Property Taxes in Portugal
Tax rates are influenced by tax residency status. When renting out real estate, residents are subject to progressive income tax rates ranging from 14% to 48%, depending on their annual income. Non-residents are subject to a fixed rate of 25%. However, this tax applies only to income earned in Portugal.
Foreigners are also liable to pay taxes when renting or buying property, even if they stay in the country for less than 183 days a year.
Individuals become tax residents of Portugal if they live in the country for 183 days or more in a year. Change of residency does not happen automatically; you need to submit an application to the local tax authority and specify a Portuguese registration address in your application.
When buying or renting real estate in Portugal with a D7 visa, foreigners obtain residency. The cost and location of the property are not relevant for this purpose.
The tax year in Portugal runs from January 1st to December 31st. Tax returns are submitted from April 1st to June 30th of the following year on the tax authority’s website.
Taxes on Real Estate Transactions
Rates for property owners depend on its value, region, and owner’s status.
The cost per square meter of housing in Portugal in the first quarter of 2023 averages €2,481. Prices in Lisbon remain stable, in contrast to Santarém and Braga, where there is an increase.
Buying for rental purposes is most profitable in the country’s interior regions, such as Santarém.
Purchase tax, IMT (Imposto Municipal sobre a Transmissão Onerosa de Imóveis), is a municipal property transfer tax. It ranges from 0% to 8%, depending on the property’s value and type. The buyer pays this tax before signing the purchase agreement.
If the property is in a rural area, the IMT rate is 5%. Commercial properties are taxed at 6.5%, regardless of their location.
When purchasing buildings of national interest or shares in offshore companies that own Portuguese real estate, buyers are exempt from paying IMT.
The IMT tax rates in Portugal are as follows:
| The property value | Tax rate |
| Up to €97,064 | 0% |
| €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% |
| €1,050,400 and above | 7.50% |
When selling real estate, capital gains tax is levied. If the seller is a resident of Portugal, they pay tax on only half of the profit from the transaction. Non-residents pay tax on the entire capital gain.
If a resident sells their primary residence to buy another, no tax is imposed. If the new property is cheaper, tax is applied to half of the difference between the profit from the sale of the old property and the expenses for purchasing the new one.
If a property is sold by a retiree or a resident over 65, they can invest the profit in a pension fund or insurance company. However, this must be done within six months after the completion of the sale.
The stamp duty (Imposto de Selo) is paid when purchasing, gifting, inheriting, or renting real estate and is set at 0.8%. The purchase of property on behalf of an organization is not subject to stamp duty.
Wealth Tax
Wealth tax rates in Portugal:
| OWNER | PROPERTY VALUE | TAX RATE |
| Individual | 600 000 € – 1 000 000 € | 0.7% |
| 1 000 000 € – 2 000 000 € | 1.0% | |
| more than 2 000 000 € | 1.5% | |
| Legal Entity | 600 000 € — 1 000 000 € | 0.4% |
|
Urban Real Estate owned by a resident company
|
–
|
7,5%
|
Taxes on Property Inheritance and Gifting
When transferring real estate or putting it to use in any way – be it through purchase, rental, gifting, or inheritance – a stamp duty of 0.8% is paid.
In Portugal, inheritance tax has been abolished since 2004. If real estate is inherited by a spouse, children, parents, or grandchildren, the donor pays 0.8%. In other cases, an additional stamp duty rate of 10% is applied. For instance, when inheriting property from someone who is not a close relative, it will amount to 10.8%.
Taxes on Rental Income from Real Estate
When renting out real estate, a contract is signed. If the contract is for a period exceeding one month, the document is registered with the tax authority, and a stamp duty of 10% of the rental amount is paid.
The owner’s rental income is subject to tax. Non-residents are subject to a fixed rate of 25%. Residents pay income tax on a progressive scale.
Income tax rates for residents:
Individual calculation of the value of a D7 visa in Portugal
- Up to €7,091: 14.5%
- From €7,091 to €10,700: 23%
- From €10,700 to €20,261: 28.5%
The tenant does not pay any taxes when entering into a contract. An additional expense, apart from the contract fee, may be a deposit equivalent to the cost of two months’ rent.
To obtain Portuguese Golden Visa (Residence Permit) with a D7 visa, it is sufficient to rent an apartment for an extended period and sign a contract. There are no requirements regarding the cost, size, or location of the property.
The yield from residential rental properties in Portugal in the first quarter of 2023 increased by 1% compared to the previous year and amounted to 6.6%.
Annual rental yields in Portuguese cities:
- Santarém – 7.6%;
- Coimbra – 5.9%;
- Braga – 5.6%;
- Funchal – 5.2%;
- Setúbal – 5.1%;
- Porto – 4.7%;
- Aveiro – 4.3%;
- Lisbon – 3.8%.
Owners receive the lowest rental income in Lisbon, Aveiro, and Porto. However, in these regions, investment risks are lower, including due to the consistently high demand for rental residential properties.
