Buying Property in Portugal – What to Think About
Popularity of Portuguese Property
Property in Portugal has recorded double digit percentage growth in various sectors, listed by numerous real estate service companies, in recent years, and the expectation is that this will continue – with an increased demand and reduced supply than previously seen.
It is an interesting misconception that property prices are driven predominantly by the Golden Visa program – in actual fact, the Portuguese Golden Visa accounts for an insignificant portion of property purchases, when considered in comparison to total property purchases in Portugal.
What are the Factors Affecting Property Prices in Portugal?
Various factors in Portugal are influencing the increase in property prices, including:
- Portugal is the new acclaimed California, the new European Silicon Valley;
- Portugal is ranked one of the best places to live and work in the world;
- It is an attraction magnet for digital nomads;
- Portugal offers a 10-year tax holiday for the affluent;
- Property has offered favourable investment opportunities over recent years and that is no different now.
Taxation of Property in Portugal
The importance of understanding the related tax consequences of holding property in Portugal is vital.
Dixcart have generated an Article that provides a comprehensive guide to the various taxes that need to be considered:
Property Taxes in Portugal – The Importance of Getting it Right – (dixcart.com)
Types of Tax to Consider
Please see below the types of taxes and the other matters that you should carefully consider:
- When is Stamp Duty Applicable?
- Stamp Duty on the Purchase of a Property
- Property Transfer Tax
- Annual Municipal Property Tax (IMI)
- What Tax Consequences are Applicable Upon the Sale of a Property?
- What are the Tax Consequences for My Rental Income?
- What Inheritance Tax Implications Exist for Property (or is it Stamp Duty that Applies)?
- What is the Preferred Structure to Hold Property in Portugal?
Dixcart is generating two additional guides regarding holding property in Portugal and the relevant taxes: the first relates specifically to the taxes in connection to property purchases and sales, while the second will cover the tax obligations in relation to rental income generated through property held in Portugal.
Other Considerations
Other important matters to take into account for non-resident individuals are; the specifics of the relevant double taxation treaty between Portugal and the country that the individual is resident in, as well as the local laws and regulations applicable in the country of tax residence.
A typical example of this for a UK resident, is the fact that UK tax residents also pay tax on the gain from the Portuguese property in the UK, however, under the double taxation treaty, any tax paid in Portugal may be credited against the tax due in the UK.
Why is it Important to Engage with Dixcart?
It is not just the Portuguese tax considerations on properties, but also the impact from where you may be tax resident and/or domiciled, that need to be considered. Although property is typically taxed at source, double taxation treaties and double tax relief need to be considered, as indicated above.
A typical example is the fact that UK residents will also pay tax in the UK and this will be calculated based on UK property tax rules, which may be different to those in Portugal. They are likely to be able to offset the Portuguese tax actually paid against the UK liability to avoid double taxation, but if the UK tax is higher, further tax will be due in the UK. Dixcart will be able to assist in this regard and to help make sure you are aware of your obligations and filing requirements.
How Else Can Dixcart Assist?
Dixcart Portugal have a team of experienced professionals who can assist with various aspects regarding your property; efficient tax planning, legal support (for the sale or purchase of a property), accounting and tax support and the incorporation and maintenance of companies.
Further to this, if you would like a deemed tax calculation to be performed, or any additional information, please reach out to our offices in Portugal for this information: advice.portugal@dixcart.com
