In Portugal, people follow the concept of possession in which one has the right to full and exclusive rights of a real estate property. This type of property ownerships gives the Portuguese real estate market a benefit over other real estate markets around Europe!
When it comes to taxes related to wealth, there are some significant factors that one must keep in mind. You should well aware of legislation pertaining to taxes relating to benefits of a particular type of wealth as well as the rates which are applicable or have the legal council that can offer the best legal advice, which can be well worth the cost.
In Portugal, the purchase of fixed property usually results in the taxing of a local Municipal Tax which is related to the property’s ownership title of transfer.
This tax is charged for value when property rights are being transferred either in part or as a whole. Apart from full ownership, this tax will also apply for habitation, temporary use, usufruct, surface rights, and other similar purposes.
How Does The Application Of This Tax Work?
Depending upon whichever is bigger, the tax can be applied on the value of the property or the agreed value as per the purchase contract.
Various rates are used when determining this particular tax. However, for residential property the rate ranges between 0-6% with the exception of properties located in the Madeira and Azores Autonomous Regions where the rates are lower.
How does the stamp tax work (Imposto de Selo)?
This is a fee for handling various legal aspects of the transfer such as handling and updating of papers, deeds, documents, contacts, and compliance with acts. The stamp tax is also based on the agreed value in the purchase contract or the taxable value of the property, depending upon which is higher. Even in the case of transfers that are completely free, this tax is applicable. The rate of stamp duty is at 0.8 percent. Even loans between individuals or other entities, can carry a stamp tax.
The amount to be taxed is the value that is specified at the time the property is registered which is usually considered to be the date of sale. The property registration contains other information as well such as the identity of the owners, its location, and its description, in addition to its taxable value. Tax years run from January to December; the last day of every calendar year sees these registers being updated.
Who Pays These Taxes?
These taxes are paid by the individual that is making the purchase.
How are the taxes to be paid?
These can be paid in any Finance Delegation. This tax is paid on the basis of the taxable value of the property owned.
What Is The Municipal Property Tax Rate?
The rate varies when it comes to Municipal Property Taxes on an annual basis but stays within the range of 0.5 percent and 0.3 percent of the taxable value of the property, regardless of whether it is industrial, residential, commercial, or of any other type. These taxes are applied by the Municipalities in which the property is located.
When Is the Tax Paid?
This tax is paid for every year after it has ended. Consider the following information.
- Payments to be made in April for an amount lower than €250;
- Payments to be made in April and November if the amount if higher than €250 but lower or equal to €500;
- Payments to be made in April, July, and November if the amount exceeds €500.
What is The method Of Payment?
This tax can be paid through Home Banking, via Multibanco, through CTT, or in person at any of the many Finance Service Offices in the country.
For property owners who do not reside in Portugal but instead live in another location within the European Union, it is important to have a representative (Procurador) within the Portuguese territory’s tax domicile. A representative can be appointed via the Finance Website or at a Finance Service Office.
In a situation where the taxable value of the property in question is equal to or higher than 1, 000, 000 Euros, a Stamp Duty of 1 percent is applicable.
It is also important to note that if the buyer is a resident of a country or region that has tax rules more favorable than Portugal then the taxes levied on the purchase are much higher than what is mentioned above. Such countries or regions are known as Tax Havens. Such situations warrant the following rates.
- Tax on Property for a Valuable Consideration – 10%
- Municipal Property Tax – 7.5%
- Stamp Duty – 7.5% (on all urban properties with a value of 1,000,000 euros or more)
Certain tax benefits are also applicable when it comes to these taxes. Consider these that follow:
- Properties Designated For tourism Usage
- Redeveloped Properties
- Properties Relevant For Cultural Heritage