Property taxes in Portugal: is it expensive to buy property?

Generally, you should budget between 12% and 15% of the property’s purchase price to cover all associated taxes and fees. This includes one-off purchase taxes, legal fees, and registration costs.

What are the main property taxes in Portugal?

The Portuguese tax system includes several different charges depending on whether you are buying, selling, or simply owning a property. The main taxes you will encounter are:

• IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis): A municipal property transfer tax paid when a property changes hands.
• Stamp Duty (Imposto do Selo): A flat-rate tax applied to the purchase price and the mortgage, if applicable.
• IMI (Imposto Municipal sobre Imóveis): An annual municipal property tax paid by homeowners.
• Capital Gains Tax: A tax paid on the profit made from selling a property.

Who is subject to these taxes?

Anyone who owns property in Portugal is subject to these taxes, regardless of their residency status. This includes:

• Residents: Individuals who live in Portugal for more than 183 days a year or have a primary residence there.
• Non-residents: Foreign investors or holiday homeowners who do not live in the country full-time.
• Corporations: Entities that hold Portuguese real estate for business or investment purposes.

Taxes on buyers

When you buy a property in Portugal, you are responsible for paying several one-off taxes at the time of the transaction.

IMT (Municipal Property Transfer Tax)

This is often the largest cost for a buyer. The rate is progressive and depends on the property value, the location (mainland vs. autonomous regions), and whether the home is your primary or secondary residence. Rates generally range from 0% to 8%.

Stamp Duty (Imposto do Selo)

A flat rate of 0.8% of the purchase price is charged as stamp duty. If you take out a mortgage, you will pay an additional stamp duty on the value of the loan, usually between 0.5% and 0.6%.

VAT (IVA)

In Portugal, VAT is typically not applicable to the purchase of residential property. Instead, the IMT and Stamp Duty system covers these transactions.

Exemptions:

• Youth exemption: since August 2024, buyers aged 35 or under purchasing their first permanent home are fully exempt from both IMT and Stamp Duty on properties valued up to €324,058 (2025 threshold).
• Properties with a purchase price below a certain threshold (approximately €104,261 in 2025 for a primary residence) are exempt from IMT.
• Buildings purchased for rehabilitation or urban renewal may qualify for IMT exemptions.

Taxes on sellers

Selling a property in Portugal involves tax implications, particularly concerning the profit you make from the sale.

Capital Gains Tax

Sellers must pay tax on the gain made between the purchase and sale price. For residents and non-residents alike (as of 2023), only 50% of the gain is taxable, and it is added to your other income for that year.

Non-residents used to be taxed at a flat rate of 28% on the total gain but this was changed in January 2023 after an EU ruling.

Exemptions:

• If you sell your primary residence and reinvest the full amount into another primary residence in Portugal or the EU within 36 months, you may be exempt from capital gains tax.
• Properties purchased before 1989 are generally exempt from capital gains tax in Portugal.

Taxes on homeowners: recurring payments

Once you own a home, you must pay annual taxes to the local municipality.

IMI (Annual Municipal Property Tax)

IMI is the main recurring tax for owners. The rate is set by the local municipality and usually ranges from 0.3% to 0.45% for urban properties. It is calculated based on the property’s Taxable Patrimonial Value (Valor Patrimonial Tributário – VPT).

Exemptions:

• Permanent Exemption: Low-income households with a property value below a specific threshold may be permanently exempt.
• Temporary Exemption: You may apply for a three-year exemption from IMI if you buy a property for your primary residence and its VPT is below €125,000.

Is rental income taxed?

Yes, if you rent out your property in Portugal, you must pay tax on the rental income.

• Standard Rate: Rental income is generally taxed at a flat rate of 25% for most residential leases.
• Deductions: You can often deduct maintenance costs, insurance, and IMI from your taxable rental income.

Exemptions:

• There are currently few exemptions for rental income tax, though long-term rental contracts (over 10 or 20 years) may qualify for significantly reduced tax rates.

First vs second home: tax implications

Portugal provides certain reliefs for those buying their first home as a primary residence. Primary residences have higher IMT exemption thresholds and lower initial tax brackets compared to secondary or holiday homes. Additionally, the temporary three-year IMI exemption is only available for a primary home.

How to save money on your property purchase

When purchasing property from abroad, currency exchange rates can significantly impact your final cost. Using a specialist provider like Wise can help you save on conversion fees.

• Pay the seller directly: You can use Wise to send the down payment or the final purchase amount directly to the seller’s Portuguese bank account at the mid-market exchange rate.
• Move money between accounts: If you have already opened a Portuguese bank account, you can use Wise to move funds from your home country with lower fees than traditional banks.

Fill out Wise’s online form today to find out how they can assist you with moving money abroad.

Wealth taxes in Portugal

Portugal does not have a general “wealth tax,” but it does have an additional property tax known as AIMI (Adicional ao IMI).

This applies to owners of residential properties where the total Taxable Patrimonial Value (VPT) exceeds €600,000 for individuals or €1.2 million for couples. Rates for individuals range from 0.7% to 1.5% on the value exceeding the threshold.

How to pay your taxes

Property taxes in Portugal are managed by the Tax and Customs Authority (Autoridade Tributária e Aduaneira), often called Finanças.

• Purchase Taxes (IMT and Stamp Duty): These must be paid before the final deed (Escritura) is signed.
• Annual Tax (IMI): This is usually paid in installments in May, August, and November, depending on the total amount.
• Online Portal: Most taxes can be viewed and paid through the Portal das Finanças website.

When to speak to a tax professional

Navigating Portuguese tax law can be complex, especially regarding residency status and capital gains. It is usually a good idea to speak to a tax professional or an experienced real estate lawyer before buying or selling a house. They can ensure you meet all legal deadlines and help you apply for any available exemptions.

Useful resources

• Portal das Finanças – The official Portuguese government portal for tax filing and information.
• ePortugal.gov.pt – Official guidance on property transfer taxes and municipal procedures.
• Portal da Habitação – The official housing portal of the Portuguese government with information on owner rights and programs.