Tuesday February 07, 2012
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Estate Agents Portugal |
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Estate Agents Portugal |
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Buying property in Portugal is open to all foreigners without restriction. An English speaking lawyer is essential to ensure your transaction runs smoothly.
Before you buy your property, bear in mind that residential property must legally have a habitation licence if constructed after 1951. In addition, it will need to have been officially recorded at the Land Conservatory and a Caderneta Urbana, that describes the property in detail, must be obtained from the tax office.
As in many overseas locations, the Public Notary merely witnesses your property transaction. Albeit highly trained and professionally vetted, he or she is NOT a lawyer or a legal advisor, but is present at the signing of the Act of Sale. Any irregularities in the contract are the responsibility of your lawyer; it’s therefore important to hire one to see to it that all documents are in order and debts are cleared by the previous owner, prior to signing your final agreement. It is also the lawyer’s duty to obtain your fiscal number and arrange your payment of the CEMI, a state tax payment, prior to sale completion.
It normally takes around 3 to 4 weeks after signing the Promissory Contract for the legal and mortgage paperwork to be ready, immediately after which time the Act of Sale can be signed.
A low interest rate in Portugal makes local mortgages an attractive option for foreign investors. A wide variety of mortgage products to fund between 60 and 80% of your property purchase are available, on a fixed, variable rate and interest only basis. The maximum loan term is set at 30 years.Unfortunately lenders will not usually take projected rental income into account when considering your mortgage application.
If you’re settling for an off-plan purchase, many developers will have their own instalment plans to offer. Charges and repayments vary according to developer but their plan may be worth considering if it compares favourably with a bank loan. As with many financial products, it pays to shop around.
Another popular means to raise funds for many buyers with property they have owned for some years is equity release, allowing money to be released from the current value of the property. An independent financial advisor in your country will advise you of the finer details.
Surveys aren’t usual practice in Portugal. However Portuguese surveyors (agrimensores) do exist and are often needed for older properties such as village houses for conversion or property built 10 to 20 years ago.
Full structural surveys should include inspection of the condition of all buildings, particularly the foundations, roofs, walls and woodwork, plumbing, electricity and heating systems and anything else such as a swimming pool and its equipment. A full survey normally costing around 800 EUR could save you untold time, money and hassle in the event that a hidden expense is exposed and justifies a reduction in the price or simply walking away from the purchase.
Purchase costs normally total around 15% of the purchase price but this will be slightly less for rural property. These costs include solicitor (between 1 and 2%) and notary fees (2.5%), Stamp Duty (0.8%), a power of attorney if needed (approx. 200 GBP), mortgage arrangement fees and Transfer Tax (IMT).
Transfer Tax (IMT) is payable at the nearest tax office and varies according to the price of the real estate:
For permanent residents:
Property Value Up to €85,500 €85,500 - €117,200 €117,200 - €159,800 €159,800 - €266,400 €266,400 - €532,700 Over €532,700 |
Rate 0% 2% 5% 7% 8% 6% |
Deduction 0 €1,710 €5,226 €8,422 €11,086 0 |
eg. if the purchase price is €150,000, the formula is: €150,000 x 5% = €7,500 less €5,226 = €2,274
For holiday home owners:
Property Value Up to €85,500 €85,500 - €117,200 €117,200 - €159,800 €159,800 - €266,400 €266,400 - €532,700 Over €532,700 |
Rate 1% 2% 5% 7% 8% 6% |
Deduction 0 €855 €4,371 €7,567 €10,231 0 |
eg. if the purchase price is €150,000, the formula is: €150,000 x 5% = €7,500 less €4,371 = €3,129
Exceptions:
Urban property such as building plots on which to build a dwelling: 6.5%
Rustic property on agricultural land: 5%
Companies in black-listed jurisdictions pay a tax rate of 15%.White-listed companies pay the above rates.
Property Tax (IMI) is payable by all property owners to the local authorities. Depending on the value of your property and its location, this can range from 0.8% to 1.3% of the assessed market value.
Capital Gains Tax (CGT) is regarded as a joint tax, forming part of income tax in Portugal. As a resident, if the proceeds of a property sale are re-invested into Portuguese property or shares within 2 years, the gain is exempt from tax. However if you are a non-resident, upon the sale of your property, 25% CGT is charged on your gain.
Rental Income:For Portuguese residents, your Portuguese rental income is added to any other earnings and your tax is calculated on a sliding scale from 12% (up to 4,100 EUR per annum) to 40% (over 51,251 EUR per annum).
Double Tax Treaty: If you are a tax resident in another country that has a double tax treaty with Portugal, you can credit any capital gains tax paid in Portugal against the capital gains tax payable in your tax domiciled country.
Inheritance Tax is charged on your Portuguese property and rates vary from 4 to 50%, depending upon the value of the property and on your relationship with the parties concerned.
See also: Property Investment in Portugal
