Manuel Garrido
Real estate in Portugal is in demand, and if you are considering jumping on the property market in Portugal, it’s essential to understand all the property tax in Portugal levies – especially the property tax for foreigners.
In this guide to property taxes in Portugal, we’ll cover the property taxes you need to know about, and you’ll also learn more about:
Taxes on Property Before Buying in Portugal
IMT Tax Portugal, or Property Transfer Tax
IMT, or Imposto Municipal sobre Transações Onerosas de Imóveis, is a property transaction tax that the buyer pays before purchasing any property, for example, a real estate property ownership transfer.
The IMT is a property tax for both locals and foreigners. This property transfer tax is sometimes known as ‘the property purchase tax’ as it needs to be paid when purchasing property. The amount that you will be taxed ranges from 0 percent to 10 percent, depending on a few factors, including:
- Property purchase price
- Location (properties in rural areas are taxed at 0.8 percent, while urban areas can be taxed from 0.3 percent to 0.545 percent)
- If you’ve ever bought a property in Portugal before
- Whether your property has been valued since 2004 (properties valued before 2004 are taxed at a rate of 0.4-0.8 percent; properties valued since are charged at 0.2 percent – 0.5 percent)
You must pay the following month if the transfer occurs outside Portuguese territory.
Stamp Duty in Portugal
The Stamp Duty, or Imposto de Selo, is charged for all contracts and legal affairs regarding your real estate.
Stamp Duty can be charged on deeds, contracts, and bank mortgages for the house. The buyer accounts for the stamp duty, which is charged at a fixed rate of 0.8 percent of the property’s registered fiscal value.
Long-term letting or sub-letting contracts are taxed at 10 percent of the monthly rental amount.
Corporate property ownership transactions in Portugal — involving a company acting as the legal property owner rather than an individual — are exempt from Stamp Duty.
Mortgage taxes in Portugal
Mortgages are often associated with purchasing a property. In Portugal, there are a few options, including fixed-rate or variable-rate mortgages.
Portugal charges an additional tax called Imposto sobre a Concessão de Crédito or the Mortgage Stamp Duty. This tax has a fixed rate of 0.6 percent of the mortgage price and is paid in cooperation with a bank.
Taxes After Completing a Portugal Property Purchase
Annual Municipal Property Tax (IMI)
The Imposto Municipal sobre Imóveis, or Immovable Property Tax, is a tax paid annually by property owners. The amount you pay depends on a rate between 0.3 percent and 0.5 percent, which municipalities set each year based on the property’s taxable value.
This rate varies based on the property type, its history, and its location, such as whether it’s in an urban area. In most parts of Portugal, the IMI rate is usually between 0.3 percent and 0.45 percent of the property’s assessed value. However, rural property owners may pay a higher rate of 0.8%.
If a property is left vacant, the IMI can be doubled. There are exemptions available for some properties. For example, if you buy a property for permanent residency, you might be exempt from paying IMI or pay a reduced amount. This exemption can last from three to six years, depending on the property’s value.
AIMI (Wealth Tax)
The Addition to the Municipal Property Tax (Adicional ao Imposto Municipal de Imóveis or AIMI) is another tax owed after purchasing real estate, and it affects those with a total real estate worth above €600,000.
There are three levels of AIMI wealth tax in Portugal:
- 0.7 percent tax rate on property valued between €600,000 and €1 million
- 1 percent tax rate on property valued between €1 million and €2 million
- 1.5 percent tax rate if the total value exceeds €2 million
Rental Taxes
If you’re letting out your real estate purchase, there are certain rental taxes.
Rental income tax is applied at a flat rate of 28 percent of your net rental income. However, certain tax deductions could apply to your rental income tax.
For example, you can deduct fire insurance costs (as this is compulsory for all rental properties), value expense costs (such as the IMI), condominium fees, and costs associated with obtaining an energy certificate.
Rental taxes vary depending on whether you’re letting out your property short-term or long-term. As well as your rental income tax liability, you should also remember that you may need a local accommodation license.
Short-term rentals
If you’re planning on renting your place to tourists for short periods, you’ll need to apply for an Alojamento Local (AL) license. This license allows property owners to rent out their properties for short-term tourism.
This could be a good option if you are considering living in Portugal for only part of the year.
To acquire your AL license, you must submit your request to the City Council with information about your property, including the type of property you would like to rent out and how many rooms and beds the property has. You will need to hire an insurance company to cover potential damages that could occur on the property.
Currently, you can buy property in Lisbon, but most of the old town is locked for AL licenses.
You can deduct any property or maintenance costs 24 months before renting from the license cost. Use any receipts to prepare an invoice identifying the work carried out on your property and its location.
Long-term rentals
For long-term rentals, you will need to draw up a standard lease agreement and do not need to obtain an AL license.
Capital Gains Tax (CGT)
Capital gains are the profit you make from selling a property. Any capital gain you earn from the sale may be subject to tax whenever you sell Portuguese property.
In your tax return, you must disclose the year the house was purchased and how much you paid for it. The CGT rate varies depending on the duration of ownership, with capital gains from properties held for more than ten years being taxed at a lower rate than those held for a shorter period.
Exceptions to Capital Gains Tax in Portugal
You may have ways to reduce or avoid Capital Gains Tax (CGT). For example, if you did maintenance work on the house, like installing a new heating system or insulation, you can show the invoices for this work during your CGT assessment.
You may also not have to pay CGT if you use the full selling price of your property to buy a new home in Portugal. The house you sell must be your main home and match your tax address. You must also buy a new house within 36 months.
After you buy your new home, the tax authorities will figure out the profit from your sale and check that you used this amount to buy the new property. It’s important to document your new home as your main residence within 12 months after you reinvest.
Book a one-on-one consultation with our Portugal Tax Specialist
Inheritance Tax
In Portugal, an inheritance tax is a tax levied on the transfer of assets from a deceased person to their heirs.
The tax rate varies depending on the relationship between the deceased and the inheritor, with spouses and direct descendants being taxed at a lower rate than more distant relatives.
In some cases, there may be exemptions and reductions available, such as for the inheritance of a main residence.
Usually, there is little to no inheritance tax in Portugal. However, a stamp tax at a rate of 10 percent applies to the assets considered to be located in the Portuguese territory and passed on as inheritance. A stamp tax exemption applies whenever inheritance is passed on to spouses or family members, such as parents or children.
Agency Fees
When buying property in Portugal, we recommend you go with a licensed real estate agent. You can confirm the agency’s license number and validity through the IMPIC (Institute of Public Markets, Real Estate, and Construction).
Real estate agents usually charge a commission of 5 percent plus VAT.
Tax Representation
In Portugal, a tax representative acts as the interface between a non-resident and the Serviço de Finanças (tax office) on tax matters under the tax regime.
If you are a non-EU resident who owns properties, holds a bank account, or has other commercial activities or interests in Portugal, you will need to appoint a tax representative in the country.
They may charge agency fees, but can help you navigate the tax system. Getting a tax representative is required if you are a non-EU resident to obtain the Portugal tax identification number (NIF) from the Portuguese tax authorities.
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Frequently Asked Questions about Portuguese Property Taxes
What taxes do you pay when buying property in Portugal?
When buying property in Portugal, you pay the Property Transfer Tax (IMT), which ranges from 0% to 10% depending on the property type, value, and location, plus a Stamp Duty of 0.8% on the purchase price. After purchase, you pay the annual Municipal Property Tax (IMI), typically between 0.3% and 0.8%, and possibly the Additional Property Tax (AIMI) if your property’s tax value exceeds €600,000.
How is property tax calculated in Portugal?
IMI, the annual property tax, is calculated by applying the municipal rate (0.3%–0.5% for urban properties, 0.8% for rural) to the property’s tax value (VPT), not the purchase price. Each municipality sets its own rate within the government’s limits.
Do foreigners pay property taxes in Portugal?
Yes, foreign property owners pay the same property taxes (IMT, IMI, AIMI) as Portuguese nationals, regardless of residency status.
What is IMT tax in Portugal?
IMI (Imposto Municipal sobre Imóveis) is the annual municipal property tax paid by property owners. It funds local public services and is based on the property’s tax value (VPT).
When is property tax due in Portugal?
IMI is due annually, usually in May. If the amount is up to €100, pay by May 31; between €100 and €500, pay in two installments (May and August/September); over €500, pay in three installments (May, August, and November/December).
How do I pay property taxes in Portugal?
You can pay IMI via home banking, ATM, direct debit through the Finance Portal, at a tax office, or at a CTT post office. Payment details are provided in your annual tax notice or available on the Finance Portal.
Are there exemptions or reductions for IMI tax in Portugal?
Yes. Temporary exemptions (up to 3 years) may apply for permanent residences or properties intended for rental. Permanent exemptions exist for low-income households and properties with a tax value below a set threshold. Additional reductions can apply for urban rehabilitation, energy efficiency, or forestry use.
What is the difference between IMI and IMT in Portugal?
IMT is a one-time property transfer tax paid at purchase, calculated on the higher of the purchase price or tax value. IMI is an annual tax paid by property owners based on the property’s tax value and municipal rate.
Is there an annual property taxes in Portugal?
Yes, IMI is the annual property tax, ranging from 0.3% to 0.8% depending on property type and location.
How much property tax do retirees pay in Portugal?
Retirees pay the same IMI rates as other property owners, between 0.3% and 0.8%. However, foreign retirees may benefit from the Non-Habitual Resident (NHR) regime, which offers reduced tax rates on pension income but does not affect IMI rates.
Can property taxes in Portugal be appealed or reduced?
Yes. While it’s important to pay taxes, property owners in Portugal can appeal their property tax assessments if they believe there is an error. Additionally, reductions or exemptions may apply under certain conditions.
