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

Capital gains resulting from the sale of Portuguese situs real estate are taxable only over 50% of its value, at the general progressive personal income tax rates.

In the past, Portugal had different rules applicable to resident and non-resident individuals selling Portuguese real estate properties. However, in 2021, the European Court of Justice ruled that the Portuguese taxation of capital gains realised by non-resident individuals was contrary to EU law, leading to a legislative amendment.

Therefore, the following rules should be considered when determining the regime applicable to the sale of Portuguese real estate properties by non-residents:

• Until 31 January 2023, the net real estate capital gains are considered at only 50% of their value and taxed autonomously at the special rate of 28%;
• As from 1 January 2023, the real estate capital gains will have to be compulsorily aggregated (at 50% of their value) with the other income obtained by non-residents and will be subject to the corresponding progressive rates of personal income tax.