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PORTUGAL
T H E P R O C E S S A N D C O S T S F O R B U Y I N G A P R O P E R T Y
I N T R O D U C T I O N 0 2
INTRODUCTION
BY PROPERTY SPECIALISTS ALGARVE; PHOTOS BY RICARDO FURTADO
BUYING A PROPERTY IN PORTUGAL
You may have been thinking about buying a
property in Portugal - or abroad elsewhere -
for a while now. We understand that it is a big
step, regardless if it's your new primary
residency, a second (holiday) home or an
investment property. Investing your money
into a different country can seem scary, and
we are here to help you.
We have created this guide to provide you
with all the information you need to know
about the buying process and the buying
costs. What do you need to take into
consideration when buying a property, and
which costs will come on top of the asking
price and how is this calculated.
PROPERTY SPECIALISTS ALGARVE
We are a small team of multi lingual people
with the same goal: To help others find their
dream property in Portugal, just like we once
did. Every one of us used to have an office job
in a rainy country and decided to move to the
sun. To play golf, to surf, to be able to read a
book on a terrace instead of on the couch
inside: Different decades, same story. Now, we
are all here in the country that we love, the
country that we chose to live our lives in, to
help you do the same.
Have a read through our buying guide and if
you have any questions afterwards, please
do not hesitate to ask us anything - we are
happy to help.
www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]
PORTUGAL
PROPERTY
BUYING
PROCESS
The most important thing about buying
a property in Portugal, is finding the right one.
Whether you’re looking to buy an apartment,
rustic farmhouse or luxury villa,
at property specialists Algarve we have
a dedicated personal team to guide you
through the process of purchasing
that dream property.
P R O P E R T Y B U Y I N G P R O C E S S 0 4
DUE DILIGENCE
When you have found the property of your
dreams, you will take on a lawyer/solicitor. You
can choose from our panel of recommended
lawyers. The lawyer carries out the due
diligence, reports the findings to you and
draws up the first contract. All documents will
be checked by your lawyer, including:
- Certidão Permanente
This documents contains details of the
property ownership
- Caderneta Predial
This document proves the property has
been registered for tax purposes.
- Licença de Utilização
This document is the license of the property
usage/purpose (e.g. Habitation,
Commercial)
THE PROMISSORY CONTRACT
Only after you are sure that everything is
correct and legal, the first legal binding
contract is signed. This contract includes the
following information:
The agreed price
What is included in the price
The date of the final deed
Other terms and conditions
This contract is made up by your lawyer and
will be signed by you and the seller. On
promissory contract, the deposit is paid. As
this contract is legally binding, the deposit is
non-refundable. If either party changes their
mind, they lose the deposit to the other (for
you this means that you lose your deposit if
you change your mind, and that you get your
deposit back double if the seller changes their
mind). The Promissory Contract is signed right
after the due diligence.
www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]
P R O P E R T Y B U Y I N G P R O C E S S 0 5
ESCRITURA / FINAL DEED
About 30 to 60 days after the promissory contract (variable timescale depending on the
situation), the final deed – The Escritura – is signed and paid. This process involves the
buyer, the seller, the buyer's lawyer, the seller's lawyer, the buyer's bank representative in
case of a mortgage, and the notary. The final contract is in Portuguese. As the notary goes
through every word of the contract with all parties, the lawyers can translate into English or
other language. The remaining balance of the agreed purchased price is paid at this stage.
The balance is always paid by cheque at the final deed.
When both parties have signed and the cheque has been handed over, you are the legal
owner of your new property in the Algarve!
www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]
PORTUGAL
PROPERTY
BUYING
COSTS
When buying a property in Lagos,
the Algarve or anywhere else in Portugal
for that matter it is important to take into
account another 6-10% over the
property price for additional buying costs.
P R O P E R T Y B U Y I N G C O S T S 0 7
BUYING COSTS
When buying a property in Lagos, the Algarve
or anywhere else in Portugal for that matter it
is important to take into account another 6-
10% over the property price for additional
buying costs. These are unavoidable costs
such as taxes that make up part of the
property buying process and costs. To
understand what this percentage is made out
of, please find below an overview of additional
costs for buying a property in Portugal. The
same principles apply for all types of property
from small apartment to luxury villa, but the
taxes on these buying costs vary with the
price.
AGENCY FEES
The Agency Fees in Portugal are for the
seller, not for the buyer.
LEGAL / LAWYER'S FEES
A lawyer will check all the documentation and
legal side of the property you want to buy.
For example, a lawyer carries out a title
check and due diligence reports on the
property. Using a lawyer, you know exactly
what you are buying, without falling into any
traps. Lawyer fees are an approximate
additional cost of 1.25% + VAT.
NOTARY FEES
Every buyer needs a notary to legally sign the
final deed of the purchase of the house. For a
notary to set up the final contract and final
deed service is a variable additional cost, but
is typically around 800-1000 euro.
www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]
P R O P E R T Y B U Y I N G C O S T S 0 8
PROPERTY TRANSFER TAX (IMT)
The property Transfer Tax is a cost, to be paid at the transfer of the property into your
name. This is a cost for the buyer of the property. The percentage applied is property value
dependent, and is shown in the table below. Two different percentage apply, there is a
percentage of the property purchase of a 1) primary residence, and 2) secondary property,
holiday property, or rental property.
IMT - PRIMARY RESIDENCE
Value of property % applied Deducted value
< € 92.407 0% € 0,00
€ 92.407 to € 126.403 2% € 11.848,14
€ 126.403 to € 172.348 5% € 5.640,23
€ 172.348 to € 287.213 7% € 9.087,19
€ 287.213 to € 574.323 8% € 11.959,32
> € 574.323 6% € 0,00
IMT - SECONDARY, HOLIDAY, INVESTMENT
Value of property % applied Deducted value
< € 92.407 1% € 0,00
€ 92.407 to € 126.403 2% € 924,07
€ 126.403 to € 172.348 5% € 4,716.16
€ 172.348 to € 287.213 7% € 8.163,12
€ 287.213 to € 574.323 8% € 11.035,25
> € 574.323 6% € 0,00
EXAMPLE CALCULATION
Mr Smith buys a holiday home of 300,000 euro, that is valued at the council tax at
300,000 euro as well. His total costs for buying the property are therefore:
Cost Calculated Amount
Property Price x € 300.000,-
Stamp Duty 0.8 *€ 300.000 € 2.400,-
Lawyer Fees* 1.25 * € 300.000 + VAT (23%) € 4.612,5
Notary Fees* Variable, around: € 800,-
IMT € 300.000 * 8% - € 11.035,25 € 12.964,75
------------------------------------------------------------------
Total Costs Property Price + 6.9% € 320.777,25
Added up, Mr Smith pays an approximate additional 6.9% buying costs, adding up to a total
of € 320,777.25 necessary for the purchase of the property priced at € 300,000.* *Please
note that these prices are an example, and may vary depending on other factors.
www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]
PORTUGAL
ONGOING
TAXES AFTER
PURCHASE
It is important to take into
consideration the costs you will have
after having bought your property in
Portugal. What are the ongoing taxes
and fees for rentals.
P R O P E R T Y B U Y I N G P R O C E S S 1 0
PROPERTY TAX (IMI)
The Property Tax (IMI) is the tax to be paid
to the council, also known as council tax or
rates. It is a percentage of the rateable
value of the property, which is set by the
tax office. Please note that this is different
from the market value. The tax ranges to a
maximum of 0.5 percent per year,
depending on the council.
For example:
The IMI in the council of Lagos is 0.4%,
and the IMI in the council of Portimao is
0.5%
RENTAL INCOME TAX
When you own a property that you are renting
out, you need to pay tax on the income. For
Portuguese residents, the rental income is
added to the wage and together the income will
altogether be taxed as usual.
For non-residents this is different. A non-
resident that rents out a property longterm, pays
28% tax over the income of the property, minus
costs. A non-resident that rents out a property
short term (holiday let), pays 28% tax over only
35% of the income. 65% of the income is tax
free.
For more -personalised- information about taxes, the buying costs and/or the buying
process in Portugal, please contact us on:
Email: [email protected]
Phone: (+351) 912 488 155
Website: propertyspecialistsalgarve.com
www.propertyspecialistsalgarve.com - +351 912 488 155 - [email protected]