Taxation in Portugal

You will need a Portuguese tax number (‘Numero Fiscal de Contribuinte’) before you can acquire a property in Portugal because you are not permitted to complete a significant financial transaction without one, either as a resident or a non-resident.

Tax number (‘Número de Identificação Fiscal’)

Applying for a fiscal number is a simple procedure and you will be issued with your number immediately. The cost of applying for a fiscal number is about €10.

Go in person to your local tax office (‘Repartição de Finanças’). As well as proof of identity (your residency card, identity card, driver’s licence or passport), you will need an address in Portugal. If you do not yet have a Portuguese address, an EU address is acceptable, however proof of this is required.

Property Transfer Tax (IMT)

The acquisition of properties in Portugal is subject to Property Transfer Tax (‘Imposto Municipal sobre Transmissões Onerosas de Imóveis’, or ‘IMT’). This tax is due on the transfer of property rights over real estate or other, based on a sliding scale of the declared value, up to 8%.

IMT is levied on the property transfer value or its taxable value, computed according to the Municipal Property Tax (IMI, see below) Code, whichever is the higher. Some of the criteria to measure the tax value of a property are the following:

  • Construction or property cost (the first one is used for urban properties and the latter for rural properties)
  • Property size (number of rooms, land area)
  • Type of use (residential, commercial, industrial)
  • Location of property (if it’s in the suburbs or in the city centre)
  • Quality and comfort aspects (if it is degraded, does not have sanitary conditions, elevator)
  • Age of the property

The tax should be paid before completion as the IMT certificate will be required by the notary for signing the sale and purchase deed. The IMT can be paid at any local tax office.

Stamp Duty (‘Imposto de Selo’)

Stamp duty is another tax payable when acquiring property in Portugal. Stamp duty’s taxable base is the same used for IMT purposes and, as a general rule, 0.8% of the property’s tax value is payable for property acquisitions.

Double taxation treaty

Britain has a double taxation agreement with Portugal to ensure people do not pay tax on the same income in both countries. In accordance with Portuguese and international law, all residents in Portugal (nationals and non-nationals alike) are required to declare assets or groups of assets held outside Portugal. Assets may include bank accounts, securities, rights, insurance, annuities and property. The declaration is a separate exercise to the annual tax return.

Municipal Property Tax (‘IMI’)

The owners of a residential property whether it is used by themselves or leased out, must pay a local tax known as Imposto Municipal sobre Imoveis (IMI). This tax is raised and spent by the town hall (‘municipio’). The amount depends on the valuation of the property and must be paid in three equal instalments in the months of April, July and October.

There are some exemptions for lower value properties, those on a tourist development and those with eco-credentials. These exemptions are only applicable to residents.

The amount due is calculated differently for homes built before 2003.

Utilities and taxes check

If there are outstanding payments on utilities the debts must be settled before services can be reconnected or transferred into your name. Outstanding taxes must be paid before you can take ownership of the property. Therefore it is important that a check is made of electricity, water, community fees, refuse collection and municipal tax.

Continue to section 4: Mortgages

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