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. However, property taxes in Portugal are not as daunting to deal with as you may first assume.

In Portugal, you will pay the same taxes as Portuguese citizens. The crucial difference that determines the property tax rates applicable to you is the use you give to the property you purchase.

If you use the property as your own permanent home, then you will pay less tax than you would if you were to use the property as a secondary or holiday home. This distinction is crucial to understanding the property tax rates applicable to you.

In this article, we will provide you with everything that you need to know concerning property taxes in Portugal. First, we will cover the property taxes that need to be paid at the time of purchase and then delve into the property ownership taxes the Portuguese tax authorities will need you to pay on an annual basis after you’ve bought your new property.

Following this, we’ll look at taxes for rental properties, the Capital Gains Tax rate, and Portugal Inheritance Tax. Finally, we’ll discuss agency fees, the importance of tax representation, and keeping documented costs incurred.

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.

This tax ranges from 0-10 percent. The 0-8 percent range depends on the price, location, property types, and purpose for which the property is intended to be used (whether it is 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 property purchase tax (IMT) amount charged is levied over the purchase price. Note that this is also referred to as the property transfer tax in 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

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

Source: PWC Portugal

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: A flat rate for agricultural and rustic lands (these lands cannot be designated for construction purposes and can’t be utilized or intended for generating agricultural, forestry, or livestock income. Land situated in an urban area may also be considered rustic if not designated for construction and does not serve an income-generating purpose)
• 6.5 percent IMT: A flat rate for commercial and building plots (includes buildings or autonomous units intended for commerce, industry, or services, and land licensed for construction)
• 10 percent IMT: Property acquired by a corporation based in a jurisdiction that is on a blacklist. Blacklisted jurisdictions are territories with favorable taxation schemes that the property owner has connections to and benefits from.

 IMT property tax exemptions in Portugal

If you are using the property for your own permanent housing, then you do not pay any IMT (Property Transfer Tax) if the property is located on Portugal’s mainland and its price does not exceed €101,917 in 2024. Likewise, no IMT tax is due if the property is located on an autonomous territory of Portugal (the Azores and Madeira), if the property is for your own permanent housing, and is worth less than €127,396.

Tax exemptions cover several entities and specific situations. Portuguese law provides for exemptions established in agreements between the state and public or private entities. Legal entities with public utility status, social solidarity institutions and similar entities also benefit from the exemption for goods intended to achieve their statutory objectives.

IMT tax exemptions for entities and in specific situations

In addition to the examples given above, it’s important to highlight various instances where Property Transfer Tax (IMT) exemptions are applicable. First, we will explore the instances where IMT exemptions apply for entities.

Business operations

An IMT exemption may apply during mergers and splits of entities, covering non-residential properties and residential properties linked to the main activity necessary for restructuring or cooperation agreements.

Government entities and public bodies

Tax exemptions cover several entities and specific situations. This includes government entities, such as the state, autonomous regions, local authorities, associations, federations of municipalities, and their public bodies without a business nature.

Foreign states

Foreign states are exempt when acquiring buildings for the headquarters of diplomatic or consular missions and residences for heads of missions if there is reciprocity.

State and public or private entity agreements

The legislation provides for exemptions established in agreements between the State and public or private entities.

Legal entities with public utility status

Legal entities with public utility status, social solidarity institutions and similar entities also benefit from exemption for goods intended to achieve their statutory objectives.

Religious legal entities

Exemptions include acquisitions of goods for religious purposes by duly registered religious legal entities.

Buildings of national, public, or municipal interest

Buildings classified as of national, public, or municipal interest are exempt from IMT.

Economically disadvantaged regions

In economically disadvantaged regions, commercial companies that acquire goods for agricultural or industrial activities of great economic and social relevance are exempt.

Physical culture associations

Physical culture associations that acquire facilities that cannot be used for paid shows are exempt.

Educational and cultural entities

Museums, libraries, schools, and educational and cultural entities are exempt from IMT Tax if the assets acquired are intended to fulfill their statutory purposes.

Real estate investment funds

Real estate investment funds held by government entities are exempt from IMT Tax if the assets acquired are intended to fulfill their statutory purposes.

Credit institutions and related companies

Credit institutions in execution, bankruptcy, or insolvency proceedings and commercial companies whose capital is dominated by these institutions do not need to pay IMT.

Property tax exemptions for individuals

In the sections below, we will explore the instances where IMT exemptions apply to individuals.

Young adults under 35

Starting 1 August 2024, individuals under 35 may be exempt from IMT when buying their first permanent home, with total exemption up to 316,772 euros and partial exemption for properties valued between 316,772 euros and 633,453 euros. These exemptions will apply regardless of the individual’s income.

Primary residence purchase

As we’ve mentioned at the beginning of this section, individuals purchasing urban properties solely for their own permanent residence are exempt from IMT if the property value does not exceed 101,917 euros in mainland Portugal and 127,396 euros in the Azores and Madeira in 2024.

Resale properties

Buyers engaged in the business of purchasing properties for resale can benefit from IMT 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

Properties purchased, rehabilitated, or built for the Rental Support Program are exempt from IMT.

Rehabilitation works

Urban properties over 30 years old or located in urban rehabilitation areas may be exempt from IMT if renovation works begin within three years after acquisition.

Young farmers and forestry activities

Young farmers acquiring rustic buildings for their first agricultural venture benefit from IMT exemption. Additionally, purchases of rustic properties in Forest Intervention Zones are exempt.

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:

• Credit with a term of less than one year – for each month or fraction: 0.04 percent
• Credit with a term equal to or greater than one year: 0.5 percent
• Credit with a term equal to or greater than five years: 0.6 percent

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. Rental income from housing is taxed at 25 percent, while other types of rental income are taxed at 28 percent.

The applicable tax rate, 25 percent or 28 percent, depends on the purpose of the rental agreement. Although these rates may occasionally change slightly, they will usually fall within this range.

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 rental income does not exceed the limit, the 25 percent rate can be reduced as follows:

• 25 percent for a duration of 2 to 5 years
• 15 percent for a duration of 5 to 10 years
• 10 percent for a duration of 10 to 20 years
• 5 percent for a duration of more than 20 years

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. Maintenance and upkeep expenses that are documented can include:

• Deductions for eligible insurance
• Expenses such as the IMI
• Condominium fees (if applicable)
• Stamp Duty
• Municipal taxes
• Interior and exterior painting

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 rental income. This is an excellent option if you are looking to stay in Portugal for part of the year and earn passive income. Indeed, the Portuguese property market can be very lucrative as it’s a popular tourist destination due to the climate, beaches, and rich history.

However, due to the new restrictions the Mais Habitação package brought into effect, there are new location restrictions for AL licenses. In addition to the restrictions implemented by the Mais Habitação package, new licenses for short-term rentals in certain locations and categories were suspended, including in key areas such as Lisbon, Porto, and the Algarve.

There are, however, locations and categories that were not included in the Mais Habitação package where it is still possible to obtain a new license, including the autonomous islands of Madeira and the Azores and some types of properties, such as houses.

It’s important to note that, in regard to this, the new Portuguese government has expressed its intention to reverse some of the Mais Habitação measures and allow local authorities the opportunity to define their own rules in this matter. We will keep you updated in the coming months regarding how this matter unfolds.

In addition to the above new rules, the requirement that ALs clearly display their registration number, the mandatory renewal of licenses every five years, as well as the limits of the number of AL units permitted in multi-unit buildings, were introduced.

You can discover more about the Mais Habitação package and the current state of short-term rentals in Portugal in our, Short Term Rentals in Portugal: 2024 Update, article.

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 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 it from the property’s sale value. For Portuguese residents, the tax on capital gains is only levied on 50 percent of this added value resulting from the acquisition value and the sale value. The Capital Gains Tax rate is applied to this result.

We can break this down into 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

However, the time between acquisition and sale, and other factors which trigger the application of different coefficients, are considered. The final value of the capital gain is subject to progressive IRS rates, so the specifically applicable rate will depend on the total income that each subject has (only considering those that are subject to tax in Portugal).

Your whole gain on the sale of a property in Portugal is subject to tax at a flat rate of 28 percent if you are a non-resident of Portugal. Portuguese residents are required to pay real estate taxes on gains from investments and real estate acquired after 1 January 1989. Once all real estate profits have been added to your other yearly income, taxation will take effect. It may range from 14.5 percent to 48 percent, depending on the income tax scale rates, with the income tax rate determined by your earnings.

The property owner must disclose the tax return, the year the house was bought, and the price paid to acquire it. If work was carried out on the property, this should be declared, including works such as installing a new heating system. Present the invoices and the amounts paid for the maintenance, and they will be considered in the capital gains assessment.

An important note is that if you are reinvesting your total selling price into a new home, then the potential capital gain may not be subject to tax. However, this is only applicable if the house that you are selling is your permanent residence address and if it corresponds with your tax address.

The time period is also essential—you must purchase a new house and reinvest the total selling price 24 months before such a sale or 36 months after the sale. If this is followed, the owner informs the Portuguese Tax Authorities of their intention to reinvest back into the property market in Portugal.

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.