Property taxes in Portugal for non-residents

Buying or owning a property is a big step that involves a substantial long-term financial commitment. Property taxes in Portugal are levied on the purchase, holding and sale of real estate assets. This article will outline the tax implications for each of these moments and what you can expect should you decide to sell your property.

Property purchase in Portugal - Taxes

You are not required to be a Portuguese resident or have a residence permit to acquire real estate properties in Portugal.

However, even as a non-resident, you will have to obtain a Portuguese Tax Identification Number (NIF), and, in case you are a non-EU resident, you will have to appoint a fiscal representative if you purchase/own a property in Portugal.

When acquiring a real estate property in Portugal, you become liable to the following taxes:

• Real Estate Transfer Tax (IMT) - up to 7.5% depending on the type of property: primary or secondary accommodation, plot of land for construction, commercial property, or rustic land.
• Stamp duty (IS) – a rate of 0.8% is applied to the same value used to assess IMT.

You should also consider the notary and registration fees, which should range between 750 € and 1,500 €.

The IMT, the IS and the notary/registration fees are due on the day of the acquisition deed.

Holding property in Portugal - Taxes

Following the acquisition, the owners of Portuguese real estate properties are liable to the annual payment of the following taxes:

Municipal Property Tax (IMI) – between 0.30% and 0.45% over the tax value of an urban property (different rates apply to rural property). A special aggravated 7.5% rate applies to properties owned by residents in blacklisted jurisdictions (you can see the complete list here).

The IMI is payable in up to 3 instalments (in May, August, and November) by owners of real estate properties on 31 December of the previous year.

Additional to the Municipal Property Tax (AIMI) – the AIMI is levied on the sum of the tax values of the properties held by a taxpayer on 1 January of each year.

There are currently 3 rates of AIMI:

• 0.7% for a real estate portfolio valued between € 600,000 and € 1,000,000.
• 1% for a real estate portfolio valued between € 1,000,000 and € 2,000,000.
• 1.5% for a real estate portfolio valued above €2,000,000.

In the case of individual ownership, a deduction of € 600,000 to the taxable base is allowed. Married or cohabiting couples who opt to submit a joint tax return are entitled to deduct up to 1,200,000 € from the VPT sum of all their urban holdings.

Properties classified as “for services”, “commercial or “industrial” are not subject to AIMI. For properties owned through a company based in a blacklisted jurisdiction, an aggravated AIMI rate of 7.5% is applicable.

The AIMI is payable in a single instalment in September.

Selling property in Portugal - Taxes

Portugal has different rules applicable to resident and non-resident individuals selling Portuguese real estate properties:

• Residents: 50% of capital gains arising from the disposal of real estate by tax residents in Portugal are taxed at the progressive marginal rates varying between 14.50% and 48%.
• Non-residents: The total capital gains from the disposal of a property in Portugal are taxable at a flat 28% rate, but the taxpayers can opt for the regime applicable to residents (in the tax return).

In 2021, the European Court of Justice ruled that the Portuguese taxation of capital gains realised by non-resident individuals is contrary to EU law. In short, more than setting an option to choose between a discriminatory regime (28% over 100% of the gain) and a non-discriminatory regime (progressive rates over 50% of the gains) is needed, and Portugal will have to fix the main rule for non-residents.

Nevertheless, as of the time of writing, the Portuguese rules in this regard have yet to be amended.