PORTUGAL BUYING GUIDE

Below is some basic information regarding the Buying Process, Legal Requirements, Mortgages, Taxes, Rental and General Running and Living Costs in Portugal

Licenced Agents

It is always advisable to to a Licensed Estate. The license is granted by the state and is only obtained and retained by passing specific qualifications. Licensed Agents are bonded by the state in the form of insurance, which may be claimed against in case of a dispute

Fiscal Numbers

Every individual purchasing a property must obtain a Fiscal Number. This is also required to open a Bank Account and have an finacial dealings in Portugal. The Fiscal Numbers can be obtained in person from the local tax office. You will need to produce your passport.

Promissory Contract

Once you have found a Licensed Agent and they have helped you to find the property of your dreams, in order to buy the property you will need to enter into a 'Contrato de Promessa de Compra e Vande' - A Promissory Contact of Sale. This is signed by both parties and details the conditions of the sale. This is a legal contract drawn up by a Notary.

At this stage the initial deposit is paid. This is normally 10% - 12% of the purchase price

Once the contract is signed, if the Buyers pulls out of the sale, they forfeit their deposit, and if the Seller withdraws the property they must pay the buyer twice the initial deposit paid

Legal Representation

It is normal practice to appoint a Lawyer to act on your behalf. Our Agents in Portugal will introduce you to a local Lawyer in relation to your property purchase. An official document called a 'Procuracao Publica' will be drawn up in the Notary Office, and be signed by the person granting 'Power of Attorney' and registered by the Notary. This document can be in Portuguese or English, but must have the seal of a Notary.

A date will be set for signing the Final Deed called the 'Escritura de Compra e Vende' which must take place in front of a Notary and is recorded in their official books. This date will depending on if the property is new and building needs to be completed or it is a resale.
Ahead of this signing the Lawyer will make checks against the property to ensure there are no outstanding mortgages or unpaid taxes and that everything is in legal order.
It is at this digning of the Final Deed that the final balance of payment is made. The Notary Office will issue an official copy with the Notary's Seal as proof to the Buyer that the sale has been concluded

Once the sale has been completed the land or property has to be registered in the name of the new owner with the Land Registry (Conservatoria do Registo Predial). This regstry is not necessary until the owner wishes to sell the property, however, it is recommended that the registration is completed as soon as possible after the Final Deed as a precautionary measure

BEFORE THE FINAL DEED CAN BE SIGNED THE PROPRTY TAX ON THE SALE MUST BE PAID

Property Sales Tax

Before the final purchase takes place a Municipal Tax payment must be made to the nearest tax office to the property. The amount due is dependant on the purchase price of the property, as detailed below
 

Example:
Property price = €100.000,00 x2% (% of tax which applies to this price property)
Deducted Value = €855,00
Total Tax Due = €2.000,00 - €855,00 = €1145,00

Commercial and Building Plots pay a flat rate of 6.5%
Agricultural Land pays a flat rate of 5%
If the purchaser is an Offshore Company the tax is a flat rate of 15%

A tax is levied on all documents listed in the General Stamp Duty Schedule, and is determined by whatever the value of the sale or contract is. A property purchase is subject to a Stamp Duty of 0.8% of the declared value

Mortgage and Costs Incurred when Purchasing a Property in Portugal

Mortgages are available for Non Residents. They are normally over a period not exceeding 30 years or the borrowers 70th birthday.

Mortgages are usually repayment (capital and interest) but to keep the cost down in the initial years (normally 3) you may have interest only, transferring onto repayment. Loan to value is normally 70%, however, if the property is on sale for €100,000 but values at €120,000, you can borrow €84,000 rather than the €70,000 which is 70% of the purchase price

• The interest rate is currently 4.5%
• A €77,000 mortgage would cost €487.14 a month
• A €90,000 mortgage would cost €569.38 a month
• A €98,000 mortgage would cost €620.00 a month
• A €110,000 mortgage would cost €695.91 a month
• When buying a property in Portugal you pay a sales tax of 6%

If You Own a Long Term Let Property

If you decide to rent out a property via a letting agent for a long term let (6 months or over). The letting agent will collect 2 months rent in advance. One month is the Agent's fee and the 2nd month is the security deposit. The Letting Agent will then charge 1% of the rent per month as a fee for collecting the rent and paying it into our account

Taxation & Costs Incurred when Selling a Property in Portugal

If you subsequently want to sell a property in Portugal the Sales Agency fee is between 3% and 5% of the purchase price

If you reinvest the proceeds of any sale within 2 years there is no capital gains tax. If you retain the profit the following applies 50% of the profit is liable to 30% tax

E.g. Purchase 2006 @ 100.000€ - Sell 2007 @ 120.000€
120.000€ -100.000€ = 20.000€
Tax 20.000€ X 50% = 10.000€
10.000€ X 30% = 3.000€
Tax = 3.000€

Ongoing Costs

Local annual tax (IMI - Imposta Municipal de Imoveis) depends on the area in which the property is located and can vary between 0.4% and 0.8% of the purchase price. e.g. a €100.000 apartment approximately costs between 400€ and 800€ a year. Payment for annual tax is divided into 2 instalments (if the amount exceeds €250,00) one is due in April and the second in September and relates to the previous year. It is imperative to pay this tax as failure to do so may result in the property being sold by the State to the highest bidder
Municipal Tax (IMI - Imposta Municipal de Imoveis) is due on the taxable estate value of all Portuguese properties, and is due from the named owner of the property as at 31st December of the year the tax is due. The rates are 0.8% for Rural Properties and between 0.2% to 0.5% for urban properties

You only pay road tax if you have a car. The cost is approximately 35€ a year.
Rubbish collection and sewage charges are included in the water bill at around 20€ a month
TV tax is included with the electricity bill. For a normal family home this is approximately 60€ a month
Cable TV is around 35€.

You only pay for schools if you have children and then only after 9th Grade

General Living Costs

• Fancy restaurant meal 25€ person
• Every day restaurant meal 7€ person
• Taxi city around 3€
• Motor road Toll to Lisbon 4,1€ one way
• Rental Car deposit full of Diesel 65€
• Cinema Ticket 5€
• Parking police ticket 60€
• Speed Limit Exceeded Police Ticket 120€
• Coffee 0,5€
• Bread 0,17€
• Milk 0,8€
• Eggs (6) 0,75€
• Golf Green fees 20€ to 120€

Please contact us if you would like further information on purchasing a property in Portugal, or to discuss the financial options available to you.

If you would like to view a wide selection of homes on offer, please go to our sister website www.worldwidedreams.net