When you buy a property in Portugal, you will need to pay the property transfer tax (IMT) and stamp duty (IS) before signing the public deed of purchase and sale. The property transfer tax is a progressive rate that varies in accordance with the purchase price of the property and can go up to 6 percent. The stamp duty is a flat rate of 0.8 percent and is also calculated over the property price. Once you are the legal property owner, you will need to pay, every year, the annual property tax (IMI), whose rate can vary in accordance with the municipality where the property is located (between 0.3 percent and 0.45 percent). Moreover, the annual property tax is calculated over the property tax value and not the property price. Please note that the property tax value is, in the vast majority of the cases, much lower than the property price. You can confirm this value on the tax land certificate of the property. Despite the above mentioned, kindly note that in some specific cases, the IMI rate can go up to 1 percent, depending on the amount of the property tax value. Finally, the Golden Visa does not grant any tax advantages. However, there are some tax regimes in Portugal that can be combined with the Golden Visa in order to grant some tax advantages.
What is the tax treatment of a property purchased for a Golden Visa application?
I am considering purchasing a property in Portugal and applying for a Golden Visa. What are the tax liabilities I have as a property owner? Does the Golden Visa help reduce some of these liabilities?
Before buying the property, it is due the duty tax in the amount of 8 percent of property's sale value and after becoming an owner shall pay property tax every year in the amount of 0.3% to 0.45 percent corresponding to the tax value of the property, i.e., the value the Portuguese government gives to the properties in order to collect taxes, usually it is from 350 to 500 euros per year.
The purchase of a property for a Golden Visa application is not relevant in terms of tax treatment. The fact of applying for a Golden Visa does not reduce any liabilities for the owner of the property. What is relevant, however, is the person who purchases property in Portugal does not mean he or she becomes a tax resident in Portugal. The tax treatment is different for people who purchase a property in Portugal and are not tax residents in Portugal. Here is a general explanation of this. First of all, when a non-tax resident purchases a property, a property transfer tax must be paid. This is a municipal tax levied on the transfer for consideration of real estate located in the Portuguese territory. The rates can vary between 5 percent to 10 percent. Some properties, however, can be exempted from this tax if, for example, it has touristic utility or if the property is destined to rehabilitation works. Secondly, stamp duty applies when purchasing a property. The rate is 0.8 percent. These two kinds of tax are paid only when the property is purchased. Thirdly, there is property tax. It’s computed on the tax registration value of urban and rural properties located in Portuguese territory. It is due by the owner of the property every year. The rates vary between 0.3 percent to 7.5 percent. Some properties, however, can be exempt of this tax if, for example, they have touristic utility. Please note that if the owner has in his property a building or buildings whose tax registration value is superior to 600,000, he must pay more. The taxable basis corresponds to the sum of the tax registration value (TRV) of all the urban properties held by each taxpayer, as reported on Jan. 1 of each year. Deductions/exemptions: In the case of individuals and undivided inheritances, a deduction of 600,000 to the taxable basis is foreseen. Married or those living in non-marital partnership taxpayers who opt to submit a joint tax return have the right to deduct 1.2 million to the sum of the TRV of all the urban properties. The rates vary between 0.7 percent to 7.5 percent. PIT is levied on income obtained by individuals. This means if the property owner receives an income for the property — let’s say, he rents the property — this rent is taxed as income and is withheld. The rate is 25 percent. If the property owner decides to sell the property, the gains are taxed at a rate of 28 percent and withheld. Please note that the rates referred to above are specific for non-tax residents in Portugal. Tax residents in Portugal are taxed for the global income they obtain. Tax rates vary between 10.15 percent and 38.4 percent. If the person who decides to purchase a property in Portugal lives outside of the EU territory and EEA, he needs to have a tax representative in Portugal who will represent him before the Portuguese tax authorities and will receive all communications from the authorities. Finally, there’s another regime with more attractive taxes for some income obtained in Portugal (it does not apply to rental income) for non-habitual residents. These are people who live in Portugal but don’t stay for more than 183 continuous days. This regime allows for the application of taxes at a rate of 20 percent to some activities. It’s liable to PIT on the net employment and self-employment income from "high value-added activities" at a flat rate of 20 percent. Foreign-source income may be exempt, under certain conditions.