Costs of Purchase
Costs: (and fees when buying a property)
• IMT – Property Transfer Tax (Imposto Municipal sobre Transmissões) IMT is payable on the value of any property located in Portugal and is usually paid by the lawyer at the “FINANÇAS” (Tax Department) who will need to show a receipt for payment before signature of the Final Deed at the Notary is possible.
The IMT rate is a sliding scale that varies with the nature and value of the property, Your lawyer has access to the calculation matrix and will work out the exact amount for you when you first contact him/her. As a very rough guide it’s around 6% of the purchase cost of the property.
The following documentation will need to be supplied by the lawyer at the time of paying the IMT
• Identification of the Vendor(s)
• Identification of the Buyer(s)
• Description of the property
• Value of the property
Should the purchase not actually be concluded, you can request a refund of the tax paid within a period of 3 years from the payment date.
• After the Final Deed (Escritura) is signed your lawyer should use a copy of the updated document to register your name at the:
“Conservatoria do Registo Predial” (Land registry Office)
Change of ownership must be passed on to the “FINANÇAS” (Tax Department).
Electricity Department – to request a new contract for the electricity meter.
Telephone/Internet Company to put the connection in your name (if applicable).
Gas company – to request a new gas meter and inspection and put the supply contract in your name (if applicable)
Camâra Municipal (Town Hall) to request the water meter or to the private company involved if a private water supply and put the supply contract in your name.
Condominium company (applicable only to specific properties within a closed condominium with communal facilities)
• Direct Debits: Your services bills can be paid through a Portuguese bank account via direct debit with the exception of the annual tax, which should be done by bank transfer. If you employ the services of a property management company then they will check values and handle this for you.
• IMI – Imposto Municipal sobre Imóveis (rates)
This annual tax is paid to the “FINANÇAS” (Tax Department) the rate calculated on the basis of a percentage of the actual value of the property. This assessed value will not coincide with the actual current value of the property; and is only updated when a transfer of ownership or major building alterations have taken place.
The Annual Council tax is calculated according to the “patrimonial value” of the property. A new purchaser may be exempted of this tax for a period from 4 to 8 years, in some areas and exemption must be requested within 60 days from date of the property purchase.
• Imposto de selo” (stamp duty) Stamp Duty is charged on property purchases, the purchaser will pay the tax at the time of the title deed (tax levied by the Notary and included in his/her charges) referring to the value of acquisition/title deeds of the property and on the value of the loan by the Bank.
• Notary and registration fees
These will have to be paid by the purchaser after signing the “Escritura” (Final Deed-title) and the total costs are approximately 1% to 3% for the Notary charges, if the property purchase price (again not applicable if off-shore) and if buying with a mortgage this percentage amount will vary. IVA is also added to the total. Current rate 23%
• Lawyer’s fees
Most lawyers will charge between 1% and 2% of the purchase price as their fee. They will carry out all the necessary searches and prepare the documentation needed for both, the promissory contract and the final deed. They will do all the searches and pay the taxes and duties with funds you have lodged with them
• SUMMARY OF COSTS – The bottom line. The total of the total costs associated with the investment on a property are normally around 8% over and above the purchase price of the property, made up as follows:
1% to 2% lawyers
1% to 2% notary and registration
0% to 8% IMT
The seller normally pays the real estate agent’s fees and the agent should not ask you for a ‘finders fee’ unless previously agreed by all parties.
• IVA – (Value Added Tax) is payable on Notary and Lawyers fees. Always check to see if it is included within or extra to any quote you receive. IVA in Portugal is currently 23%
Please note: These notes are provided in good faith for guidance only and we do not accept responsibility for any mistakes or misinformation. Please check all details and information with your chosen lawyer as regulations change constantly.