Buying a property in Portugal is a relatively simple process. Here are the essential points to consider:
Role of the notary or the lawyer
Attention: the notary at the time of the promise to sell is content to authenticate the signatures and the financial settlement between seller and buyer. He only intervenes at the end for the final contract.
It is therefore advisable to gather all the information with a lawyer (or your bank in case of a credit application) from the property registry and the town hall. He will also have to make sure that the taxes and condominium charges are up to date.
If you are buying from a private individual
Go to the City Hall, “Câmara Municipal”, of the place where the property is located, and ask for the building and housing permits, “Licenças de Construção e de Habitação do imóvel”. You will then obtain the document that proves that the property was built legally: “o Alvará da Licença de Utilização”. Properties built before 1951 are exempt from this requirement.
To verify that the property is not mortgaged, pledged, or rented, that the seller is the owner of the property, you can go to the Tax Center, “Finanças”, located in the municipality or district of the property.
There may also be a technical sheet (ficha técnica de habitaçao) that lists the technical and functional characteristics of the building. All homes that were completed after March 30, 2004 must have a Technical Sheet, which gives technical details about the construction, insulation, materials, suppliers, etc. This document is provided by the seller.
An energy certificate is also required and given to the buyer.
If you go through a real estate agency
When dealing with a real estate agency, you will of course ask your real estate agent for the above mentioned documents. It is not uncommon to find an agent who is bilingual in French and Portuguese. The real estate agency must have an AMI Number “Associação de Mediacão Imobiliária” (The Real Estate Association in Portugal), issued by the Institute of Construction and Real Estate – the INCI.
If you ask for a bank loan
What is very interesting is that the bank will send an expert to check the quality and the potential selling price of the property. This gives you a minimum price reference that is nice to know. The bank will be able to lend on the value of the property and not on your income, it is much easier to prove. And another advantage, in this case the bank will check the documents before taking a mortgage, it is very reassuring and well done.
The two main documents are:
- The certificate of property registration at the land registry (codigo de acesso à certidao do registro predial) with the description of the property and its registration in the name of the seller. This document is an extract from the urban planning register (Conservatória). It indicates, among other things, the identity of the property and whether the property is subject to an outstanding mortgage. There is a description of the registered data of the property (building and land area, type, location, boundaries), which should correspond to the real property.
- The tax identification document of the property (Cadernata Predial) cadastral document. Registration document of the property that specifies the location of the property, location, surface, composition, owner. The financial registration of the property, which must be reconciled with the details on the land register, also gives information about the property value (taxable value). This document is obtained at the Tax Office (Finanças).
The process of buying real estate in Portugal
You have found your property. You will have to sign a “Contrato de Promessa de Compra e Venda” contract of compromise of sale. This is the legal document that sets the conditions of the sale. This contract is under private signature, it is recommended to recognize the signatures at a notary.
Between 10 and 20% of the deposit must be paid by the buyer directly to the seller. If you retract after the signature of the deed you will lose the amount. But if the seller decides to retract after the signing of the contract, he will have to pay the double of the deposit.
Every buyer must obtain a NIF, a tax identifier “no contribuinte”. If you do not have an address in Portugal, you will be asked to have a fiscal representative (lawyer, accountant or someone you know).
A date will be set for the signing of the sales contract, called “Escritura de Compra e Venda”. This is usually 3 to 4 weeks after the preliminary sales agreement, which is fast. It is this act that is done before a notary.
Before the deed of sale, you will have to pay a municipal tax called IMT (Imposto municipal sobre Transmissões) and IS (Imposto de Selo). This tax is payable at the tax office closest to your property. Real estate transactions in Portugal are not subject to VAT.
The final deed of sale “Escritura de compra e de venda” is done with a notary. The notary ensures the legality of the transaction. Once you have purchased the property, the notary will register you as the owner in the national register.
The seller of a property usually pays a commission to the real estate agent, which is not regulated and can vary from one region to another.
Taxes and fees
Agency fees are paid by the seller. The following costs will be incurred:
Costs at the time of purchase
- Legal fees: Variable between 1.5 and 2% of the purchase price
- Notary and registration fees: Variable between 1.5 and 3% of the purchase price
- Stamp duty (imposto de selo): 0.8% of the purchase price plus 0.6% of the mortgage amount if applicable.
IMT (Imposto Municipal sobre Transaçãoes onerosas de imo- veis): This is the municipal tax you have to pay when you buy a property. It is unique.
Up to 92407€ 1%
From 92407€ to 126403€ 2%
From 126403 to 172348€ 3%
From 172348 to 287213€ 7%
From 287213 to 574323 8%
More than 574323€ 6%
Annual costs of a property in Portugal
IMI (Imposto Municipal sobre Imoveis): This is the equivalent of the French property tax and is intended to finance the municipalities. Individuals or legal entities who, on December 31 of each year, are owners or usufructuaries of real estate, whether or not they reside in the Portuguese territory, are subject to the payment of this tax.
It is calculated on the Tributary Patrimonial Value (VPT), which is less than the purchase price. The rate is 0.8% for rural properties and 0.3 to 0.5% for urban properties. This rate will have to be set annually by the municipalities.
This tax must be paid every year, in relation to the previous year, on the following dates
- Amount equal to or less than 250€ one annual payment in April ;
- Amount greater than 250€ and equal or less than 500€ two payments in April and November;
- Amount greater than 500€ three payments in April, July and November.
It is paid in any tax office, post office, Multibanco distributor or by bank at home.
You can benefit from the exemption of the IMI for 3 years by asking the Finanças.
