Introduction - Purchase & Living cost - Buying guide
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Introduction

Portugal has long been a favourite holiday destination, with its superb sandy beaches and famous golf courses it's easy to see why. There are no restrictions on foreigners purchasing property in Portugal, with a simple purchasing procedure and Aquavista on hand in the UK, it has never been easier to purchase your dream home in Portugal!

Purchase & Living Cost

Purchase Costs

At escritura (signing of the property deeds) the purchaser is obliged to pay the costs of purchase, the first being IMT, (stamp duty). IMT is currently 6.5% for any land purchase and between 0-6% depending on the purchase price.

The preparation of the public deed requires action by the notary public, who will charge a fee. The purchase will need to be registered with the appropriate Land Registry. This will be approximately 2.5% of the declared sale/purchase price.

Fees and taxes vary depending on the municipality. Aquavista always recommends clients to employ a lawyer who will advise on the relevant legislation.

VAT is applicable when purchasing a plot of land and dealing directly with a builder, the amount is worked out on the building contract value.

Legal fees vary depending on work requirements but are typically around 2%.

The vendor pays real estate agency fees. Please note purchase costs in Portugal do vary enormously and Aquavista will provide a detailed breakdown for specific properties you may be interested in.

Running Costs

It is very difficult to generalise the exact running costs of a property in Portugal as this varies on many different factors. Aquvista will be more than happy to provide approximate running costs depending on your property requirements.

As an example the running costs of a two-bedroom townhouse, with a communal swimming pool and gardens would be as follows:

• Maintenance charge 1000-1200 Euros Per Annum
• Property tax, this varies between 0.4% - 0.8% Per Annum depending on location and permanent residents can apply for a permanent residence document which can allow exemption from this for a number of years (the exact number depends on the Finance department)
• Electricity depending on usage can be between 30 - 200 Euros per month.
• Water depending on usage can be between 20 - 100 Euros per month.

 

Buying Guide

Tenure of Property

Property in Portugal is purchased freehold.

Purchasing Process

Promissory Contract

Once both the purchaser and the vendor have reached an agreement on the conditions of the sale, their lawyers can either draw up the final contract or a promissory contract. A promissory contract is usually required if there are any outstanding procedures to be completed before signing the final contract. This may include the vendor or purchaser applying for a mortgage, a request for outline planning permission, completion of any construction works or up dating of the registration at the land registry or tax office. If there is more than one purchaser, for instance a married couple or business partners, the promissory contract must be signed by all involved.

The promissory contract will include:

• The identification of the purchaser and vendor
• The identification of the property, its registration number, a complete description, the number of its construction licence or "Habitation/Occupation Licence" and the Material & Technical declaration (Ficha Tecnica)
• The agreed purchase price including the form of payment
• The deposit (sinal) amount and confirmation that this has been received and whether further amounts will be paid before the final contract (reforco de sinal) is signed.
• The deadline (prazo) for the signature of the final contract
• Whether interest is payable on any delays of the completion of the sale
• Whether the purchaser may build on the property before the completion of the sale
• Who will pay the property transfer tax (IMT, this is generally the purchaser)
• The conditions for default on the contract
• Any other conditions that the purchaser or vendor must meet before completion of the sale
  
  

Deposit and refund

Usually the deposit will be 10% - 30% of the purchase price, but can be more by agreement of both parties. This is non-refundable should the purchaser default on the contract, however, should the vendor default, the purchaser will be entitled to a refund of double the original deposit.

Final Contract

For the purchase of urban property with finance from a Portuguese bank, the bank's appointed Notary can prepare the final contract (Escritura de Compra e Venda). Alternatively the final contract is prepared by a public Notary, the property sales tax paid (IMT), the contract is signed in front of a Public Notary and the sale is registered at the land registry.

The final contract must be signed by all of the purchasers and will include:

• The identification of the purchaser and vendor
• The identification of the property, its registration number, a complete description, the number of its construction licence or "Habitation/Occupation Licence" and the Material & Technical declaration (Ficha Tecnica)
• The agreed purchase price including the form of payment

The Notary will need to see the following:

• Valid passports or residence cards (Cartao de Residencia) and tax numbers (Cartao de Contribuinte) for all purchasers and vendors
• A valid copy of the title deed (Certidao da Conservatoria do Registo Predial)
• The construction licence (Licenca de Construcao) or Habitation/Occupation licence (Licenca de Habitacao)
• Certificate of payment or exemption from the property transfer tax (IMT) from the local tax office together with an updated rate document (Caderneta Predial)
  

Property transfer tax

Property transfer tax (IMT) is due on all transfers of ownership of property, either by sale or inheritance, and is paid by the purchaser. The amount of tax depends on the type of property and the purchase price.

Completion of documentation

Once the final contract is signed, the new owner should notify the land registry and the tax department of the sale, this is normally carried out by your legal representative. Once the registration is completed, your legal representative will issue an up-dated copy of the title deed and rate document. With the copies of the purchase contract the new owner will be able to request transfer of the utility contracts.

Extra notes

If the property is an apartment or on a development with shared facilities or structures (propriedade horizontal), purchase may imply acceptance of existing management or condominium agreements. The administrator of the Management Company or condominium will provide all of the relevant information. A copy of the statues of a condominium (titulo constitutivo) should be registered in the land registry. This will detail all services provided and charges. The condominium will also have rules (Regulamento do Condominio) for use of both the shared and privately owned areas.

The administrator will provide up to date accounts of the property detailing any outstanding debts from the previous owners.

When purchasing property in Portugal it is essential that you only deal with Government licensed English speaking lawyers (Advogados), Aquavista's associate in Portugal is properly licensed and will be able to provide necessary proof if required.

Power of attorney is often given either to your lawyer or representative in Portugal, and must be notarised by a Notary in the purchaser's home country and must bear the official "Apostille" of that country in order to be accepted by the Portuguese courts.

Mortgages

Mortgages are available to the majority of nationalities for purchasing a property or re-financing for home improvement purposes via Portuguese banks or specialist overseas mortgage companies in the UK.

The minimum amount is currently £20,000 with no maximum; however, this must not exceed 80% of the valuation of the property.

Proof of income is required in all cases and can be made up of earned income, pension, investment or rental income; however, the lender will not always take all or part of these incomes into account when determining the maximum loan available. Non-status mortgages are not currently available.

Current rates from approximately 3.65% in Euros, and current terms 5 to 30 years up to the age of 80.

Letting

The letting potential in Portugal is excellent. Portugal is benefiting from a steadily increasing amount of tourist interest, and with the stunning golf courses is rapidly becoming a golfers paradise.

Much like the running costs, it is very difficult to provide an accurate figure for expected rental income. Aquavista will be more than happy to provide an approximate rental income depending on your property requirements.

As an approximate guide, a two-bedroom townhouse, in a good location, with swimming pool, and gardens could expect 1000 - 1500 Euros per week during August.

Offer Information

Residency

It is not necessary to become a Portuguese resident to purchase property in Portugal, but those who intend to move permanently to Portugal might choose to do so and the British Consul will provide the appropriate forms and advice. The applicant must show proof of the method of arrival on the island, undergo a medical test and show financial and medical independence. The process can be prolonged.

Work Permit

Work permits are available for EU citizens; please contact the Portuguese Embassy for further details.

Tax regulations

The UK and Portugal have signed up to a double taxation agreement, which stipulates that tax, need only be paid once. For international tax issues and double taxation relief and for information on your UK tax liabilities visit www.inlandrevenue.gov.uk

Medical Insurance

Portugal has a national health service that is very similar to the NHS in the UK, however, not all services are available for free. With this in mind Aquavista does recommend British clients to carry an E111 card and arrange suitable medical insurance.

 

To view previously asked questions on purchasing property in Portugal, or to ask your own question click here

 

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