In today's blog post, we will talk about all the purchase taxes & costs that come with buying property such as apartments, land plots, houses, or villas in the Algarve. Any property price advertised in Portugal, no matter where, privately, real estate, internet, or anywhere else, are net prices to the vendor, meaning the purchase taxes, fees, and costs must be calculated on top of the agreed price with the vendor. Let´s start with the costliest one:
TAXES
IMT
In Portugal, the Property Purchase Tax – IMT (Imposto Municipal sobre as Transmissões) is the most expensive of the taxes when buying your property – and can be divided into 4 main property groups and is levied on the value contained in the deed contract or on the net asset value of the properties, whichever is greater, it is paid to the state and exist in every transaction or sale.
The Tax is calculated in the following way:
IMT = Value of the Deed or Net Asset Value (the higher one) x Appliable Tax rate – Benefit of the Tax Rate
-Own and Permanent Housing
|
Simplified Table for Own and Permanent Housing |
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|
Property Value |
Tax Rate |
Benefit on the Tax Rate |
|
Up to € 92,407.00 |
0% |
0.00 |
|
From € 92,407.00 to 126,403.00 |
2% |
1848,13 |
|
From € 126,403.00 to 172,348.00 |
5% |
5640,23 |
|
From € 172,348.00 to 287,213.00 |
7% |
9087,19 |
|
From € 287,213.00 to 574,323.00 |
8% |
11959,32 |
|
From € 574,323.00 to 1,000,000.00 |
6% |
0.00 |
|
Above € 1,000,000.00 |
7.5% |
0.00 |
So in case you get to an agreement for the purchase of the house with the owner for €500.000:
IMT = €500.000 x 8% - 11959,32 = €32040.68
-Secondary housing or lease
|
Simplified Table for Secondary Housing or Lease |
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|
Property Value |
Tax Rate |
Benefit on the Tax Rate |
|
Up to € 92,407.00 |
1% |
0.00 |
|
From € 92,407.00 to 126,403.00 |
2% |
924.07 |
|
From € 126,403.00 to 172,348.00 |
5% |
4716.16 |
|
From € 172,348.00 to 287,213.00 |
7% |
8163.10 |
|
From € 287,213.00 to 574,323.00 |
8% |
11035.25 |
|
From € 574,323.00 to 1,000,000.00 |
6% |
0.00 |
|
Above € 1,000,000.00 |
7.5% |
0.00 |
In the same case for a secondary housing or lease on a property of €500.000
IMT = €500.000 x 8% - 11035.25 = €32964.75
-Rustic Buildings
|
Simplified Table for Secondary Housing or Lease |
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|
Property Value |
Tax Rate |
Benefit on the Tax Rate |
|
All values |
5% |
0.00 |
-Other Urban Buildings and other costly Acquisitions
|
Simplified Table for Secondary Housing or Lease |
||
|
Property Value |
Tax Rate |
Benefit on the Tax Rate |
|
All Values |
6.5% |
0.00 |
IMPOSTO DE SELO (STAMP TAX)
Being a “antiquate” tax, so to say, because transactions don´t really require a stamp, the Portuguese state still gets an interesting amount from this tax. For example, on purchasing property with your capital you are charged at the rate of 0.8%, bank loans are taxed with a 0.6% stamp tax.
Using our example from before on a property in Lagos for €500.000
Imposto selo = €500.000 x 0.8 % = €4000
IMI (Imposto Municipal sobre Imóveis)
IMI is a tax that is charged on who already owns a property and is levied annually with rates varying from 0.3 % to 0.8%, and it´s based on the net asset value, which in most cases is lower than the purchasing price. These rates are set by the local councils of where the property is located.
For example, suppose the property is located in Lagos. In that case, the tax rate will be 0,34% in 2021 (will be lowered to 0,32% in 2022, making it very close to the minimum established by the law of 0,30%). Thus, we will be left with the following amount to pay annually:
Assuming the €500.000 purchase price property has a net asset value of €350.000
IMI= €350.000 x 0.34% = €1190
WHAT ARE THE OTHER COSTS OF BUYING A PROPERTY IN THE ALGARVE, PORTUGAL?
Notary & Registry
The transaction of the property has various costs until its legal formalization. That formalization is done via a deed that can be executed in different locations. Most commonly notary offices and conservatories, the state created a way to centralize all these steps in a method called “Casa Pronta” (you can also pay the taxes here). The cost of the deed in this method is 375€. In other notaries, this value can be a lot higher depending on their pricing.
Lawyers
For straightforward deals, lawyer fees are 1%(+23%vat) from the purchase price. This figure is standard but can sometimes vary if it’s a high-priced property or a regular client and adjusted accordingly. Therefore, we highly recommend using lawyers for the purchase of property in Portugal and advise our clients to do so. They take care of the transaction and make extensive due diligence before the purchase, which can save you a lot of headaches and give you peace of mind.
MORTAGES & LOANS
- BANK COMMISSION: If you decide to buy in the Algarve and use bank financing, you might be surprised that you´d only pay a small commission that includes the evaluation of the house and study of the loan process. Some people like to use mortgages brokers to find the best suit for their situation, which we can recommend if the client requires. In numbers, this should be around €1000 euros.
- Life insurance: Banks will insist that you pay for life insurance on the house to cover for potential misfortunes. This depends on many factors, such as which insurance company, age, and health conditions of the applicant.
- General Insurance on the house: This varies on the value of the house.
- Notary: Using a bank loan, you will also have to register the mortgage on the house on the deed day, which will be another €350 and a total of 700 euros in the “Casa Pronta” option.
Technical Due Diligence
Not obligatory, but a good measure to take before buying a second-hand property is to check the current state of amenities such as air-conditioning, roofing, pools, and other property details. The survey cost can be from 300€ to 1000€, depending on the property's size and what work to be done.
