Having covered several countries’ stances on property tax, it’s now time to focus on Portugal. We have already posted articles on the aspects of moving to Portugal as a non-citizen. Yet, this article will specifically aim at the different circumstances that can arise in the country in terms of taxes. In this article we will be going over a variety of topics such as the following. Immovable property tax, property purchase tax, stamp duty, rental taxes, wealth tax, capital gains tax, agency fees, inheritance tax, and lastly, fiscal representation within Portugal.
Immovable Property Tax (IMI)
If you’re to own property in Portugal then you’re required to pay a certain amount of immovable property tax. This is otherwise known as IMI. The rate you’ll be required to pay is unique to you, and will be decided by a municipal assembly.
The rate of this form of tax ranges between 0.3-0.45 percent. In more rural areas of the country the rate of tax is fixed at 0.8 percent, not having the state ranges applying to them. Difference from the state range is also applied to properties that have been re-valued ever since 200. With the range for this circumstance falling between 0.2-0.5 percent. Any property owned that’s claimed through a corporation that is residing within any of the tax havens of the world, such as the British Virgin Islands, will be required to pay a fixed rate of 7.5 percent.
Exemptions on IMI Tax
There are some examples in which properties can be exempt from having to pay IMI tax. For example, if a property is used as a home or is planning on being rented out, this will exempt the property from any IMI requirements for up to three years. The exemption will only apply for the three years in the situations of urbanized properties with a Tax Registration Value of up to €125,000. The property must also be owned by a person who gained taxable income within the nation in the year before they purchased the property, this figure sits at up to €153,300. If any of these circumstances fit your profile, then you should be exempt from having to pay the IMI tax on your property for a base level of three years.
Property Purchase Tax (IMT)
Relating to your property, the property purchase tax on a property is determined based upon the higher value of the deeds of the property or the rateable value of the said property. The rate of property purchase tax varies from property to property and some of the determining characteristics as to what the figure for IMT could be are the type of property you own and the base value of that property.
Exemptions on IMT taxes
You may be exempt from IMT tax in the case of which the property you have purchased doesn’t have a value above €92,000.
If you’ve purchased a property that’s retained national interest then it could be exempt from having to pay IMT tax. A property that’s a national interest could be, for example, public-use buildings or municipal buildings. Buildings or properties that’re being used for rehabilitation are also potentially able to avoid having to pay IMT tax. However, to make use of this exemption, the rehabilitation work in question must be started within three years of purchasing the property.
For properties that’re expected to be going up for resale, if the owner can prove and certify through solid documentation that resale activity has been going on for at least a year, then IMT tax exemption could be granted. Lastly, in certain circumstances, some businesses that are going through restructuring phases within firms could find that financing members of the government could grant exemptions from IMT if requested.
Stamp Duty (IS)
On contracts relating to the acquisition of deeds, loans, mortgages, and other aspects, you’ll be legally required to pay the fees for stamp duty. Like many things mentioned in this article, this varies from case to case. Usually, the fee related to stamp duty relates in accordance with the type of property and its value. The rate usually falls between 0.4 percent and 0.8 percent.
If you purchase a property and plan on renting it out to people, you’re required to pay a rate of tax upon the income you gain from renting. This rate of tax is paid at a flat rate of 15 percent.
Wealth Tax (AIMI)
This is a tax that requires tax rates paid based upon how expensive your property is. Usually it’s required if you own a share within Portuguese property with a base value exceeding €600,000. If the property in question is owned by a company, the tax rate is at 0.4 percent. If you own it as an individual the AIMI rate is at 0.7 percent. The tax rate goes up once again if the property you own shares in exceeds more than €1million. At this level the tax rate hits 1 percent.
Capital Gains Tax
If you own property such as real estate and other investments in Portugal and gain profit in the process of selling it, you’re required to pay capital gains tax. Capital gains tax varies depending on the type of asset you own. For example, whether or not you live within the property and what your residence status is within Portugal.
Another example is, if you’re a non-resident of Portugal, the flat rate of capital gains tax sits at 28 percent. If you’re a Portuguese resident then the gains you have gathered from the real estate are added together alongside your other acquired income from the year. In this case, the rate then scales from between 14.5 percent and 48 percent.
Exceptions to Capital Gains Tax in Portugal
If you’re a resident of Portugal who pays tax, along with selling your main home whilst purchasing another, you will then be exempt from capital gains tax. This can apply for up to three years after the purchase or two years before the sale.
If the property you own was lived in before 1989, whilst being in your name at that time, then it’ll also be exempt from having to pay capital gains tax upon it.
Only sellers in Portugal are required to pay agency fees. If capital gains are gained from a sale of a property, it’s possible to deduct agency fees from the sales cost of the property being sold.
If you’re inheriting from your immediate family, no inheritance tax is required. Despite this, a 0.8 percent stamp duty is required. This rises to 10 percent for gaining inheritance from any non-immediate family members.
Fiscal Representation in Portugal
If you own an asset in Portugal yet do not have resident status in the country, you’re legally required to assign a fiscal representative. This will also be the case to ensure that you’re legitimately obeying the obligations of tax in Portugal.
For further information, please refer to our ultimate guide on Buying Property in Portugal.