Costs of Purchasing Portuguese Property
IMT – Property Transfer Tax (Imposto Municipal sobre Transmissões)
This is payable on the value of any Portuguese property normally the lawyer pays this at the Tax Department (FINANÇAS). Before signing the Final Deed in front of the Notary, the lawyer has to show a payment receipt.
The IMT rate varies according to the nature and value of the property. Your lawyer works out the exact amount using the calculation matrix. To give you an idea, it is around 6% of the property purchase price.
The lawyer supplies the following documents when paying the IMT
• ID of the Vendor(s)
• ID of the Buyer(s)
• A description of the property
• Proof of the value of the property
If the purchase falls through for any reason, you can ask for a refund of the tax paid if it is within three years of the payment date.
IMI – Imposto Municipal sobre Imóveis (rates)
This Annual Council Tax, paid to the Tax Department (FINANÇAS), is calculated according to the ‘patrimonial’ value of the property. New purchasers can be exempt from this tax for four to eight years in some areas but exemption must be requested within 60 days of buying the property.
Imposto de Selo (Stamp Duty) – As in the UK, stamp duty is charged on property purchases, and buyers pay this tax at the time of the title deed.
Notary and registration fees
These are paid by the purchaser after signing the “Escritura” (Final Title Deed) and the total costs are approximately 1-3% of the property purchase price (again not applicable if off-shore) and if buying with a mortgage this percentage will vary. IVA (VAT) is also added to the total – the current rate is 23%.
Most lawyers charge 1-2% of the purchase price. They carry out all the necessary searches and prepare the documentation needed for both the promissory contract and the final deed. They pay the taxes and duties with funds you have paid them.
Other people to contact regarding costs
- Having signed the Final Deed (Escritura) your lawyer can use it to register your name at the Land Registry Office (Conservatoria do Registo Predial) and then the change of ownership is passed to the Tax Department (FINANÇAS)
- Electricity Department – a new contract must be requested for the electricity meter
- Telephone/Internet Company to put the connection in your name (if applicable)
- Gas company – put the supply contract in your name, ask for a new gas meter and inspection
- Water supply – Camâra Municipal (Town Hall) – put the contract in your name
- Condominium company (only for those properties within a closed condominium with communal facilities)
Direct Debits: You can pay all your services bills by direct debit through a Portuguese bank – except for the annual tax (IMI) which must be done by bank transfer. If you use a property management company, they will check all the costs and sort this out for you.
SUMMARY OF COSTS
So, to sum up, the total costs associated with buying a property are normally around 8% over and above the purchase price, and are made up as follows:
1-2% notary and registration
- Estate agents’ fees are usually paid for by the seller and you shouldn’t be asked for a finders’ fee.
- IVA (VAT) is payable on Notary and Lawyers’ fees. Always check it has been accounted for in all payments so you don’t get a nasty shock!
Please note: These notes are provided in good faith for guidance only and we do not accept responsibility for any mistakes or misinformation. Please check all details and information with your chosen lawyer as regulations change constantly.