PORTUGAL...PORTUGAL PROPERTY BUYING PROCESS The most important thing about buying a property in Portugal, is finding the right one. Whether you’re looking to buy an apartment, rustic

PORTUGAL

T H E P R O C E S S A N D C O S T S F O R B U Y I N G A P R O P E R T Y

I N T R O D U C T I O N 0 2

INTRODUCTION

BY PROPERTY SPECIALISTS ALGARVE; PHOTOS BY RICARDO FURTADO

BUYING A PROPERTY IN PORTUGAL

You may have been thinking about buying a

property in Portugal - or abroad elsewhere -

for a while now. We understand that it is a big

step, regardless if it's your new primary

residency, a second (holiday) home or an

investment property. Investing your money

into a different country can seem scary, and

we are here to help you.

We have created this guide to provide you

with all the information you need to know

about the buying process and the buying

costs. What do you need to take into

consideration when buying a property, and

which costs will come on top of the asking

price and how is this calculated.

PROPERTY SPECIALISTS ALGARVE

We are a small team of multi lingual people

with the same goal: To help others find their

dream property in Portugal, just like we once

did. Every one of us used to have an office job

in a rainy country and decided to move to the

sun. To play golf, to surf, to be able to read a

book on a terrace instead of on the couch

inside: Different decades, same story. Now, we

are all here in the country that we love, the

country that we chose to live our lives in, to

help you do the same.

Have a read through our buying guide and if

you have any questions afterwards, please

do not hesitate to ask us anything - we are

happy to help.

www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]

PORTUGAL

PROPERTY

BUYING

PROCESS

The most important thing about buying

a property in Portugal, is finding the right one.

Whether you’re looking to buy an apartment,

rustic farmhouse or luxury villa,

at property specialists Algarve we have

a dedicated personal team to guide you

through the process of purchasing

that dream property.

P R O P E R T Y B U Y I N G P R O C E S S 0 4

DUE DILIGENCE

When you have found the property of your

dreams, you will take on a lawyer/solicitor. You

can choose from our panel of recommended

lawyers. The lawyer carries out the due

diligence, reports the findings to you and

draws up the first contract. All documents will

be checked by your lawyer, including:

- Certidão Permanente

This documents contains details of the

property ownership

- Caderneta Predial

This document proves the property has

been registered for tax purposes.

- Licença de Utilização

This document is the license of the property

usage/purpose (e.g. Habitation,

Commercial)

THE PROMISSORY CONTRACT

Only after you are sure that everything is

correct and legal, the first legal binding

contract is signed. This contract includes the

following information:

The agreed price

What is included in the price

The date of the final deed

Other terms and conditions

This contract is made up by your lawyer and

will be signed by you and the seller. On

promissory contract, the deposit is paid. As

this contract is legally binding, the deposit is

non-refundable. If either party changes their

mind, they lose the deposit to the other (for

you this means that you lose your deposit if

you change your mind, and that you get your

deposit back double if the seller changes their

mind). The Promissory Contract is signed right

after the due diligence.



ESCRITURA / FINAL DEED

About 30 to 60 days after the promissory contract (variable timescale depending on the

situation), the final deed – The Escritura – is signed and paid. This process involves the

buyer, the seller, the buyer's lawyer, the seller's lawyer, the buyer's bank representative in

case of a mortgage, and the notary. The final contract is in Portuguese. As the notary goes

through every word of the contract with all parties, the lawyers can translate into English or

other language. The remaining balance of the agreed purchased price is paid at this stage.

The balance is always paid by cheque at the final deed.

When both parties have signed and the cheque has been handed over, you are the legal

owner of your new property in the Algarve!


PORTUGAL

PROPERTY

BUYING

COSTS

When buying a property in Lagos,

the Algarve or anywhere else in Portugal

for that matter it is important to take into

account another 6-10% over the

property price for additional buying costs.

P R O P E R T Y B U Y I N G C O S T S 0 7

BUYING COSTS

When buying a property in Lagos, the Algarve

or anywhere else in Portugal for that matter it

is important to take into account another 6-

10% over the property price for additional

buying costs. These are unavoidable costs

such as taxes that make up part of the

property buying process and costs. To

understand what this percentage is made out

of, please find below an overview of additional

costs for buying a property in Portugal. The

same principles apply for all types of property

from small apartment to luxury villa, but the

taxes on these buying costs vary with the

price.

AGENCY FEES

The Agency Fees in Portugal are for the

seller, not for the buyer.

LEGAL / LAWYER'S FEES

A lawyer will check all the documentation and

legal side of the property you want to buy.

For example, a lawyer carries out a title

check and due diligence reports on the

property. Using a lawyer, you know exactly

what you are buying, without falling into any

traps. Lawyer fees are an approximate

additional cost of 1.25% + VAT.

NOTARY FEES

Every buyer needs a notary to legally sign the

final deed of the purchase of the house. For a

notary to set up the final contract and final

deed service is a variable additional cost, but

is typically around 800-1000 euro.


P R O P E R T Y B U Y I N G C O S T S 0 8

PROPERTY TRANSFER TAX (IMT)

The property Transfer Tax is a cost, to be paid at the transfer of the property into your

name. This is a cost for the buyer of the property. The percentage applied is property value

dependent, and is shown in the table below. Two different percentage apply, there is a

percentage of the property purchase of a 1) primary residence, and 2) secondary property,

holiday property, or rental property.

IMT - PRIMARY RESIDENCE

Value of property % applied Deducted value

< € 92.407 0% € 0,00

€ 92.407 to € 126.403 2% € 11.848,14

€ 126.403 to € 172.348 5% € 5.640,23

€ 172.348 to € 287.213 7% € 9.087,19

€ 287.213 to € 574.323 8% € 11.959,32

> € 574.323 6% € 0,00

IMT - SECONDARY, HOLIDAY, INVESTMENT

Value of property % applied Deducted value

< € 92.407 1% € 0,00

€ 92.407 to € 126.403 2% € 924,07

€ 126.403 to € 172.348 5% € 4,716.16

€ 172.348 to € 287.213 7% € 8.163,12

€ 287.213 to € 574.323 8% € 11.035,25

> € 574.323 6% € 0,00

EXAMPLE CALCULATION

Mr Smith buys a holiday home of 300,000 euro, that is valued at the council tax at

300,000 euro as well. His total costs for buying the property are therefore:

Cost Calculated Amount

Property Price x € 300.000,-

Stamp Duty 0.8 *€ 300.000 € 2.400,-

Lawyer Fees* 1.25 * € 300.000 + VAT (23%) € 4.612,5

Notary Fees* Variable, around: € 800,-

IMT € 300.000 * 8% - € 11.035,25 € 12.964,75

------------------------------------------------------------------

Total Costs Property Price + 6.9% € 320.777,25

Added up, Mr Smith pays an approximate additional 6.9% buying costs, adding up to a total

of € 320,777.25 necessary for the purchase of the property priced at € 300,000.* *Please

note that these prices are an example, and may vary depending on other factors.


PORTUGAL

ONGOING

TAXES AFTER

PURCHASE

It is important to take into

consideration the costs you will have

after having bought your property in

Portugal. What are the ongoing taxes

and fees for rentals.


PROPERTY TAX (IMI)

The Property Tax (IMI) is the tax to be paid

to the council, also known as council tax or

rates. It is a percentage of the rateable

value of the property, which is set by the

tax office. Please note that this is different

from the market value. The tax ranges to a

maximum of 0.5 percent per year,

depending on the council.

For example:

The IMI in the council of Lagos is 0.4%,

and the IMI in the council of Portimao is

0.5%

RENTAL INCOME TAX

When you own a property that you are renting

out, you need to pay tax on the income. For

Portuguese residents, the rental income is

added to the wage and together the income will

altogether be taxed as usual.

For non-residents this is different. A non-

resident that rents out a property longterm, pays

28% tax over the income of the property, minus

costs. A non-resident that rents out a property

short term (holiday let), pays 28% tax over only

35% of the income. 65% of the income is tax

free.

For more -personalised- information about taxes, the buying costs and/or the buying

process in Portugal, please contact us on:

Email: [email protected]

Phone: (+351) 912 488 155

Website: propertyspecialistsalgarve.com


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PORTUGAL...PORTUGAL PROPERTY BUYING PROCESS The most important thing about buying a property in Portugal, is finding the right one. Whether you’re looking to buy an apartment, rustic