Portugal: A Buyer’s Guide

Due to it’s stunning scenery, gorgeous beaches and wonderful weather, Portugal is a popular place for foreign property investment. The process of buying property in Portugal is relatively simple as long as a good solicitor is found who can offer good advice on tax and legal issues.

When you have found a property you want to buy, your first step is to familiarise yourself with the local town hall known as the ‘Camara’. At this stage, it is also wise to find an independent Portuguese lawyer who speaks your language fluently.

Your lawyer will need the power of attorney (Parcuracao) so that they are able to act on your behalf. The power of attorney can be requested at the Notary office or the consulate offices.

You will then need to register at the tax office (Financas) where you will receive a fiscal number.

Now, you can have the searches on your property carried out. Make sure that the property is correctly registered at the land conservatory offices (Conservatoria do Registo Predial) and is in the seller’s name. If the property is not correctly registered, do not go ahead with the purchase. The searches should show the history of the land and property and will show whether there are any charges remaining over the property.

If your property is a place of residence, you will need to get a habitation license (Licencca de habitacao) which is issued by your local town hall.

If your property is located in an urban area, you will need to get a Cardernerta Urbana which is available from your local tax office. This will indicate the rateable value of your property as well as the tax you will need to pay on the property to the local town hall each year. Although not necessary, it is advisable to have a search of the property at the local tax office so that you are aware of all the charges you will need to pay.

Once both the vendor and buyer are happy with the property, the promissary contract (Contracto de promessa de compra e venda) can proceed. This contract is signed at the Notary office and is legally binding. At this point, you will need to pay a deposit on the property and you will agree a completion date with the vendor. The deposit is there to protect the house sale agreement – if the seller withdraws from the sale, they must pay twice the deposit back to the buyer; if the buyer withdraws from the sale, they lose their deposit.

Before completion, property tax (sisa) must be paid by the property buyer at the local tax office. The tax is variable, so check before you buy.

After the tax has been paid, the sale can complete. The sale must be executed in fron of the Notary and the balance of the property price must be paid according to the promissory contract. The deeds of purchase (Escritura de Compra e Venda) are now presented to the land conservatory and the property is then registered in the name of the new owner. A registration fee of 0.75% of the purchase price must be paid to the land conservatory for the registration.

You will then probably need to settle your legal fees to both the Notary and your lawyer. Legal fees vary, but 2% is a good ballpark figure to take. The fees should have been confirmed prior to you signing the promissory contract.

When you decide to sell your property on, it is important that you consider capital gains tax. For non-resident owners, capital gains are taxed on one half the capital gains being added to the taxpayer’s income for income tax purposes. If the owner is a resident of the property, capital gains tax is not payable if the full sale value is then invested in another property in Portugal within two years of completion of the sale.

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