Welcome to the Advocate Abroad® guide to buying property in Portugal

This property guide will give you an overview of the conveyancing process in Portugal, including information on both your and the seller's legal rights and obligations as well as pitfalls to avoid. This will be of particular use of course to those who are buying property in Portugal as a foreigner

That said, no guide can take the place of independent legal advice. You will find customer reviews of the Advocate Abroad English-speaking lawyers in your area of Portugal, which will perhaps give you the confidence to get in touch before taking concrete steps towards investing in a property.

Advocate Abroad® is a unique network of independent English-speaking lawyers, accountants, architects, translators and financial service companies in Portugal. There are many ways to buy a property in Portugal. You can buy off-plan, you can buy a plot of land to build a detached house, you can buy an already built house. In this guide, we will give you some hints and tips on buying off-plan as well as resale property. Now, on with the guide! 

1. What Information do I Need Before Buying a Resale Property in Portugal?

There are a number of legal issues that need to be considered when buying a property in Portugal. In particular, the vendor is legally obliged to provide the following documentation:

  • Permanent Certificate of Land Registration Building
  • Passbook Habitability License
  • Building License Permit, if property is still under construction
  • Deeds
  • Property plan
  • Energy certificate of the property

In addition, the buyer should be careful to confirm the following:

  • Name of the current owner of the property
  • If there is any mortgage or other charge over the property
  • The physical property conforms to the description
  • That the land is correctly zoned for building
  • The buyer should also make sure there are no sitting tenants in the property

2. And what if it is a New Property?

Before buying a new property it is advisable to confirm the following:

  • The existence of a project license in which the relevant technical department confirms that the building project has been carried-out in accordance with the original approval originally issued by the town hall.
  • That the license of first occupation has been issued.
  • The certificate of habitability of the properties should be available.
  • Inscription in the property registry of the urbanization along with the necessary insurance for purposes of dealing with any defects in the building work.
  • That any sums advanced (via instalments) for the purpose

The vendor of the property has the following legal obligations:

  • To conserve the property until it is handed over to the purchaser.
  • Transfer the property.
  • Make good any defects or deficiencies in the property.
  • To pay certain costs and taxes.

If there are any defects in the property known to the seller and which may have not been communicated to the buyer, the buyer may possibly rescind the contract or claim damages instead. There is a six month time limit, from the date of purchase, in which to exercise this right. 

Unless there is agreement to the contrary, the purchaser is obliged to pay the costs relating to the drawing up of the deeds of transfer as well as those costs necessary to effect the transfer of the property - this would include notary costs. Any capital gains tax that is due will be payable by the vendor. 

4. What is a Promissory Contract?

Assuming that all of the preliminary checks determine that the property is as stated and can be purchased safely, the purchaser may need some time to put together the funds necessary to complete the purchase. 

The Portuguese property purchasing process provides for this by use of a ‘promissory’ or ‘deposit’ contract. Effectively this is a contract-to-contract and normally stipulates that before a stated future date, the property will have passed from the seller to the buyer. Should either side fail to complete there are penalties. 

The buyer will forfeit the deposit (up to 10% of the value of the property depending on the value) and the seller must return the deposit and pay to the purchaser a penalty equal to the amount of the deposit ie return twice that amount. 

5. What Is an ‘Escritura’?

The final contract or ‘escritura’ as it is known in Portuguese is when the title of the property passes and the buyer’s new title may be registered in the local property register. 

The signing takes place in the office of the public notary who is a type of official registrar who must witness the contract signing in order for it to be legally binding. On the day of the signing all interested parties meet in the office of the notary - this may include a representative of the bank if a mortgage is required. 

The deed is read aloud by the notary and the parties then present their identification after which the deeds are signed by the vendor, the purchaser and the notary. At this point the monies for the purchase are handed over in the form of a bank-guaranteed cheque. 

6. When May a Contract for Purchase be Legally Withdrawn?

The reasons for which a contract may be rescinded are normally included in the contract itself in order to protect the parties to the contract. The following would however be the main reasons for rescinding a contract for the purchase of property:

  • Failure to fulfil obligations under the contract.
  • Loss of the property.
  • Failure to pay.
  • Hidden charges (over the property) or defects.

7. What Fees, Taxes and Charges do I pay when Buying a Property?

Whether you are buying or selling a property in Portugal there are a number of costs associated with the process. A number of these you will expect if you have been through the process in another country, but some you will not. 

We now consider the main charges and the party that is usually responsible is the buyer (unless otherwise indicated). However, it should be borne in mind always that the concept of freedom to contract is a cornerstone of Portuguese law and the parties may always assume whatever responsibilities they wish with regard to payment of the costs and taxes incurred when transferring property in Portugal. 

Find more information in Property Buying costs in Portugal

8. Obtain an Nif (Número De Identificação Fiscal)

This is arranged in the Finanças offices (Autoridade Tributária). Some offices have recently started working on an appointment basis only, while others don’t. Lawyers do have priority when arranging an appointment. 

Getting a fiscal number is the first thing to be done when you have found a property in Portugal that you wish to purchase. Although it is not a difficult or complex process it is important to know exactly what kind of purchase/investment you are going to make because there are different types of NIF (NIF for residents, NIF for non-residents, NIF for the non-habitual resident tax regime, etc). 

9. Opening a Bank Account in Portugal

Most Portuguese banks will not allow you open an online bank account, especially if you aren't a resident. You will normally need to use a power-of-attorney to open a bank account online. 

This basically means that you give permission for a lawyer to act on your behalf and pay them. As an alternative, you could open an account with a bank that has branches outside Portugal. 

While, people have been able open Portuguese bank accounts this way, it does limit the choice severely. Another option is to visit Portugal and open a bank account that way. While this option has its benefits, it is risky since the bank may ask for documentation that you don't have on you, rendering the whole effort a waste of time and effort. It's likely to be more cost-effective to use the power of attorney option, as it does not include a trip in Portugal. It's difficult to say no to this! 

The following items are generally required to open a bank account in Portugal:

  • Passport (or European identification card)
  • Address proof (e.g. Driving licence or utility bills
  • NIF (Portuguese financial number)

Banks may request proof of income or pay slips. This is a peculiar requirement that some Portuguese banks may have. Your pension slips will suffice if you are a pensioner. If you are self-employed, you must show your tax return.

10. Getting a Mortgage Loan in Portugal

Foreign nationals including citizens of another European country will require a minimum deposit of 20% to obtain a Portuguese mortgage. The amount that you can borrow will vary depending on which lender you choose. It could be anywhere from 60% to 80% of your property's purchase price or valuation. 

There are also loans that can be financed at fixed or variable rates, depending on which lender you use. Portuguese lenders may require supporting documentation to be processed for a mortgage application. These documents could include:

  • Photocopy of passport
  • Copy of the Portuguese tax number
  • copy of the most recent utility bill to prove address
  • Credit report
  • Recent bank statements
  • Recent pay slips
  • Recent personal tax returns
  • Copy of the tenancy agreement (s)

The bank will need proof of your income. This could include rental income, dividends, salary income and investment income. It also includes pension income. This can be proven by bank statements, tax returns, and pay/pension slips. 

There will be costs involved in arranging a mortgage and these should be factored into your total property buying costs.

11. Property Taxes in Portugal

While Portugal is famous for it’s sun, sand and Madeira wine, undeniably it is a world-beater when it comes to taxes! 

They are literally everywhere you look and it is easy to get confused by the endless acronyms. Here we highlight the principalproperty taxes in Portugal that you are likely to come across when buying a property. In general the principal taxes or charges in Portugal can be grouped as follows:

  • IVA (VAT)
  • IMT
  • IMI
  • IS - Stamp Duty
  • Capital Gains Tax
  • Property Management Fees (Despesas de condomínio)
  • Other Charges

For more information, as well as to discover the specific tax rate for a particular tax in Portugal, read: Property Tax in Portugal.

12. IMT - Imposto Municipal Sobre a Transmissão Onerosa de Imóveis

The IMT is a municipal Property Transfer Tax and is levied on the transfer for consideration of real estate located in the Portuguese territory. 

The rate will depend on either the purchase price or the tax registration value, which one is higher. It will vary between 0% and 8% if it is a rural of urban property, if the property is exclusively intended to permanent place of residence or not. 

13. IS - Imposto De Selo

Stamp duty is due on acts, contracts, documents, titles, books, papers and other items contained in the General Table, which occur in Portugal and are not subject to or are exempt from VAT (such as is the case of property purchase). 

The fixed stamp duty rate for buying Property in Portugal is 0,8 % of the purchase price or the tax registration value - whichever is higher. 

14. IMI – Imposto Municipal Sobre Imóveis

Property Tax is computed on the tax registration value of urban and rural properties located in Portuguese territory. It is due by the owner, the usufructuary, or the holder of the surface right of a property with reference to 31st December of the relevant year. 

The tax registration value is determined by means of valuation, based on the type of property based on the information given by the taxpayer and by the application of different ratios which depend on the type of the property, its localization, state of conservation and facilities. It is 0,8 % for rural properties and ranges from 0,3% to 0,45% depending on the municipality. 

Each municipality determines, on an annual basis, the applicable IMI rate within the mentioned ranges. As from 2015, municipalities, by resolution of the municipal assembly, can fix a reduced rate to buildings for permanent residence of the owner, based on the number of dependents therein living. 

The reduction rate may be up to 20% in the case of one dependent, 40% in the case of two, and 70% in the case of three dependents. Please note, this reduction is not available if you are renting the property out to tourists. 

15. Capital Gains Tax

This is not a tax paid at the time of the purchase nor is it a property tax per se. Just as in the UK it is a personal tax levied on any increase in wealth brought about by the sale of an asset. In Portugal it is known as the ‘Mais Valias’ tax (Imposto Sobre O Rendimento De Pessoas Singulares). 

The actual amount that has to be paid will depend on a number of variables such as the rate of tax at the time, the length of time that the property has been owned, the value of the property and any profit derived at the time of sale. If the full amount realised from the sale is used to purchase another home then this tax is not payable. 

Also, it should be noted, unlike other European countries, the purchaser of a non-resident property owner is not forced to retain a percentage of the purchase price and pay it directly to the Tax Agency, leaving the vendor having to prove all due taxes have been paid before being able to claim back the retained amount. 

16. Property Management Fees

Portugal, similar to other mainland European countries has a much higher proportion of apartment style properties than in the UK or Ireland. When multiple proprietors share common parts of a property such as the lifts in the building, porter facilities, the building edifice, the car-park or swimming-pool there is a cost associated with the upkeep of such shared amenities. 

Accordingly each proprietor is required to contribute financially to the upkeep by way of a community charge, known in Portugal as ‘la comunidad’. 

The amount payable varies from building to building or urbanization to urbanization but will also be determined by the property owned within the building {some properties are larger than others and therefore should pay a larger share). For purchasers of property, an important point to note is that the purchaser of a second-hand apartment within a building or community assumes the debts and pending community charge for the previous and current years. 

For this reason the seller is required to present the purchaser with a certificate of proof of payment of the community charge unless the purchaser has expressly waived this requirement. 

17. Other Charges

In addition to the main taxes outlined above, any purchaser should consider additional costs associated with the purchase of a property in Portugal, such as the following: If a community charge is being paid then this will most likely include the charge for collection of rubbish but if the property is a separate building such as a villa in its own grounds, then such charges are paid separately. 

18. Valuation of the Property

This will usually be a requirement of the financial institution that may issue the mortgage although they will insist that you, the buyer, must pay. 

The person carrying out the survey must be certified by the relevant government ministry under Legislation N° 153/2015. The fees charged may vary and will ultimately depend upon the following factors:

  • Not all surveyors or survey companies charge the same.
  • Where the property is located.
  • Will the surveyor need to charge expenses (mileage etc) to reach the property.
  • Does the surveyor need to access technical information (plans etc).

Ultimately, the financial institution will have to accept the surveyors report and so you will most likely use one recommended by them or by an independent surveyor registered with the CMVM. 

19. Checking the Land Registry

To ensure that the particulars of the property are correct i.e. the identity of the current owner(s), the mortgage charges and any other encumbrances that currently exist on the property and the existence of any court judgments affecting the property etc it is necessary to check with the land registry at the local town hall where the property is located.

If you wish to do it yourself, the cost is a nominal administrative charge of €6. In Portugal this certificate is known as the informação predial simplificada though a lawyer will usually get that together with “certidão do registo predial” - property registration certificate, at a cost of €15. 

20. The Notary

Buying Property in Portugal has its little tricks to safe money. While in Portugal it is not strictly necessary to use a Notary to assist in the process of a property conveyance, it can be practically advantageous to do so. 

The costs vary considerably and will normally be around 1000€ in Lisbon but perhaps as little as 250€ outside the capital. 

21. Inscription of New Title on the Land Registry

Once the property deeds have been created and signed by both parties, it is very important to have the new title registered on the Land Registry. This will ensure that your title is protected against any 3rd party. It will also be mandatory if you have obtained a mortgage to assist with the purchase of the property. 

The Registo Casa Pronta is a government provided service that is the cheapest way to do this. They charge 375 euros to register the property and 700 euros to register with the mortage. 

This can be managed by your lawyer in Portugal. However, a notary will have special access to the Land Registry and this can ensure a smoother passage to getting the title registered. 

22. Removal of the previous Mortgage from the Registry

While not a legal requirement, it is preferable to have any previously registered mortgage associated with the property removed from the register. 

This can be managed by your lawyer who will normally insert a clause into the property deeds that require the vendor to present a receipt from the lender to demonstrate that the mortgage has been paid off. 

Since the sellers’s mortgage is normally paid-off with the proceeds of sale, this operation happens at the same time as the conveyance, with a representative of the bank or mortgage company present to receive payment from the sellers for the balance of the mortgage outstanding and to provide the receipt so that the mortgage can be extinguished from the register. The seller is technically responsible for the costs associated with the removal of their mortgage, though in practical terms this will come out of the proceeds of the sale, which are paid for by the purchaser.

23. Buying Property in Portugal after Brexit

Although Brexit has been 'done,' Portugal is still open to British residents who would like to relocate there in 2021, especially those that are seeking to retire, though options do exist for those of working age, who have the luxury of moving to Portugal and continuing with their work by the beach! 

Non-EU/EFTA citizens who are planning to move to Portugal for longer than three months will need a long-term Portuguese residency visa. This allows them to apply for a Portuguese residence license from the SEF. Usually, an Autorizao de Residencia permit is granted to permit Portuguese residency for a year. You can renew this every two years, for a total period of five years. You can apply for permanent residence permits after this period. 

Non-EU citizens who apply for a Portuguese residence permit must show proof of sufficient funds and accommodation. The reason for applying for a Portuguese residence permit may require additional documentation. Portugal's Golden Visa Program is an interesting option available to British citizens and any foreign investor from outside the EU who have sufficient resources. 

This special program is designed to attract foreign investment to Portugal. If you purchase Portuguese real estate, or invest in excess of a certain amount, the scheme will speed up the process for to obtain residence in Portugal. Once you have been resident in Portugal for a certain period of time, you will be entitled to apply for citizenship. 

Under one of the qualifying routes you will need to invest at least 350,000 euros in Portugal. In return, your Golden Visa will permit you to live, work and travel freely in the Schengen countries. You must be present in Portugal at least 7 days per year. It may be a good option if you need to travel freely, are in a hurry to get residency in Portugal or have important business and family interests abroad. However, it will not be an option for those who wish to relocate to certain areas of Portugal. 

Please see: Buying Property in Portugal after Brexit.

© Copyright 2020 Advocate Abroad SL.

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Teresa, Lawyer in Faro ...
Teresa read law at the University of Coimbra. She is specialised in civil law, contracts, property and inheritance case, with more than 10 years representing international clients. She holds a postgraduate degree in Banking, Stock Exchange and Insurance Law and also holds the specialization course leading to the degree of Master of Corporate Law. A well-known speaker, Teresa's research focuses on issues of economic and financial law, as well as fundamental rights. She speaks English fluently.
We used this service for some specific legal and administrative issues relating to our property ownership in Portugal. Teresa and her team were very helpful, their service fees were reasonable. I would absolutely recommend them. We then used them again for IMI representation.
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Kay Hall
11 Mar 2024
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