Overseas Property Investment in Portugal
Being Portuguese myself, it’s obvious that my heart still lies there even after living in the UK for almost 10 years. Portugal has a lot offer for property investors, the Algarve may have been the pioneer region which attracted many European property buyers but investors are now looking everywhere, from Lisbon (perhaps the most underrated capital in Europe) to Porto, going though to the beautiful inland areas in the hot plains of the Alentejo or the North Western green valleys of the win
e-producing Minho region.
The Portuguese vast Atlantic coastline attracts thousands of holidaymakers every year since the 1960s. Presently, about 50,000 British live there all year round and almost 150,000 own a Portuguese holiday home.
The best of all is that is only a couple of hours flying from London.
The property buying process
A fiscal number from the local tax office is needed as well as a Portuguese postal address.
You should also ensure that the seller has no outstanding debts on the property as well as carrying out full checks on title deeds. We also advise you to ensure that the property has a certificate of habitation and it’s not property owned by an offshore company. In the past was a lucrative way for foreign owners avoiding some taxes, but some laws have been put in place in 2004 which made this detrimental financially. You should find an experienced Portuguese speaking lawyer to get these tasks done for you.
You are required to pay a non-refundable deposit of approximately 10 per cent after signing a preliminary contract - “Contrato Promesa de Compra e Venda” – which is verified by a government notary. The escritura or final deed must be signed in the presence of the notary, and all involved costs and taxes must be cleared at this point, concluding the buying process.
Property buying costs
The costs involved to buy a property in Portugal are typically 10 per cent higher than in the UK, which includes:
- 2 per cent notary fees.
- Lawyer fees will set you back between 1.5 to 2 per cent.
- IMT or property transfer tax is between 0 for properties under €80,000 and goes up to 6 per cent depending on the property’s price.
- If you need to take a mortgage from a Portuguese bank or building society, expect arrangement and registration fees of approximately 2 per cent.
Property running costs and taxes in Portugal
In Portugal the annual property tax for owners is about 0.7 per cent, based on the actual property value determined by the government as well as an additional yearly fee of 0.7 per cent rate for the local authorities.
The VAT rate in Portugal is 19 per cent. Property transferred to directly family is free of inheritance tax. Nevertheless if you are a UK taxpayer you will still have to pay inheritance tax in the UK. Regular transfers are taxed at 10 per cent in Portugal.
The Portuguese legal system considers residents those who spend more than 183 days in a year in Portugal. Portuguese resident are taxed based on their worldwide income, whereas non-residents only pay tax from income generated in Portugal. Capital gains tax is taxed at 25 per cent for non-residents.
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