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Fees & Costs for a purchase/sale in the Algarve

Portugal, like all countries, has its own legal and taxation procedures referring the purchase and sale of property. Portugal Service and its experienced sales team will be happy to guide you through the process of investing in Portugal, ensuring that when you make your decision, it will be an informed one. In this section we give you a concise introduction to the Portuguese real estate transaction process, highlighting inherent costs and documentation. 

Before you complete the buying process and make any commitment for a property, it obviously makes sense to find out as much as you can about its legal and financial status. You need to appoint an experienced local lawyer to verify the property prior to purchase to ensure your peace of mind. Your lawyer will make the appropriate checks at the relevant institutions as the property’s registration, ownership and taxation history. For added buyer confidence, you can also appoint an independent surveyor to check the building’s structural condition. If everything is in order with the property, the first step in the buying process can be taken.

Completing the Transaction:
If the property in question is owned by an individual(s) then a Promissory Contract of Purchase and Sale (Contrato Promessa de Compra e Venda) is drawn up by the lawyer. This document contains all the conditions of the transaction and a time limit is established for the signature of  the final deed in accordance with the wishes of the parties. The contract is signed by both parties or their legal representatives, at which point a 10%  to 20% deposit is paid, or as otherwise agreed. This legally binding document proves that the purchase has now been
contracted and sealed in accordance with Portuguese legislation.

If a buyer defaults on the contract he loses any deposit paid. If the vendor defaults, the double of the deposit is paid back. Completion on this kind of purchase takes place in the presence of a notary, or alternatively the registry office or a registered lawyer. Checks are made that the IMT (property transfer tax) has been paid and
the content of the final deed of purchase and sale is verified, before being read out to the parties (or their representatives). The deed is then signed and the balance of the transaction price is paid. The original of this document remains where the transaction was completed, bound into the official records. Authenticated copies can be obtained at any time to prove ownership. A copy of the title deed is then immediately lodged in the local Land Registry office and Tax office and the change of ownership registered.

Calculating Costs! Transaction taxes to be paid by the purchaser include:

IMT – Property Transfer Tax:
This tax is levied on the purchaser immediately prior to the signing of the final deed with various percentile
rates (2% to 6% of the purchase price) calculated in accordance with the value of the property. Properties priced over €550,836 are subject to single percentile rate of 6%. Building plots are subject to a rate of 6.5%. Stamp Duty - Paid by the purchaser and levied on the deed at a rate of 0.8% of the purchase price.

IMI – Municipal Property Tax:
IMI is an annual property tax levied on all properties in April and September (referring to the previous year). IMI rates vary from council to council and property to property – between 0.2% and 0.8%. Some exemptions to paying this tax for a certain timescale can apply to purchasers if the property is bought as a primary residence.

Transaction taxes to be paid by the vendor:
Change of ownership is automatically reported to
the tax authorities by whoever performed the property transaction. Capital Gains Tax will need to be paid on the sale of property. Your capital gains are calculated according to various criteria. In general your net taxable profit
results from the difference between the purchase and sale prices, after these prices have been subjected to a series of adjustments. These include anything from taking into account inflation, deducting costs (agent commissions and other fees) or any documented improvement costs (from the last five years).

Your gain is then taxed according to your residential status. Non-residents pay a flat rate of 25%. For residents, the gain is immediately halved before being added to your final tax declaration, for which the rates are considerably lower. Another advantage for residents is the three-year rollover period for sales profit tax exemption when the property is your main residence and you reinvest your taxable profit in another main residence property.
For further details, please Contact us now!








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