Property Purchase Process | Property Purchase Costs | Mortgage Finance

Overview

In Portugal, the buyer is liable to pay for all of the purchase costs, including notary fees, land registry fees and transfer taxes. The vendor is liable for all ownership costs in connection with the property up to the completion date. In the instance of any dispute, the law and courts which govern the contrato de promesso will deal with it.

Exact costs will vary by region and by type of property. However, as a general rule you should allow 10-15% on top of the purchase price to cover additional buying costs.

Taxes:

• Property Transfer Tax:

  When you purchase resale property in Portugal, you are liable for property transfer tax (Imposto Municipal Sobre Transmissao Onerosa de Imoveis or IMT). The amount you have to pay varies according to type and value of the property and the area in which it's located. IMT is currently (2006) 5% for rural properties and for everywhere else is based on a sliding scale from 0% to 8%. The value of the property for tax purposes is governed by its tax registration which is reviewed every three years, based on 75 per cent of the annual inflation indexes published by the government. The acquisition of 75% or more of the shares of a limited liability company, which is the owner of the real estate, is also subject to real estate transfer tax.

• VAT:

  When buying new build property in Portugal you must pay Value Added Tax (VAT). VAT on new build property is usually around 17% with lower rates on the islands of Madeira and the Azores .

Legal fees:

• Notary fees:

  Notary fees are usually around 1% of the purchase price and cover stamp duty, administration and registration costs for the notary's time.

• Other legal fees:

  UK and Portuguese legal costs will usually come to around 1-2%.

Other buying costs

• Mortgage arrangement fee:

  The mortgage arrangement fee to your lender will be around 1.5-2% of the value of the loan.

• Survey:

  If you decide to have a survey this must also be factored in and will come to around 1.5-2% of the purchase price. Buyer's may also have to pay their first year of rates on purchase.

Special situations and exceptions:

Under certain situations, purchasers may be exempt from paying IMT, in particular on the acquisition of own homes or dwellings, which serve exclusively residential purposes and which do not exceed Euro 80,000 in price. You should seek legal advice if unclear.

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