Fiscal Number - Número de Contribuinte
When buying a property in Portugal you will need a tax number 'número de contribuente' issued by the local tax office 'Finanças'. This 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 advise you that foreigners owning property in Portugal should have a fiscal representative in Portugal. Your Lawyer will give you guidance in this respect.
It is advisable if you own a property in Portugal to have a Portuguese Will, even if you already have one in your home country, as it makes the process easier for whoever will eventually inherit the property.
As an added incentive for tax residents in Portugal, this has been abolished for a spouse, children or parents inheriting property. Any other parties will pay only 10%. If you are not a tax resident in Portugal then you may be liable to Inheritance Tax on your asset in Portugal in your country of tax domicile.
If you intend to live permanently in Portugal, or more than 183 days per year consecutively, then you will be required to apply for residency. This is an identification document that entitles you, 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. You will not become a Portuguese citizen nor have to renounce your current nationality.
Below are the taxes involved when owning a property.
Stamp Duty - IMT
This is Property Transfer Tax and is a one off payment made to the Portuguese State immediately before the final deed is carried out. The tax-free limit is 80.000€ and above this, there is a sliding scale up to a maximum of 6% of the purchase price for a property purchase above 500,000€, The purchase of “land only” is levied at a flat rate of 6.5% regardless of sale value.
On the initial purchase of a property in Portugal, you will pay a small tax to the Land Registry to register the property in your name and a fee to the Notary Public for overseeing the Final Deed. This amount varies but should not exceed 1.5% of the property purchase price unless you are taking out a mortgage with a local Portuguese bank, in which case it will be higher.
Municipality Tax - IMI
This is the annual municipality tax for services provided, garbage collection, schools, roads etc and is determined by two factors; the rateable value of your home as assessed by the municipality and the percentage tax rate set by the municipality. Municipality tax rates for each town vary between 0.4% to 0.8% of the rateable value depending on the region. The municipality will periodically reassess rateable values.
Capital Gains Tax
This is the profit made from a sale between the original purchase price and the sale price.
- Tax Residents in Portugal pay 20% on 50% of the profit or nothing at all if the asset sold was registered as the vendors principal residence for at least the last 6 months and the “gain” is reinvested into a new principal residence in Portugal. There are time limits set for this reinvestment and if all of the gain is not used in the subsequent purchase, CGT is due on the balance.
- Non residents pay 25% on the total gain less some allowances.
- All assets acquired before Jan 1st 1989 currently registered in the name of the owner on that date are 100% exempt of CGT.