BUY a property in Portugal in 2021

BUY a property in Portugal in 2021

Use only a government-licensed real estate agent/agency. This is a license granted by the portuguese State after required qualifications are gained. In addition to qualification, civil liability insurance is also mandatory.

When purchasing a property in Portugal, we also recommend that you use a Lawyer. Most speak English and will provide a list of the costs involved.

It is up to the real estate agent to collect the necessary legal documentation from the seller before putting the property up for sale. It is up to the Lawyer to verify that the documents are up to date and that the information contained therein corresponds to that presented at the City Council and at Tax Department.

All residential properties must have the following documents:

  • Licença de Habitação | habitation license for property built after 1951 or a certificate to prove that the property was built before 1951;
  • Certidão de Teor | property registration certificate from the Land Registry Department
  • Caderneta Predial | property tax document from the Tax Department
  • Ficha Técnica | technical report for all properties completed after March 2004 (a document that details the construction of the property and the materials used)
  • Certificado Energético | energy rate certificate (a legal requirement as from January 2009 for all properties which are sold or rented)

If buying a rural property it is necessary that the property have a Caderneta Rustica. This is a detailed and an up-to-date description of the property. This document is issued by the local Tax Department.

The Vendor and Purchaser will agree a Promissory Contract detailing the conditions of Sale - "Contrato de Promessa de Compra e Venda". The Contract is then legalized by registering it in the local Notary Office. It is legally binding on both sides and the law states that the vendor must repay twice the deposit should he/she withdraw from the sale. If the buyer fails to complete he/she forfeits the total deposit. The Lawyer will explain this.

A document named Procuração Pública | power of attorney is prepared with the necessary details and this document is signed and registered by the Notary. This official document can also be created in the Portuguese language outside Portugal in a Portuguese Consul in a foreign country, or, in a Notary in the language of the country concerned. In the case of the latter the document must have the Seal of the Notary and an Apostil attached. An official translation into the Portuguese language will later be necessary.

Every buyer must obtain a Fiscal Number from the local Tax Office (Finanças). (Your Lawyer can assist you with this).

Prior to the completion of the sale, the purchase will usually be subject to IMT tax. 'Imposto Munipal Sobre Transmissões' This Tax is paid in the local Tax Office nearest to the location of the property being purchased. The amount charged is dependent upon the type of property and the sale price. In certain cases the buyer may be exempt from paying the Tax if the sale price is below € 85,500.00; however, this is a very rare occurrence these days.

Below is a table of the IMT tax payable on all urban purchases. All Rural properties are subject to a flat 5% Tax based on the sale price. Any Offshore Company purchase is subject to a Tax of 15% applied to the sale price.

When all the above requirements have been completed the act of sale can proceed in any Notary Office. This act is known as the "Escritura de Compra e Venda" which takes place in front of the selected Notary and is recorded in the official books. The Notary will check prior to the completion of the sale that all the necessary documents are correct to ensure that the sale can complete according to the facts provided. It is then that payment is normally given to the seller, and when applicable, the balance of purchase has to be made according to the signed Contract in Point 2 above. After the act is recorded the Notary Office will issue a photocopy of the entry which is the proof to the buyer that the act has officially taken place. The photocopy will carry the seal of the Notary but as further official copies can be requested at any time this document should not be mistaken for a "Title Deed"- as known in the UK.

After completion the property is registered in the new owners name in the Land Registry Office. (Conservatória do Registo Predial). This registration is not obligatory until the owner wishes to sell the property. However, it is strongly recommend that the registration be done immediately after the Notary act to prevent and protect against possible financial abuse by the previous owner.

Buying a property in Portugal can be a smooth and easy transaction but equally it can be a nightmare experience, so choosing the right professionals to work with and guide you through the purchasing process is another important decision that you have to make. We at Fernando Vaz Estate Agent aim to help our clients make informed buying decisions based on sound advice. This document is aimed at informing the purchasers of the different stages involved in purchasing a property in Portugal, step by step.

From an offer being accepted to Promissory Contract can take anything from 7 days to 60 days depending on whether the purchaser needs a mortgage or not and if all of the vendor documents are in order. Promissory contract to Escritura can take as little as 7 days but normally takes between 30 and 60 days. The average mortgage assisted sale time is approximately 3 months. These are the same average time scales as in the UK.

What the purchaser should do;

  • Prospective purchaser views property
  • Tenders offer to Estate Agent
  • Estate Agent informs vendor

If the offer is accepted

  • Purchaser should receive a confirmation of sale letter from the agent
  • Instruct a lawyer
  • Pay reservation deposit to lawyer (optional)
  • Appoint a Power of Attorney (if not going to be present for the signings.)
  • Obtain a fiscal (Contribuinte) number (We or lawyer can help with this)
  • Set up bank account with mortgagor (We can help with this)
  • Apply for a mortgage
  • Purchaser receives mortgage offer
  • Purchaser and vendor agree a date for signing the Promissory contract and the Escritura. (Exchange of contracts and completion)
  • Purchaser pays 10% - 30% deposit to Lawyer
  • Promissory Contract signed
  • Purchaser pays IMT tax via Lawyer
  • Purchaser pays Portuguese Stamp Duty (levied on any documents, books, papers, acts, deeds and products) (0.8% of the purchase price) via Lawyer
  • Purchaser and Vendor sign Escritura (Deed)
  • Registration of the sale with Conservatória do Registo Predial (Land Registry) at a Notary office and grants full security of ownership)

The Banks Role;

In order to purchase a property in Portugal, you will be required to open a bank account first

The bank will require from you:

  • Fiscal number
  • Certified copy of ID card or passport

If you require a mortgage the bank will need from you:

  • 3 months payslips (Originals)
  • Last 3 years P60 (Check if 3 or 1 yrs P60)
  • Last 6 months personal bank statements
  • Bank references

If self-employed:

  • 3 years audited accounts (check if 2 yrs)
  • 6 months bank statements
  • Latest mortgage statement from UK if applicable
  • Copy of the signed Contrato Promessa de Compra e Venda? (Sales Contract)
  • Plans/drawings of the site and/or plans of the property
  • If constructing/renovating the property copies of Planning Permission and Building Licenses
  • Credit report on mortgagee
  • Detailed address of property to be purchased
  • Contact details of key holder to the property for the evaluation

The Mortgage Process:

  • Mortgage request received by bank
  • Life assurance and building insurance arranged
  • Formal mortgage approval subject to valuation and life
  • insurance Bank instructs surveyor to value property
  • Bank receives results from surveyor
  • Medical examination if required
  • Subject to the results - a mortgage offer is made
  • Bank supplies lawyer with provisional mortgage registration documents
  • Lawyer provisionally registers the purchase on behalf of the purchaser and the mortgage and returns documents to the bank
  • Date agreed for funds to be released (Bank drafts final deed for mortgage)
  • Funds released
  • Insurances and life assurance in place

The Taxes IMT tax due (UK equivalent of Stamp Duty) (Paid at any Finanças) (Tax office)

  • Habitation property: between 0% if purchase price is below Euros € 81.600,00 and 6% if above € 510.000,00
  • Rustic property at a flat rate of 5%
  • Commercial property or land for construction at a flat rate of 6.5%.
  • Offshore companies domiciled in one of the 83 blacklisted jurisdiction at a flat rate of 15%
  • Offshore companies domiciled in other jurisdictions at normal rate as described above.
  • IMI tax (Property Rates) taxed at a rate between 0.5% - 0.8% of the property's tax value on properties which tax value hasn't been reassessed according to the new IMI, and between 0,2% and 0,5% on properties which tax value has been determined according to the new IMI Law.
  • Portuguese Stamp Duty levied on any documents, books, papers, acts, deeds and products. Currently (0.8% of the purchase price).

The Lawyers Fee
The Lawyers Role

  • Meeting with purchaser to discuss the property and sale transaction Receive reservation deposit from purchaser (optional)
  • Discusses Power of Attorney (may be accomplished after the Promissory Contract's stage).
  • Inform Lawyer if mortgage assisted purchase
  • Receive documents from the Agent
  • Check the documents (Cross references the information with the Tax Office and Land Registry)
  • Draft contract drawn up
  • Vendor and Purchaser agree a date for signing the Promissory Contract and Escritura
  • Deposit paid by purchaser to Lawyer (typically between 10 to 30%)
  • Promissory Contract (Exchange of contracts)
  • Provisional registration of mortgage (if applicable)
  • IMT tax due (Paid at any Finanças) (Tax office) & Stamp duty due to be paid at the Notary just prior to Escritura
  • Escritura (Completion) (Signed in front of a Notary)
  • Registration of the sale with Conservatória do Registo Predial (Land Registry) at a Notary office (Records the sale price and grants full security of ownership)

- This normally works out to be approximately 1.5% - 2% of the agreed sale price.

On-going commitments and obligations

If you spend less than 6 months per year in Portugal then you are classed as non-resident. However you are obliged to:

  • Appoint a Fiscal Representative in Portugal who will take care of paying your local annual property taxes and paying any applicable taxes on income derived from activities in Portugal, including that derived from renting your property
  • Insure your property and contents including additional liability insurance if the property is to be rented
  • Pay taxes and insurance where applicable
  • Pay condominium and other bills e.g. electricity, water etc.
  • If you spend more than six months a year in Portugal you are deemed a permanent resident and would be expected to pay taxes and social security contributions. Your fiscal representative can advise further on your specific case.