Property Taxes in Portugal 2024: An Overview

Perhaps the least glamorous part of buying property is navigating the taxes and fees associated with the purchase, especially when buying property in a different country. Between the Stamp Duty of 0.8 percent, property purchase tax (IMT) of up to 10 percent, and immovable property tax (IMI) of 0.3 to 0.45 percent for urban properties, or 0.8 percent for rural properties, property taxes in Portugal can seem overwhelming.

However, Portugal property tax is not as daunting as you may first assume. Firstly, it’s good to know that foreign property owners pay the same property taxes as Portuguese citizens. The crucial factor that determines your property tax rates is how you use the property you purchase – whether as a permanent home or secondary or holiday home.

In this article, we will provide you with everything that you need to know concerning property tax in Portugal. We break down the property taxes to be paid at the time of purchase and then delve into the property ownership taxes the Portuguese tax authorities impose on an annual basis after you’ve bought your new property. We’ll also look at taxes for rental properties, the Capital Gains Tax, and Portugal Inheritance Tax.

Property Taxes in Portugal: Taxes During the Purchase Process

The following taxes are those that you will need to pay at the time of purchasing when investing in Portugal real estate.

Property purchase tax (IMT)

The Imposto Municipal sobre as Transmissões Onerosas de Imóveis (IMT) (Municipal Tax on Onerous Transmissions of Real Estate) is a transfer tax levied over the purchase price of the Portugal property.

Also referred to as the property transfer tax, the IMT rate ranges from 0-10 percent and is levied on the property purchase price. The 0-8 percent range depends on the price, location, property types, and intended use or purpose for the property (either for your own permanent housing or to be used as secondary housing), while the fixed rate of 10 percent applies in cases where the buyer has connections with territories that benefit from more favorable taxation schemes, known as blacklisted jurisdictions.

The IMT Tax rates on urban property exclusively intended for use as a permanent place of residence are listed below.

Source: PWC Portugal

You can use the following sum to work out the Portugal tax rate:

IMT = property value x tax rate x tax deduction

You can also calculate the percentage using our Portugal Property Tax calculator.

The following criteria are essential to calculating the property purchase tax (IMT):

• Type of property: Urban property or rural property
• Buying purpose: Principal or secondary residence
• House location: Mainland Portugal or its autonomous regions
• Blacklisted jurisdictions: Whether the property owner has connections with territories that benefit from favorable taxation schemes

Specific IMT circumstances and tax rates

There are various rates that apply to specific circumstances when it comes to IMT Tax, which we explore in more detail below.

• 5 percent IMT: For agricultural and rustic lands (not designated for construction nor for generating agricultural, forestry, or livestock income)
• 6.5 percent IMT: For commercial and building plots 
• 10 percent IMT: Property acquired by a corporation based in a jurisdiction that is on a blacklist

 IMT property tax exemptions in Portugal

Luckily, the Portuguese government has certain exemptions that will apply in special circumstances to provide some tax relief. Let’s walk through some of the other IMT tax exemptions for entities and individuals.

IMT tax exemptions for entities and in specific situations

The following are instances where IMT exemptions apply for entities.

• Business operations: During mergers and splits of entities
• Government entities and public bodies without a business nature
• Foreign states: When acquiring buildings for the headquarters of diplomatic or consular missions and residences for heads of missions
• State and public or private entity agreements
• Legal entities with public utility status: For goods intended to achieve their statutory objectives
• Religious legal entities: For the acquisition of goods for religious purposes by duly registered religious legal entities
• Buildings of national, public, or municipal interest
• Economically disadvantaged regions: Commercial companies that acquire goods for agricultural or industrial activities of great economic and social relevance are exempt.
• Physical culture associations: When acquiring facilities that cannot be used for paid shows
• Educational and cultural entities: Museums, libraries, schools, and educational and cultural entities are exempt if the assets acquired are intended to fulfill their statutory purposes.
• Real estate investment funds held by government entities: If the assets acquired are intended to fulfill their statutory purposes
• Credit institutions: If in execution, bankruptcy, or insolvency proceedings, and also commercial companies whose capital is dominated by these institutions

IMT property tax exemptions for individuals

Next, let’s explore the instances where IMT exemptions apply to individuals.

• Young adults under 35: Since 1 August 2024, individuals under 35 may be exempt when buying their first permanent home, with total exemption up to €316,772 and partial exemption for properties valued between €316,772 and €633,453. These apply regardless of the individual’s income.
• Primary residence purchase: Individuals purchasing urban properties solely for their own permanent residence are exempt from IMT if the property value does not exceed €101,917 in mainland Portugal and €127,396 in the Azores and Madeira.
• Resale properties: Purchasing properties for resale can qualify for an exemption if the property is resold within one year and not resold again within that period, with at least one property resold in each of the two previous years.
• Rental Support Program properties
• Rehabilitation works: For urban properties over 30 years old or located in urban rehabilitation areas if renovation works begin within three years after acquisition
• Young farmers and forestry activities: If young farmers buy rustic buildings for their first agricultural venture or if purchasing rustic properties in Forest Intervention Zones 

Imposto do Selo (Stamp Duty)

Said to be the oldest tax levied by the state, the Imposto do Selo tax, also referred to as Stamp Duty, is an additional transaction cost for property buyers. During the property buying process, the buyer must pay Stamp Duty on title deeds, contracts, bank mortgages, and loans. Securities that are subject to Stamp Duty also include bills of exchange and promissory notes, although these are not typical instruments for property acquisition.

The Stamp Duty amount you pay depends on the property’s worth. The Stamp Duty rate for purchasing a property in Portugal is 0.8 percent of the value of the business or the value of the property, levied on whichever value is higher. If the property is donated, the Stamp Duty for the transaction will be 10 percent of the value of the business or the value of the property.

When purchasing a home, the Stamp Duty is paid to the Portuguese Tax Authority, and the Stamp Duty on the deed of sale generally costs €25. Some notaries may agree to receive the amount and pay the tax authority on your behalf. However, these instances are not common to all.

Based on the Stamp Duty Code, you will also need to pay Stamp Duty when you take out bank mortgages valued at over €5,000. Stamp Duty on mortgage loans is levied as follows:

Note that corporate property ownership transactions can be exempt from Stamp Duty under certain circumstances. These circumstances include acquiring relevant real estate for investment purposes within the Investment Support Tax Regime (RFAI).

Notary fees

Thirdly, although it is not a tax, you’ll need to consider Notary Fees. The Notary is the private entity responsible for providing you with the official documents that prove you are the owner of the property. This fee usually amounts to between €500 and €1,000.

Rental Income

If you plan to rent out your property, there are specific taxes to consider. Net rental income from a housing rental agreement is taxed at 25 percent, while other types of rental income are taxed at 28 percent.

Additionally, it’s important to note that the 25 percent tax rate applies to long-term rental income from 2023 (for the entire year of 2023), following the Mais Habitação package enacted in October 2023.

Under the terms of the Mais Habitação package, the 25 percent rate can be reduced based on the duration of the rental contract if the monthly income does not exceed the general income price limits by 50 percent. If your monthly net rental income does not exceed the limit, the 25 percent rate can be reduced as follows:

Note that there are possible tax exemptions on rental income in the following cases where rental income:

• Is derived from contracts included in the Lease Support Program
• Is obtained through accommodation for displaced students and does not exceed the maximum affordable rental limits
• Is derived from rental contracts signed before 1990
• Is derived from properties previously used for local accommodation. This exemption applies to rents until the end of 2029 and must meet two conditions. Firstly, the local accommodation establishment must have been registered and used for this purpose by 31 December 2022. Secondly, the lease contract and registration with Finanças (Finances) must take place by 31 December 2024.

Landlords may also deduct the expenses incurred in the process of obtaining and guaranteeing the rental income from the amounts of rent received.

You will need to present an invoice identifying the work carried out on the property and its location so you can receive deductions from tax on rental income. There are specific differences between short and long-term rentals.

Short-term rentals

For short-term rentals, you will need an Alojamento Local (AL) Local Accommodation License. This allows property owners to rent out their properties to gain short-term rental income. This is an excellent option if you are looking to stay in Portugal for part of the year and earn passive income. The Portuguese property market can be very lucrative as it’s a popular tourist destination due to the climate, beaches, and rich history.

While the Mais Habitação package had placed restrictions on the issuing of new AL licenses in key areas such as Lisbon, Porto, and the Algarve, the Portuguese government has recently announced a roll back of certain restrictions and has revoked the rule that stopped new AL registrations from being issued. Municipalities now have the authority to approve an administrative regulation regarding AL activities in their respective territory.

The changes aim to align AL regulations with residential market needs and strengthen confidence in the rental market.

Long-term rentals

For property owners looking to put their property up for long-term rentals, you can rent out your property with standard lease agreements, and an AL License is not required. Long-term rentals in Portugal offer a stable income stream, spanning a minimum of 12 months and attracting digital nomads, students, and professionals.

Extended stays typically result in fewer damages to your property and lower maintenance costs but yield lower returns compared to short-term rentals. We recommend working with a real estate lawyer who can assist with legalities like drawing up rental contracts and ensuring that you are up to speed with any changes to legislation.

Capital Gains Tax on Property in Portugal

Capital Gains Tax is levied on a property sale in Portugal and the amount you pay depends on your residency status. Residents of Portugal pay capital gains tax on 50 percent of the capital gain from the sale, while non-residents are taxed on the full amount of the capital gain from the property sale.

Portuguese Capital Gains Tax on real estate is based on the real estate added value, which is the amount obtained by subtracting the acquisition value from the sale value. The Capital Gains Tax rate is applied to this result.

We can break this down into an equation using the variables below to clarify the calculation:

• SV: Sale Value of the property
• AV: Acquisition Value of the property
• CG: Capital Gains
• T: Capital Gains Tax
• R: Tax Rate

The steps to calculate the Capital Gains Tax can then be summarized as follows:

Step 1: Calculate the Capital Gains (CG) as the difference between the Sale Value (SV) and the Acquisition Value (AV):

CG = SV – AV

Step 2: Since the tax is levied on 50 percent of the Capital Gains:

Taxable Capital Gains = CG ÷ 2

Step 3: The Capital Gains Tax (T) is then calculated by applying the Tax Rate (R) to the Taxable Capital Gains:

T = R x (SV – AV) ÷ 2

If you are a non-resident of Portugal, your whole gain on the sale of a property in Portugal is subject to tax at a flat rate of 28 percent. Portuguese residents are required to pay real estate taxes on gains from investments and real estate acquired after 1 January 1989.

The property owner must disclose their tax return, the year and purchase price of the property, and any work done, providing invoices for maintenance costs, which count toward capital gains assessment. If reinvesting the full sale price into a new home, the gain may be tax-exempt, provided the sold property is the primary residence and tax address, with the new home purchased within 24 months before or 36 months after the sale, notifying the Portuguese Tax Authorities of this intention.

We’ve created an ultimate guide about Capital Gains Tax in Portugal so you can get all the information you need in one place.

Deductions to Capital Gains Tax in Portugal

Some costs can also be deducted from this amount, which include:

• The request for the energy certificate
• The IMT
• The commission paid to the real estate agency
• Solicitor costs
• The deeds
• Charges for the appreciation of the property – for maintenance and conservation works, in order to increase the value of the property carried out in the previous 12 years and that are duly documented

Inheritance Tax

There is no inheritance tax in Portugal. Nonetheless, Stamp Duty (at a rate of 10 percent) is applicable on the assets considered to be in the Portuguese territory passed on as inheritance. An exemption to the Stamp Duty applies whenever such inheritance is passed on to spouses, descendants, and ascendants.

Agency Fees

In Portugal, there are no agency fees for the buyer, as the seller pays these. The buyer’s agent usually works on a commission basis for the seller. Therefore, when negotiating the property price, make sure you get a second opinion from a trusted advisor. This is because the seller will get a higher commission for a higher sale. In this respect, it can be worth working with a buyer’s agent, who works solely on behalf of the buyer.

Goldcrest: How We Can Help You

Goldcrest is a local buyer’s agent based in Lisbon that provides insightful real estate expertise and strategic advice. From sourcing to property acquisition, we offer a tailor-made service for our clients, assisting them in identifying outstanding investment opportunities in some of Portugal’s finest locations, from relocation to investment projects.

With us, we make the property purchase as simple and hassle-free as possible. Goldcrest will also ensure that the negotiation phase runs smoothly, providing you with an optimal purchase price.