What are the taxes and costs of a vendor when selling a property in the Algarve, Portugal?
Imposto sobre mais-valias imobiliárias (capital gain tax)
If sold for a higher price than you bought it on your property sale, you'll have to declare the gains with the IRS. These will be calculated and have various factors which come into play for the calculation. In the case of property, you'll have to consider the charges you have had with the house and its sale, as well as the updated exchange rate coefficient. Finally, and most importantly, if you are a resident or non-resident.
Capital gain = (selling price) – (buying price x depreciation coefficient) – (charges with the property) – (charges with the valorization of the property)
Residents:
After you calculate the capital gain on your property, the state will charge you at a rate of 50% on the amount according to your tax bracket applicable to your overall income. So, for example, if you made a capital gain of 100.000 euros "profit," the state will charge you on the amount of 50.000 euros. But there are a few exceptions to this case, where this amount can be reduced, like:
• If it's your primary residence and you reinvest the money in the timeframe of 36 months in a new primary residence for at least 48 months since the sale of your old house, you are free of paying capital gain. (you will have to reinvest the whole amount)
• If the property has been bought before the 1st of January of 1989, the capital gain tax law entered into effect after this date.
• If you are over 65 years of age at the sale of the property, you can reinvest the amount in a retirement fund without being charged.
Non-residents:
If you're a non-resident for tax purposes, the tax applicable to your capital gain will be 28% for individuals and 25% for companies, their exceptions and ways to be taxed as a resident if you are an EU citizen, but we recommend speaking to your lawyer or accountant.
Real estate fees
If you decide to contact a professional licensed real estate company to sell your property, you can always get back to us! You don't need an agent to sell your property, but it definitely speeds up the process and lets you get the most out of the deal with their professional knowledge of the local market, so it's a good investment. In Portugal, the seller pays for the agent's fees, not the buyer. The fees are established during the property listing, to which you have to ad 23% VAT.
Lawyer fees
It is not obligatory to have a lawyer for the selling process, but if you opt for one, lawyer fees are 1%(+23%vat) from the selling 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 to sell property in portugal and advise our clients to do so, which can save you a lot of headaches and give you peace of mind.
Mortgage cancellation
In general, there are no hefty charges for anticipating the payment of the mortgage. It can be 0,25% or 0,5% of the amount loaned depending on the duration of the bank loan still left. There are no charges in some cases, so we recommend asking your mortgage broker or bank for your particular case.
Questions and answers:
How do I sell a property in Portugal?
The short answer would be to contact a real estate agent of your choice or us. We recommend getting all the paperwork reviewed and updated before placing it on the market. This helps you save a lot of time and headache when you find the buyer for your property. In Portugal, you can have more than one agent advertising your property. However, make sure that they all give the same information about the selling price and specifications.
After these steps, you will most likely get viewings to your property and eventually an offer, and the negotiation process starts. After this step, there should be a promissory contract where the buyer secures the property, usually with an amount of 10% on the purchase price (you should have a lawyer already appointed at this stage).
The promissory contract should stipulate the time frame for signing the title deeds where the remaining amount, 90%, will be transferred. If you have a mortgage on the property, it will be canceled simultaneously on the same day at the notary. Ask your lawyer to help you change supply contracts such as water and electricity bills, so they are not running in your name after the sale.
Does it take long to sell a property in Portugal?
This depends on a lot of factors. We recommend using a real estate agent because they will advise you on promoting your property in the best way possible, making professional videos and photographs, advertising on various portals and their own database, pricing the property correctly (very important), and more! So, from our experience in the current market, property tends to sell quickly it can be on the same day to or up to 2 months, after this period if there is no visits / offers you should revaluate the selling strategy.
