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.
But no guide can replace independent legal advice, especially for those considering retiring in Portugal and have no experience of legal processes in other countries. 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!
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Introduction to Portuguese Property
Portugal has become a popular destination for foreigners looking to buy property, thanks to its sunny climate, beautiful landscapes, and welcoming culture.
The Portuguese property market offers a wide range of options, from modern apartments in city centers to traditional villas in the countryside. Whether you’re looking for a holiday home, a retirement destination, or a place to start a new life, Portugal has something to offer. With its relatively low cost of living and favorable tax environment, Portugal is an attractive option for many buyers.
In this guide, we’ll explore the ins and outs of buying property in Portugal, including the buying process, tax implications, and what to expect from the local real estate market.
Location and Lifestyle
When it comes to buying property in Portugal, location is key.
From the rolling hills of the countryside to the vibrant cities of Lisbon and Porto, Portugal offers a diverse range of lifestyles to suit every taste.
The Algarve region in southern Portugal is a popular destination for holidaymakers and retirees, with its golden beaches, golf courses, and mild climate. In contrast, the northern regions of Portugal offer a more rural way of life, with picturesque villages, scenic landscapes, and a strong sense of community.
Whatever your lifestyle preferences, Portugal has a location to suit your needs. With its rich culture, delicious cuisine, and friendly people, Portugal is an ideal destination for anyone looking to buy a property and start a new life.
1. What Information do I Need Before Buying a Resale Property in Portugal?
Before you start, it’s good to know current Portugal property market trends and the best ways to find property to make an informed investment decision.
There are also several legal issues to consider when buying a property in Portugal. In particular, the vendor must 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
And you should also check:
- 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
For those looking to maximize their investment, research various property investment opportunities in Portugal can help you identify locations with the best returns before deciding on a specific area.
2. And what if it is a New Property?
Before buying a new property you should check the following:
- That there is a project license where the relevant technical department confirms that the building project has been carried out in accordance with the original approval given by the town hall.
- That the license of first occupation has been issued.
- The certificate of habitability of the properties is available.
- Inscription in the property registry of the urbanization along with the necessary insurance for any defects in the building work.
- That any sums advanced (via instalments) for the purpose
3. What Legal and Financial Obligations do Sellers have towards the Buyer?
The vendor of the property has the following legal obligations:
- To keep the property until it is handed over to the purchaser.
- To transfer the property.
- To make good any defects or deficiencies in the property.
- To pay certain costs and taxes.
If the seller knows of any defects in the property and has not informed the buyer, the buyer may rescind the contract or claim damages. There is a 6 month period from the date of purchase in which to exercise this right.
Unless otherwise agreed, the purchaser must pay the costs of the drawing up of the deeds of transfer as well as the costs necessary to transfer the property - this would include notary costs. Any capital gains tax due will be paid by the vendor.
4. What is a Promissory Contract?
Assuming all the preliminary checks show the property is as stated and can be bought safely, the purchaser may need some time to gather the funds to complete the purchase.
When buying Portuguese property the process allows for this by use of a ‘promissory’ or ‘deposit’ contract. Effectively this is a contract-to-contract and normally states that before a stated future date the property will have passed from the seller to the buyer. If either side fail to complete there are penalties.
The buyer will lose 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 i.e. 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 fulfill obligations under the contract.
- Loss of the property.
- Failure to pay.
- Hidden charges (over the property) or defects.
7. Property Purchase Costs: What Fees, Taxes and Charges can you expect?
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.
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.
Get a fiscal number in Portugal 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.
Portuguese banks are increasingly willing to offer mortgage loans, making it easier for foreigners to finance their property purchases. 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, and it’s important to choose a reliable mortgage provider to ensure a smooth application process. 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 its sun, sand, and Madeira wine, it is also known for its various tax rates!
They are literally everywhere you look and it is easy to get confused by the endless acronyms. Here we highlight the principal property taxes in Portugal that you are likely to come across when buying a property. Understanding local taxes, such as the IMI and IMT, is crucial for property buyers to avoid unexpected costs. 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
Additionally, a wealth tax may apply to high-value properties, so it’s important to be aware of all potential tax obligations.
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 a house 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 calculated on the tax registration value of urban and rural properties in Portugal. It is due by the owner, the usufructuary, or the holder of the surface right of a property as of 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.
If you plan to generate income from your property, understanding the Portugal property rental market dynamics is essential for maximizing returns while ensuring compliance with local regulations.
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, capital gains tax in Portugal is a personal tax levied on any increase in wealth brought about by selling property or other assets. 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 has a higher proportion of apartment style properties than the UK or Ireland. When multiple owners share common parts of a property such as the lifts in the building, porter facilities, the building itself, the car-park or swimming-pool there is a cost associated with the upkeep of such shared amenities.
Each owner 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 above, any purchaser should consider other 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 valuation 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. Land Registry Check
To ensure the property particulars are correct i.e. the current owner(s), mortgage charges and any other encumbrances on the property and any court judgments affecting the property etc you need to check with the land registry at the local town hall where the property is located.
If you want to do it yourself the cost is a nominal administrative charge of €6. In Portugal this is called 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 a house in Portugal you may hear about little tricks to save money - be warned! While in Portugal it is not strictly necessary to use a Notary to assist in the process of a property conveyance, it can be very practical to do so. Failing to use a notary will mean your ownership is not publicly recognised and could therefore be at risk.
The costs vary greatly and will be around 1000€ in Lisbon but perhaps as little as 250€ outside the capital.
21. Registration 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 your title is protected against 3rd parties. 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 mortgage.
This can be managed by your lawyer in Portugal. However, a notary will have special access to the Land Registry and this can make the process smoother to get 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 requires the vendor to present a receipt from the lender to demonstrate 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.
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23. Buying Property in Portugal after Brexit: Role of a Real Estate Agent
Although Brexit has been ‘done,’ those moving to Portugal from the UK still have options should they wish to relocate here, 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! UK nationals must now adhere to the 90/180 day Schengen Area rule, which limits their stay in Portugal without a visa.
For property owners who cannot be present year-round to handle maintenance and tenant issues, reliable Portugal property management services can be invaluable for protecting your investment and ensuring hassle-free ownership, particularly for non-resident investors.
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 permit 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. New rules have been implemented for UK nationals looking to buy property in Portugal post-Brexit, affecting visa and residency options.
Non-EU citizens who apply for a Portuguese residence permit must show proof of sufficient funds and accommodation - for example under the Retirement Visa in Portugal. The reason for applying for a Portuguese residence permit may require additional documentation. Portugal’s Golden Visa Program is an interesting option available to UK nationals 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.You will need to invest at least 350,000 euros in Portugal under one of the qualifying routes.
In return, your Golden Visa will allow 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.
On tax, unfortunately the Portuguese non-habitual residency programme has been closed to new residents, however it is still open to those who previously moved to Portugal and did not apply for the program at the time.
24. Pitfalls and Common Mistakes
Buying the right property in Portugal can be a great experience, but there are several pitfalls and common mistakes to avoid. These include
- Not researching the market thoroughly
- Not understanding the legal and financial aspects of the purchase
- Not working with a reputable real estate agent
- Not budgeting for additional costs, such as property transfer tax and stamp duty
- Not considering the tax implications of owning property in Portugal
- Not seeking professional advice from a lawyer and/or accountant
By being aware of these potential pitfalls and taking the necessary precautions, you can have a smooth and successful property buying experience in Portugal.
25. Property Condition and Renovation
When buying a property in Portugal, it’s not uncommon to find older properties that require renovation or modernization. If you’re planning to renovate a property, it’s essential to factor in the costs and potential pitfalls of the renovation process. Here are some things to consider:
- The cost of materials and labor, and any potential for cost overruns
- The need for planning permission or other regulatory approvals
- The potential for hidden defects or structural problems
- The impact of renovation on the property’s value and potential for resale
- The need for professional advice and guidance from architects, engineers, or other experts
By carefully considering these factors and seeking professional advice, you can ensure that your renovation project is successful and adds value to your property.
26. Insurance and Utilities
Once you’ve purchased a property in Portugal, you’ll need to consider insurance and utilities to ensure that your home is protected and functional. Here are some things to consider:
- Building insurance to protect against damage or loss
- Contents insurance to protect your personal belongings
- Liability insurance to protect against accidents or injuries
- Utility bills, such as electricity, water, and gas
- Internet and phone services, and any potential for installation or connection fees
- Property taxes and other local charges, such as the IMI (Imposto Municipal sobre Imóveis)
By researching and comparing different insurance and utility options, you can ensure that your property in Portugal is protected and functional, and that you’re getting the best value for your money.
27. Frequently Asked Questions
Can foreigners buy property in Portugal?
Yes, foreigners can buy property in Portugal! There are no restrictions, and non-residents have the same rights as locals. While the Golden Visa program no longer includes real estate investments (as of October 2023), Portugal remains an attractive destination for foreign buyers. Alternative visa options, like the D7 and Digital Nomad Visa, offer residency opportunities for those looking to live in the country.
What are the pitfalls of buying a property in Portugal?
Buying property in Portugal comes with potential pitfalls. Legal issues, such as unclear property titles or inheritance complications, can arise, along with unexpected costs like taxes and maintenance fees. To avoid surprises, thorough due diligence with a local attorney is essential for a secure transaction.
What is the tax on buying property in Portugal?
When buying property in Portugal, you’ll pay a transfer tax (IMT) and stamp duty. IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) is charged at progressive rates up to 8%, depending on the property’s value and whether it’s a main or secondary home. A 0.8% stamp duty (Imposto de Selo) also applies. Some exemptions exist, such as for lower-value properties or first-time buyers.
How long can you stay in Portugal if you own a property?
Owning property in Portugal doesn’t grant automatic residency. Non-EU citizens can typically stay for 90 days within a six-month period without a visa. To live there full-time, you’ll need a residency permit, such as the D7 Visa for passive income earners or the Digital Nomad Visa for remote workers.
