Buyers Guide

Buying and Selling in Portugal

Portugal, like all countries, has its own legal and taxation procedures surrounding the purchase and sale of property. Batista Property and its experienced sales team will be happy to guide you through the ins and outs of investing in Portugal, ensuring that when you make your decision, it will be an informed one. In this section we bring you a concise introduction to the Portuguese real estate transaction process, highlighting inherent costs and documentation.

As you enter the buying process on a property it makes obvious sense to find out as much as you can about its legal and financial status before making any commitment. Appointing an experienced local lawyer to verify the property prior to purchase will ensure peace of mind. Your lawyer will make the appropriate checks in the relevant institutions, such as:

- Certificate of the Land Registration (Certidão de Teor da Descrição Perdial): This document is used by the local Land registry office and proves the property ownership.

- Booklet (Caderneta Perdial): This is issued by the tax Department and will confirm that the property has been registered for tax purposes.

- Habitation licence (Alvara de Licença de Habitabilidade/Utilização): This is issued by the local Town Hall (Camera Municipal) and proves that the building complies with the relevant building regulations.

- Fiscal Number: Everyone who wants to purchase a property, even when you are a non -resident, will need to obtain a fiscal number. Take certified copies of your passport, a small fee and attend a fiscal department (Finanças).

Ownership Types and Completing the Transaction:

- The path the property transaction takes depends on its current ownership. If the property in question is owned by an individual(s) then a Promissory Contract of Purchase and Sale (Contrato Promessa de Compra e Venda) is drawn up by the purchaser’s lawyer. This document contains all the conditions of the transaction, all details of the property, the terms and conditions agreed, price, completion date, inventory etc. and a time limit is established for the signature of the final deed in accordance with the wishes of the parties. A deposit of minimum 10% of the purchase price is usually required. If a buyer defaults on the contract he loses any deposit paid, if the vendor defaults the double of the deposit is paid back.

- Checks are made that the IMT (property transfer tax) has been paid and the content of the final deed of purchase and sale is verified, before being read out to the parties (or their representatives). The deed is then signed and the balance of the transaction price is paid. The maximum rate being 6,5% of the property price.

- The final deed (Escritura de Compra e Venda) is done before a notary and this is prepared and drawn up based on the property's documents. The presence of either parties (seller and purchaser) or their legal representatives are required to sign the deed. At this stage, payment of the balance of the price must be made. Previous to the deed, all expenses and taxes relating to the property have to be in order; otherwise you might be responsible for those payments (E.g. rates, electricity and water bills). After obtaining a certified copy of the deed, the registration of your property must be applied for, so that the property will be registered in your name.

Calculating Costs

Some of the costs and taxes involved in real estate transaction in Portugal have been alluded to in the text above. To ensure you are fully aware of any possible costs you may have to face when making your investment, we’ve compiled a typical costing scenario for you here.

Costs break down into two categories: service charges and local transaction taxes. Service providers employed within the purchase and sale of a property for the purchaser include a lawyer fees can be calculated to a maximum of 1% of purchase price.

Service costs for the vendor include the estate agent’s fee of 5% plus IVA (value added tax):

- IMT – Property Transfer Tax: This tax is levied on the purchaser immediately prior to the signing of the final deed with various percentile rates (2% to 8% of the purchase price) calculated in accordance with the value of the property. Properties priced between 580.066€ to 1.010.000€ are subject to a single percentile rate of 6% and properties priced over 1.010.000€ are subject to a single percentile rate of 7,5%. Building plots are subject to a rate of 6.5%.

- IMI – Municipal Property Tax: is an annual property tax levied on all properties in April and September (referring to the previous year). IMI rates vary from council to council and property to property – between 0,3% and 0,8% of the fiscal evaluation of the property. Some exemptions to paying this tax for a certain timescale can apply to purchasers if the property is bought as a primary residence.