INFORMATION
Purchasing
property in Portugal may seem to be a daunting experience but in reality is
no more complicated than in the UK. All the top lawyers that we deal with
speak fluent English and many other languages to help make purchasing
property as smooth as possible.
In this section you will find advice and up to date information on
everything involved with buying and selling property here in the Algarve.
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Contracting a Lawyer - Advogado
It is highly recommended to use a local Lawyer to assist with the purchase of your property as each country has its own specific laws. They will carry out all of the relevant searches, checking that the vendor is legally able to sell, that all of the relevant documentation is in place and that the contract contents carry no outstanding debts on the property. Some new developments have in-house lawyers, but it is recommended that purchasers do not use a lawyer that represents both the seller & buyer. Fees charged are generally between 1-2% of the property value, depending on the complexity of the property's history.
Clients can give their lawyer a Power of Attorney 'Procuração' to act in their absence, which avoids many unnecessary trips abroad to deal with paperwork. Quintasales has a list of Lawyers, Surveyors and mortgage lenders.
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To survey or not to survey...?
A valuation of an existing property will be carried out as a matter of course if clients are taking a mortgage. This is not a building survey, so if a client wishes to have a structural assessment this must be carried out by the equivalent of a Chartered Surveyor. This will also serve to highlight potential problems, not only with the property, but with plans for new roads and nearby construction.
All new builds are accompanied by a 5 year builder's guarantee.
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Mortgages
Download the PDF
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Fiscal Number - Número de Contribuinte
All clients buying a property will need a fiscal number 'número de contribuinte' from the tax office 'Finanças'. It is also needed in order to open a Portuguese bank account and for setting up utility accounts. New rules regarding tax evasion & money laundering mean that your Lawyer will decree that clients have a fiscal representative in Portugal. Your Lawyer will give you guidance in this respect.
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Promissory Contract - Contrato de promessa de Compra e Venda
This is the stage that both parties promise to enter into a final contract to buy/sell a property; the equivalent of exchange in the UK. A deposit is required at this point, usually between 10-30%. It is a binding document signed by both parties, which states all of the terms & conditions agreed, such as price and completion date.
If the ownership is a corporate entity and you are keeping the same ownership, then your lawyer will have to do searches on the company and subsequently a Share Purchase Agreement is drawn up instead of a promissory contract and a deposit paid. Completion usually follows soon after which is normally quite straight forward with the monies being transferred between the parties lawyers on exchange of the company shares and documents.
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Provisional Registration
If clients are taking a mortgage their lawyer must make a provisional registration in the Bank's name. This is why it is important lawyers are told at the start, as they must have a special clause in the Power of Attorney document that allows them to do this on clients behalf.
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Final Deed - Escritura
This is the conveyance of property held at the Notary office where the balance of the price is paid & the deeds are transferred to the buyer's name. The Notary reads a statement which both parties sign, stating that monies have been received/paid accordingly. This is read out in Portuguese; you do not need to be present but if you are, the wording will be carefully translated for you.
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Registration - Registo
After the 'escritura' has been completed a notarized copy will be required to register the property in the buyer's name at the Land Registry 'Registo Predial'. It may take a few months to receive a copy, but it will be effective from the date the registration was submitted and signed.
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Will
It is advisable for clients owning a house to have a Portuguese will, even if they have one in the UK, as it makes the process easier for whoever will inherit the property. A lawyer will advise fully on each client's circumstances and can carry out this simple procedure at the Notary.
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Inheritance Tax - Imposto Sucessório
As an added incentive for residents, this has been abolished for a spouse, children or parents inheriting property. Any other parties will pay only 10%. If client is not resident in Portugal they may be liable to Inheritance Tax in the UK.
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Residency
If clients are intending to live permanently in Portugal, or more than 183 days per year consecutively, they will be required to apply for residency. This is an identification document that entitles them, as a member of the European Union, to the same rights as a Portuguese national. It shows details such as name, address in Portugal, DOB, marital status, passport number and requires a fingerprint and photograph. They will not become Portuguese citizens nor have to renounce their British status.
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Purchase Taxes
Below are the taxes involved when owning a property although CIMT is the only tax incurred at the point of purchase.
Stamp Duty - 'IMT - Imposto Municipal sobre Transmissões' (formely SISA)
This is the equivalent of UK Stamp Duty and is a one off payment made before the final deed is carried out. Previously IMT was very high at 10%, so tax evasion was rife, therefore a new system was introduced from 01 June 2003 to encourage buyers to declare the true value of the property. Now the tax-free limit has been raised to 80.000€ and above this, there is a scale up to a maximum of 8%, whilst the top bracket of tax has been reduced to 6%.
| Declared.Property Value Euros |
Tax |
IMT Amount € |
Less |
Total Amount |
| From |
To |
Rate |
|
Allowance |
Payable € |
| 0.00 |
81.600 |
0% |
Nil |
Nil |
Nil |
| 81.600 |
112.200 |
2% |
1.632 - 2.244 |
1.632 |
0 - 612 |
| 112.200 |
153.000 |
5% |
5.610 - 7.650 |
4.998 |
612 - 2.652 |
| 153.000 |
255.000 |
7% |
10.710 - 17.850 |
8.058 |
2.652 - 9.792 |
| 255.000 |
510.000 |
8% |
20.400 - 40.800 |
10.608 |
9.792 - 30.192 |
| 510.000 + |
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6% |
30.600 |
No Allowance |
30.600 |
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Other Taxes
Some taxes depend on whether you are classed as a resident or not. You will be considered resident if you spend more than 183 days in Portugal during the tax year (01 Jan-31 Dec); it does not have to be consecutive. You may also be considered resident if you own property and pay taxes in Portugal.
Council Tax - 'CIIVII-Código do Imposto Municipal sobre Imóveis' (formely Contribuição Autárquica)
This is like UK rates and is determined by two factors; the rateable value of your home and the percentage rate set by the council.
Council rates for each town have recently been reduced from 0.7-1.3% to 0.4.-0.8% accordingly.
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Capital Gains Tax - Mais Valia
This is the profit made from a sale.
- Residents pay 20% on only 50% of the profit or nothing at all if it is reinvested in property in Portugal. It has to be done within 1 year prior to the sale of old property or 2 years after sale of old property to be exempt from paying CGT. If all of the profit is not used CGT is due on the balance.
- Non residents pay 25% on total profit.
- All assets acquired before Jan 1st 1989 are exempt.
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OffShore Ownership
In the higher price ranges, usually in excess of €750.000, properties can be bought offshore and the company will own the property rather than an individual. If the property is bought by more than one person, all owners become shareholders of the company.
The advantages of using this method are that the property is the sole asset of the company and no transfer tax, capital gains tax or inheritance tax are payable. No Notary fees are due and it is a very quick, confidential way to sell on a property as it only involves selling shares in a company.
This is still a viable option for many with high net worth property owners and currently the 'white' listed locations are Malta and Delaware. Under the new legislation Offshore ownership now incurs some taxes and it is recommended to speak to your Lawyer.
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Fees / Costs
There are various fees to take into account as in any other country, but as a general guide all costs usually come to:
| Property Value |
Lawyers Fees (based on 1%) |
IMT |
Notary / Registration (based on 1.5%) |
Total |
Total % |
| 100.000 |
1.000 |
368 |
1.500 |
2.868 |
2,9% |
| 150.000 |
1.500 |
2.502 |
2.250 |
6.252 |
4,2% |
| 200.000 |
2.000 |
5.942 |
3.000 |
10.942 |
5,5% |
| 250.000 |
2.500 |
9.442 |
3.500 |
15.442 |
6,2% |
| 300.000 |
3.000 |
13.392 |
4.000 |
20.392 |
6,8% |
| 350.000 |
3.500 |
17.392 |
4.000 |
24.892 |
7,1% |
| 400.000 |
4.000 |
21.392 |
5.200 |
30.592 |
7,6% |
| 450.000 |
4.500 |
25.392 |
5.600 |
35.492 |
7,9% |
| 500.000 |
5.000 |
29.392 |
6.000 |
40.392 |
8,1% |
| 550.000 |
5.500 |
33.000 |
7.000 |
45.500 |
8,3% |
| 1.000.000 |
10.000 |
60.000 |
5.600 |
75.600 |
7,6% |
| 2.000.000 |
20.000 |
120.000 |
6.000 |
146.000 |
7,3% |
| 5.000.000 |
50.000 |
300.000 |
7.000 |
357.000 |
7,1% |
This is a general guideline only and full details should be obtained from your Lawyer.
There is no VAT 'IVA' payable for private individuals buying properties. Other costs that are to be taken into account are:
- Mortgage Fees
- Life Insurance
- House Insurance
- Survey
- Alteration of utility bills
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Departments
Land Registry - 'Conservatória do Registo Predial'
Open Mon - Fri 09.00-14.00
This Public Dept is where all properties are registered.
Tax Department - 'Repartição de Finanças'
Open Mon - Fri 09.00-12.30 & 14.00-16.00
A Fiscal numbers 'Número de Contribuinte' is issued by the 'Finances' and is necessary to open a Portuguese bank account for payment of utility bills such as water, electricity etc. They also issue Land Tax Certificates.
Town Hall - 'Câmara Municipal'
Open Mon - Fri 09.00-12.30 & 14.00-16.00
The 'Câmara' governs the district and it is here that every building project is submitted for approval and issue of building licenses. They also provide all services such as water supply, garbage collection & issue licenses for habitation and commercial establishments. The 'Presidente da Câmara' is the leader of the political party who received majority vote at the local elections.
Notary - 'Cartório Notarial'
Open Mon-Fri 09.00-16.00
This Public Dept prepares, amongst other things, deeds from purchase to sale. The Notary who is graduated in law certifies signatures on documents to be presented to other depts. As a Civil Servant representing the State they verify legality of documents and that all admin/tax laws are carried out correctly.
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Selling your Property in Portugal
If you are interested in selling your property then Quintasales will assist you in all matters.
We will ask you to sign our sales agreement highlighting the price of the property, details etc, this document is required by Law along with the following documentation
(Note: your Lawyer should have copies of all these documents):
A copy of the 'Escritura'
The document signed when you purchase a property and ownership is transferred to the new owner's name.
A copy of the Habitation License - 'Licenca de Habitacao'
A certificate from the Town Hall stating the property has been inspected and complies with building regulations and is fit for habitation. This only applies to properties built after 1951.
A copy of the certificate from the Land Registry - 'Certidão de Teor'
Proves description & inscription of property at the Land Registry Office.
A copy of the land tax certificate, 'Caderneta Urbana/Rustica Urbana Predial'
Issued by the Tax Department confirming that the property has been registered for tax purposes. It will show location, plot size, number of rooms, pool size etc and details should match those entered at the Land Registry Office.
A copy of the property plans approved by the local council - 'Câmara'
A copy of the last payment of the Contribuição Autárquica, now CIMI - 'Código de Imposto Municipal Sobre as Transmissões'
A copy of the ID and Contribuição Fiscal for each owner named on the Escritura |
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