities even if no corresponding rent has been received. From the value of the rents various costs and expenses may be deducted, such as taxes (IMI and IS), insurance policies, as well as costs of maintenance and preservation of the property.
Such costs may be deducted from the gross income of the rental so as to calculate the profit made, which will be taxed at 25% for corporate bodies and at 28% for private individuals (non-resident).
INTEREST RATES COULD MAKE TAKING OUT A LOAN VERY ATTRACTIVE
Even though you may have the resources to buy the property you have in mind, it is worth considering taking out a loan.
AMOUNT THAT CAN BE LOANED
In general, a minimum of 5,000 Euros and a maximum of 80% of the value of the property, considering the lesser of two values: The value of the evaluation and the value of the acquisition.
The maximum term of a loan is usually 40 years given that the maximum age of the borrowers and the term of the loan added together do not exceed 80 years.
RATE OF INTEREST
Depending on the position of the market and the relationship between the client and the bank, the annual rate of interest for taking out a loan on a property in Portugal can be up to 70% lower than the rates practiced in other parts of the world.
The guarantee for the loan will be the property itself, which will be mortgaged by the bank. For more information, consult Porta da Frente Christie’s or Aria Property.