Buying Property in Portugal

Taxes & Costs You Should Plan For

Tax Residency for Property Purchases

For property purchase taxes in Portugal, the key distinction is tax residency, not nationality.

You are generally considered tax resident in Portugal if you spend more than 183 days in the country in a 12-month period, or if you have a habitual residence that indicates an intention to live in Portugal on a permanent basis. Many expatriates become tax resident in their first year.

Tax residency status can have a material impact on how property transfer tax is calculated.

IMT – Property Transfer Tax

IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is the principal tax payable when purchasing property in Portugal.

The amount of IMT payable depends on three key factors:

• The purchase price

• Whether the property is a main residence

• Whether the buyer is Portuguese tax resident

IMT for Tax-Resident Buyers (Main Residence)

For buyers who are tax resident in Portugal and purchasing a main residence, IMT is calculated on a progressive scale. This means that different marginal rates apply to different portions of the purchase price, rather than a single rate applying to the full value.

At the time of writing, the highest marginal IMT rate for a main residence is 8%, which applies only to the portion of the purchase price above approximately €316,772. Lower rates apply to earlier bands, including a zero-rate allowance at the bottom of the scale.

Worked example — €1.5 million main residence (tax-resident buyer):

• No IMT is payable on the initial tax-free portion

• Mid-range portions are taxed at progressively higher rates

• Only the portion above the top threshold is taxed at 8%

The resulting IMT payable is approximately €106,800, equating to an effective IMT rate of around 7.1%, not 8% on the full purchase price.

This illustrates why progressive taxation is particularly significant at higher purchase values.

IMT for Second Homes or Investment Properties

Where the property is not a main residence, the zero-rate exemption does not apply and IMT is generally higher overall. Progressive rates still apply, but from a lower starting point, resulting in a higher effective tax burden compared with a main residence purchase.

IMT for Non-Tax-Resident Buyers

There has been recent legislative discussion regarding IMT treatment for buyers who are not Portuguese tax resident.

Current proposals indicate that non-tax-resident buyers may be subject to a flat IMT rate of 7.5% applied to the full purchase price, rather than a progressive scale. Under such a regime, a €1.5 million purchase would result in IMT of approximately €112,500.

The key distinction is tax residency, not nationality. Expatriates who live in Portugal and are tax resident are treated in the same way as Portuguese buyers for IMT purposes, while buyers who are not tax resident may fall under a different regime.

Important context

IMT rules and rates are subject to legislative change, and the precise amount payable depends on individual circumstances and timing. Buyers should always obtain confirmation from their legal or tax adviser before committing to a purchase.

Stamp Duty

Stamp duty (Imposto do Selo) is payable at a fixed rate of 0.8%. It is calculated on the purchase price or the official tax value of the property, whichever is higher, and is paid at completion alongside IMT.

Notary & Registration Costs

Buyers should also budget for notary, registration, and associated administrative fees. These are typically modest relative to purchase taxes — often in the region of €1,000–€2,000 — but should be factored into overall acquisition costs.

Annual Property Taxes (IMI & AIMI)

After completion, property owners are subject to IMI, an annual municipal property tax. IMI is calculated as a percentage of the property’s municipal tax value (Valor Patrimonial Tributário, or VPT), rather than the purchase price. Rates generally range from around 0.3% to 0.45% per year, depending on the municipality.

Some higher-value property holdings may also be subject to AIMI, an additional annual tax. AIMI applies only where the combined municipal tax value of Portuguese property exceeds defined thresholds and is calculated solely on the value above those thresholds. Because VPT values are often significantly lower than market values, many residential buyers are not affected in practice.

Practical Considerations

Portuguese Tax Number (NIF)

All buyers must obtain a Portuguese tax number (NIF) before purchasing property. The NIF is required to sign contracts, open a Portuguese bank account, and pay property-related taxes.

Banking & Currency Planning

Most transactions involve a Portuguese bank account for payment of taxes and completion funds. Buyers transferring funds from abroad should give careful consideration to currency movements, as exchange-rate fluctuations can have a meaningful impact on total acquisition costs.

Important Note

Tax and legal matters are complex and subject to change. The information above is provided for general guidance only and does not constitute legal or tax advice. Buyers should always seek advice tailored to their individual circumstances from suitably qualified professionals.