Navigating taxes on property in Portugal is essential for homeowners and investors, particularly with the latest updates introduced in the past year. This guide provides a clear overview of the key property-related taxes and their implications.

1. Property Transfer Tax (IMT)

The Imposto Municipal sobre a Transmissão Onerosa de Imóveis (IMT) is a one-off tax applied when property ownership is transferred. Rates depend on the property’s type, value, and intended use:

• Residential Properties:
• Up to €97,064: Exempt
• €97,064 to €132,774: 2%
• €132,774 to €181,034: 5%
• €181,034 to €301,688: 7%
• €301,688 to €578,598: 8%
• €578,598 to €1,050,400: 6%
• Over €1,050,400: 7.5%

From 1 August 2024, individuals under 35 purchasing their first permanent home were exempt from both IMT and stamp duty for properties valued up to €316,272.

2. Stamp Duty (Imposto de Selo)

Stamp duty is charged at 0.8% of the property’s purchase price. This applies to transactions such as sales, gifts, and inheritances. The buyer is responsible for paying this tax upon acquisition.

3. Annual Municipal Property Tax (IMI)

The Imposto Municipal sobre Imóveis (IMI) is an annual tax based on the property’s taxable value (Valor Patrimonial Tributário, or VPT).

• Urban Properties: 0.3% to 0.45%
• Rural Properties: 0.8%

Rates are set by the local municipality, with payments structured as follows:

• Amount ≤ €100: One instalment in May
• €100 < Amount ≤ €500: Two instalments in May and November
• Amount > €500: Three instalments in May, August, and November

4. Additional to IMI (AIMI)

The Adicional Imposto Municipal sobre Imóveis (AIMI) applies to high-value properties:

• For Individuals:
• Properties valued over €600,000: 0.7%
• Over €1 million: 1%
• Over €2 million: 1.5%
• For Married/Cohabiting Couples (Joint Taxation):
• Exemption threshold doubles to €1.2 million.

5. Capital Gains Tax

When selling property, capital gains are taxed differently for residents and non-residents:

• Residents: 50% of the gain is taxed at progressive income tax rates.
• Non-Residents: Gains are taxed at a flat rate of 28%.

From 11 September, new rules offer greater flexibility for homeowners to qualify for tax exemptions on the sale of a primary residence.

6. Wealth Tax (AIMI)

For properties exceeding €600,000, AIMI functions as a wealth tax:

• Individuals:
• Over €600,000: 0.7%
• Over €1 million: 1%
• Over €2 million: 1.5%
• Companies: A flat rate of 0.4% on all properties applies.
• Married/Cohabiting Couples: Joint ownership doubles the exemption to €1.2 million.

7. Inheritance and Gift Tax

Portugal does not impose inheritance tax. However, stamp duty of 0.8% is levied on property transfers by gift or inheritance. Transfers to spouses, descendants, and ascendants are exempt from this duty.

8. Rental Income Tax

Rental income is taxable, with rates differing for residents and non-residents:

• Residents: Taxed at progressive rates ranging from 14.5% to 48%.
• Non-Residents: Flat rate of 28%.

Landlords can deduct documented maintenance and repair costs to reduce taxable income.

Conclusion

Understanding the evolving property tax landscape in Portugal is crucial for making informed decisions. Whether you’re buying, selling, or renting property, staying updated on these taxes ensures compliance and aids financial planning.