Our Portuguese property expert Richard Way has been doing some hefty research on the costs involved in buying a property in Portugal, including purchase costs and ongoing taxes.
Portugal’s version of transfer is IMT (Imposto Municipal sobre Transamissoes) and it’s based on a complicated sliding scale, with rates ranging from one to eight per cent, or a ﬂat rate of six per cent for properties over a certain value.
“For a €350,000 property, IMT would be approximately €16,965, plus another €2,800 in stamp duty,” said Paula Meireles, an independent lawyer based in the Algarve.
Other costs for the purchase include: legal fees of €6,450 (incl. VAT); completion fees of €738; and €550 for land registration fees and other disbursements. This means the total cost of purchasing a €350,000 resale property in Portugal would be in the region of €377,503.
On-going ownership taxes/fees
Council tax in Portugal is called ‘Imposto Municipal sobre Imóveis’ (IMI). Rates are calculated on the property’s rateable value and vary from 0.3 per cent to 0.8 per cent, according to the local council and property type. As a guide, for a €350,000 villa or townhouse in a tourist area in the Algarve, annual IMI will be circa €400-€800, depending on the property. Often in the Algarve there will also be communal fees, typically known as condominium fees.
“The idea is that the closer you get to the coast the higher fees will be,” said James Charlton at agent Cerro Novo. “If you are in a golf complex, you would be looking at about €3,000 a year, all in. If it’s a townhouse that’s not in a golf complex, taxes and fees will range between €700 and €1,500 a year. You can ﬁnd really good townhouses that are not in a large complex which have a private pool for really good rates. If you go into a golf complex they will want more but you also get more for the service.”
* Inheritance - There is no inheritance tax for direct family and spouses in Portugal, and for anyone else it is levied at a ﬂ at rate of 10 per cent
Cost of living
Portugal remains one of the most aﬀordable places to have a holiday. According to the Post Oﬃce Holiday Costs Barometer, the Algarve is the best value holiday destination in the Eurozone in 2017. The barometer assesses 14 beach resort destinations in the Eurozone, comparing prices of meals, drinks and other holiday essentials.
Global consumer price website Numbeo.com rates consumer prices as 28 per cent lower in Portugal compared to the UK, making it the cheapest of all four countries. Numbeo highlights restaurant and grocery prices as 46 per cent and 26 per cent cheaper than the UK respectively, with utilities being 45 per cent cheaper. Of course, Portugal has some more exclusive corners where living costs will be higher, for example in the parts of the Golden Triangle.
To rent out your Portuguese property to holidaymakers, by law you must register with your town hall and obtain a rentals licence, known as an ‘Alojamento Local’. Your property will need to meet certain health and safety standards to get the licence, and wherever your property is advertised, your registration number with the letters ‘AL’ must be displayed alongside.
Amongst other requirements, you will need to register your lettings activity with the Portuguese tax authority and make an annual tax declaration. For non-residents, tax on rental income is set at a ﬂ at rate of 28 per cent, with allowances for certain expenses. There is a double taxation treaty between Portugal and the UK.