Real Estate Taxes and Costs in Portugal
Taxation Researcher | August 03, 2022
Property Transfer Tax (IMT)
Imposto Municipal Sobre Transmissões (IMT) is tax you need to pay when you are buying a property in Portugal.
|TAX BASE, €|
|Up to €92,407||0%|
|€92,407 - €126,403||2% on band over €92,407|
|€126,403 - €172,348||5% on band over €126,403|
|€172,348 – €287,213||7% on band over €172,348|
|€287,213 – €550,836||% on band over €287,213|
|€550,836 – €1,000,000||flat rate of 6%|
|Over €1,000,000||flat rate of 7.50%|
|Source: Global Property Guide|
However, if the property owner resides in a low-tax jurisdiction place (tax haven), then the applicable rate is 7.50%.
Property Tax (Immovable Property Tax, IMI)
Property tax is levied on the officially assessed values or "patrimonial value" of the buildings located in the territory of each municipality. The calculation of the patrimonial value takes into consideration the cost of the building, the average value of the land, the location of the property, etc.
The applicable rate is defined annually by each municipality in a decision taken by the respective municipal assembly. Rural properties are taxed at 0.8% while urban properties are taxed from 0.30% to 0.50%. Properties not updated in accordance with the new property tax rules are taxed from 0.50% to 0.80%. You can find IMI rates here.
Additional Property Tax (AIMI)
In Portugal, there´s also additional property tax called AIMI.
Regardless of residency status, rates applied are as following:
- Properties held by companies: 0.4%
- Properties held by individuals: 0.7%
- Properties valued over €1 million: 1%
Rental Income Tax
Whenever you rent out your property in Portugal, whether short-term or long-term, you are obligated to pay taxes.
Non-resident individuals: Net rental income earned by nonresidents is taxed at a flat rate of 28%, withheld at source. Taxable income is gross rent less maintenance costs, repairs, and other related expenses (such as insurance premiums and municipal tax). Mortgage interest costs incurred when the property was purchased are not deductible.
Married couples are taxed jointly.
Resident companies: Income and capital gains earned by companies subject to corporate income tax at a flat rate of 21%. Income-generating expenses are deductible when calculating taxable income.
Non-resident companies: Same as above, but instead of 21% it will be 25%
If you are considering to short let your property in Portugal, keep an eye out on the latest updates from the local council. New laws are being introduced across the country affecting short-term rentals, most recently in Porto.
Capital Gains Tax
Capital gains tax in Portugal is charged on the sale of property or other assets at a rate of 28% for individuals and 25%
Capital gains realized by nonresidents on the sale of Portuguese property are taxed at a flat rate of 28%. The taxable gain is computed by deducting the following from the selling price: the acquisition cost adjusted for depreciation and increased by the official inflation coefficient, costs of transferring ownership, and improvement costs incurred in the last five years prior to the sale.
For capital gains realized from fixed assets such as real property, only 50% of the capital gains will be taxable if the capital gains are reinvested in fixed assets such as real property during the year the sale occurred, the previous year, or within two years after the sale.
Nonresidents are required to appoint a local representative in Portugal for tax purposes. The appointment must be in writing and must show the representative´s express acceptance. Non-compliance with this obligation incurs a fine of up to €5,000. The representative fulfils all the tax obligations of the nonresident such as filing the income tax returns and paying the tax liability.
Furthermore, any Portuguese-sourced income of nonresidents cannot be transferred abroad unless it is conclusively proved that any underlying tax liability is paid or adequately secured. Non-compliance with this prohibition incurs a fine of up to €25,000.