Buyer's Guide To Portugal
Purchasing a property
Once a price has been agreed with the vendor both parties will sign a preliminary contract ( Contrato de Promessa de Compra e Venda ) and make a deposit of usually 10% of the purchase price.
The deposit is forfeited if the buyer does not proceed. If the vendor withdraws double the deposit is paid to the buyer by the vendor. The balance of the purchase price and all fees will be payable on completion to the notary advogado and both vendor and purchaser will sign the escritura de compra e venda, the definitive contract equivalent to the Deeds of the property.
Financing a purchase
Portuguese Mortgages and how they work
All mortgages are full status and proof of income and outgoings will be required.
Portuguese mortgages are secured on the property in Portugal.
A deposit of 20% of the purchase price is required and you will also be liable for solicitor's fees.
Only Euro mortgages are available - minimum amount of EUR75,000.
They are Repayment loans and can be taken over a 5-20 year term. All mortgages should be fully repaid by the age of 65 and life cover is required.
Extend your main mortgage or have a new mortgage for the property.
Extending your main mortgage is at present a cheap way of raising cash,
Cosmic Villas Ltd can help you to arrange re mortgage.
The other option is to take out a second mortgage on your holiday home.
Several companies offer mortgages overseas, please refer to our finance section on the home page.
Since January 2004, transfer tax is now known as IMT (imposto municipal sobre transmissőes onerosas) and is calculated on the highest of the two taxable values - either on the newly-determined taxable value or on the purchase price value.
Residential (villas and apartments): 0-6%
Urban, construction land or commercial: 6.5%
For offshore-domiciled buyers: 15%
There is a tax on acquisition of property called SISA. As of 31.5.2003 rates are as follows:
0% to €80,000
2% - 6.5% thereafter
5% for land.
If the buyer is in a low tax regime the rate is 15%.
Imposto municipal sobre imóveis (IMI): you pay between 0.4% and 0.8% of your taxable value. Portuguese properties are being revalued and you may end up having to pay between 0.2% and 0.5% of the value given to your property.
Inheritance tax has been abolished in Portugal. There is still a 10% stamp duty charge on transfer of assets. Gifts or donations to a spouse, children, parents or grandparents are exempt.
Notary and registration fees
This is usually about 2.5% of the purchase price.
Usually between 1% and 2% of the purchase price.
Are carried out by the lenders and you as the purchaser will be liable for this cost.
The valuation fee is approx. €150 - €250
Where property is rented with a rental contract this must be registered with the tax authorities.
Withholding tax of 15% should be deducted from rental income.
Please note that on Cosmic Villas Ltd web site does not constitute regulated financial advice. We recommend a course of action specific to your personal circumstances. The information is intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. We can arrange this for you, call us or email us. Any statement regarding financial services products and tax liability is based on legislation and tax practices as at 1 January 2004, which is, of course, subject to change. The value of any tax benefits or relief's depends upon the individual circumstances of the investor. For with-profit based investments, there is no guarantee as to the level of bonuses that will be declared, if any. Where mortgages are explained please do remember that your home is at risk if you do not keep up repayments on a mortgage. All mortgages are subject to underwriting, status and are not available to people under the age of 18.