Property Law and Taxes
It is recommended that you hire the services of a licensed property lawyer when transacting on property in Portugal.
General rules / buying procedure
Once you have identified the property that you wish to purchase you can make your offer, once this has been accepted you will be expected to formalise this agreement by signing a Promissory Contract to sell and buy with the current owner.
The Promissory Contract
(Contrato de Promessa de Compra e Venda)
Both the Buyer and Seller of the property will enter into a Promissory Contract which will outline the terms and conditions of the purchase. This contract will then be registered at the Notary Office.
This is a legally binding Contract which shall afford the following protection
If the Seller withdraws from the Contract they are required to return twice the deposit. If the Buyer withdraws from the Contract they shall forfeit the deposit. Your lawyer will detail the laws and procedures in relation to producing and signing this Contract.
Along with the signing of this Promissory Contract you will be expected to make a down payment (Deposit), which is usually 10% to 20%.
Power of Attorney (Procuraçâo)
Due to a number of reasons it may be necessary to hire a third person such as a lawyer to legally represent you when you sell or buy property in Portugal. This document once prepared is registered at the Notary Office which then entitles your representative to legally act on your behalf in accordance with said Power of Attorney. This document can be prepared outside of Portugal but will need to be officially translated into Portuguese before the document becomes valid in Portugal.
You may at any time instruct a Third Person to act as your Legal Representative by producing and signing a Procuraçâo. This will indicate what type of authority your representative has and for what type of transactions they are able to perform on your behalf.
Fiscal Number (Numero Fiscal)
Each Buyer is obligated to obtain a Fiscal Number from the local Finanças -Tax Office.
When you buy property in Portugal you are obliged to register at the local Finanças where upon successful registration you will be given your own Fiscal Card and Tax Number. This document along with your Identity Card, Passport will be required when you complete your property purchase.
Imposto Municipal sobre Transmissões (IMT) Municipal Tax on Transactions
Prior to the actual purchase of the property, the Buyer will be required to pay a tax levied on the purchase of property in Portugal. This tax is paid at the local Tax Office (Finanças) and is calculated on the following basis: (In some instances the buyer may be exempt from these taxes). Property taxes will vary between 0% and 1.2% depending up on your individual circumstances and the type and value of the property that you are purchasing. Offshore companies are charged at a different rate. (Taxes for a Primary Residence may be charged at different rate)
Closing the Contract
Escritura de Compra e Venda - Once the correct documentation is in hand and all of the necessary taxes have been paid and in accordance with the Contrato de Promessa de Compra e Venda the Seller and Buyer may proceed to the “Closing of the Contract.” This is concluded at the Notary Office selected beforehand. The Notary will confirm that the documentation is correct and will then proceed to finalise the purchase of your property in Portugal. The outstanding balance is then paid to the Seller in the form of a Guaranteed Bank Instrument. This Act will be recorded by the Notary with the Buyer receiving two Certified Copies of said document.
Land Registry Office
Conservatoria do Registo Predial - Upon completion of the transfer of ownership it is recommended that the property be registered in the name of the new Owner at the local Conservatoria do Registo Predial (Land Registry Office). This procedure is not obligatory however it is recommended. The registration can be done at any time after the closing of the purchase.
Additional documentation needed to conclude the purchase
Property Tax Document
Caderneta Predial - The current Owner of the property will have this document which was supplied to him by the local Finanças – Tax Office. A valid document will need to be obtained, which for tax purposes only confirms the description of the property, Fiscal Number, Owner and annual taxes payable on declared value.
Energy Certificate and C02
Certificaçâo Energética e Ar Interior - This document will be supplied by the Seller and must be delivered by them at closing. This document certifies the condition of the property in relation to its energy efficiency.
Property Registration Certificate
Certidão de Teor - The local Conservatória do Registo Predial (Land Registry Office) will provide you with this document which will confirm that the Seller is the Legal Owner of the property. This document will also confirm whether there are any outstanding Charges or Liens secured on the property. This document confirms the Legal History of said property and is only valid for a short period of time.
License to Utilise
Licença de Utilização (Residential, Commercial, Agricultural, etc) - The current Owner of the property will have to provide this document which may be obtained from the Câmara Municipal, local Town Hall. This document confirms the legal usage for said property.
Imposta Municipal de Imóveis (IMI) - Properties in Portugal are subject to an Annual Tax (IMI). The IMI rates are calculated on a similar basis as the following:
Rural Properties: 0.8%
Urban Properties between: 0.4% to 1.2% (Rate varies from Council to Council)
Certain amounts can be paid in two or three installments.
The first is payable prior to the end of April with the remainder payable prior to the end of September. In some cases the taxes can be paid in three instalments. If this tax is not paid the State has the right to auction your property to the highest bidder to recover their losses.
Utility fees and charges: Water, Sewage, Waste Collection, Electricity, Gas, Telephone, Cable, Condominium fees (Where Applicable)
The information provided above is for guideline purposes only and does not constitute any legally binding information or agreement. It is recommended when buying or selling property in Portugal that you seek the advice of a legal representative and tax advisor.