PORTUGAL

Buying property in Lisbon, Algarve

A Guide to Buying Property in Portugal
Purchasing property in Portugal is a relatively straightforward process, but it is advisable to work with reputable real estate agents, lawyers, and notaries to ensure a smooth transaction. Here’s an overview of the key steps and considerations:

The Buying Process

Initial Agreement: The first step in the property purchase is signing a promissory contract, which confirms the buyer’s intent to purchase and locks in the terms of the sale. A 10% deposit is typically paid at this stage. Be aware that this deposit is usually non-refundable if the buyer decides to withdraw from the deal.
New Developments & Off-Plan Purchases: When buying new developments or off-plan properties, the payment is often made in stages, with each stage overseen by a lawyer to ensure everything proceeds correctly.
Finalizing the Sale: Once all necessary legal checks are completed, a deed (escritura) is signed and filed with a local notary. This document confirms the buyer and seller's names, the purchase price, and that all documentation has been reviewed and verified.
Golden Visa Program

Portugal offers an attractive Golden Visa program for international buyers, providing a path to residency for those who invest in real estate. Key details of the program include:

Investment Threshold: A minimum investment of €500,000 in real estate qualifies buyers for the Golden Visa. If the property is located in an urban renewal zone and requires redevelopment, the threshold lowers to €350,000.
Residency Permit: The Golden Visa offers residency for the investor and their family, including dependent children. The permit can be renewed every two years, provided the visa holder spends at least two weeks in Portugal during that period.
Another option for international buyers is the Non-Habitual Resident (NHR) tax scheme, which provides a 10-year tax break. Under this scheme, income generated outside Portugal is tax-free for a decade, and individuals who move to Portugal for work may qualify for a flat 20% income tax rate.

Financing Property Purchases

To secure financing for a property in Portugal, it’s wise to obtain an Agreement in Principle, which outlines how much you can borrow from a lender. This agreement strengthens your position as a buyer and may improve your chances of having your offer accepted.

Some sellers may not accept a mortgage clause in the purchase contract, making it important to engage with a mortgage broker early in the process. Brokers can help secure financing terms that align with the property contract. In some cases, buyers can finance up to 100% of the property purchase price by combining a mortgage with a Lombard loan.

Taxes and Fees

Before completing the purchase, buyers must pay the IMT tax (Imposto Municipal sobre as Transmissões Onerosas), which varies depending on the type of property:

Holiday Homes: Tax rates range from 1% to 8% of the purchase price. For homes priced above €550,836, a fixed rate of 6% applies.
Rustic Property: Purchases of rustic land incur a 5% tax.
Plots of Land: Land purchases are taxed at 6.5%.
Offshore Companies: Purchases by companies based in tax havens are taxed at 8%, with an additional 0.8% stamp duty.
After the purchase, the buyer must pay an annual property tax called the Imposto Municipal sobre Imóveis (IMI), which is similar to council tax in the UK. This tax is based on the property’s declared value, with rates ranging from 0.2% to 0.8%, depending on the location and age of the property.

Other fees include:

Lawyer Fees: Typically 1% of the property’s purchase price.
Notary Fees: These usually range from 1.5% to 2% of the purchase price.
VAT: A 23% VAT applies to estate agent, legal, and survey fees.
Conclusion

By working with trusted professionals and being aware of the costs and requirements, buying property in Portugal can be a rewarding experience. For further guidance or specific questions, feel free to reach out for more personalized assistance.