Property Advice: Taxes
What Taxes are Applicable and How Much Will I Pay?
There are only 3 taxes that really concern any non resident property buyer in Portugal.
IMI (Council Tax)
The first is called IMI, which is the same as council tax. This is decided by the value of your property as assessed by the Inland Revenue. It is worth noting that this value is normally substantially less than the actual value of the house. Each district has its own rate and this is published annually.
For Example: A Town Centre Property in Albufeira Valued at €150,000 comes with a rate of 0.60%. Therefore the annual IMI would be €1,200 per annum.
(€150,000 * 0.60%).
If you rent your property out then you will also be liable to pay Income tax in Portugal. This is calculated at a flat rate of 25%. You should always declare this in your country of residence as it may be deductable from your global tax bill. There are also annual expenses that you are entitled to deduct from your rental income before applying the 25%.
Capital Gains Tax
When you sell your property you will have to pay Capital Gains Tax on any profit made during the ownership period. Again for non-residents this is a flat rate of 25% of the profit. Again there are many deductions to be applied before calculating the 25%.
All of the above are calculated by your fiscal representative, who will advise on the best way to process your tax returns.
Fiscal Representation in Portugal
As like in most countries within Europe, Portugal requires that all non-resident property owners must empower a tax resident entity to act as their "Fiscal Representative". This person or company, is responsible for dealing with the non-residents tax affairs and to avoid local tax office fines and penalties for late or missed payments in the absence on the non resident.
This used to be a service provided by lawyers, and typical would be done for you when you bought your property by your appointed lawyer. However with the law's becoming more stringent and time consuming most law firms are no longer willing to provide this service, and will recommend a company that specialises in tax and can provide an all inclusive service. The duties of your fiscal representative are :
- Obtaining a fiscal number and card, this is mandatory to buy a property, open a bank account, apply for a mortgage, signing any contracts or title deeds, utility connections etc.
- Preparation of Tax Returns, for assessment of property income (i.e. rentals) or capital gains in event of a sale.
- Payment of council tax (IMI) This is payable by every property owner in Portugal.
- Register the property at the local tax office upon completion
- Appraise the valuation performed by the Inland Revenue on the property, which will determine the Property Rateable Value (VPT), and request a valuation if necessary. This will determine your yearly IMI, or council tax.
As there are quite large fines in place for non payment, or late payments of the property taxes and income taxes this is now an essential part of the buying process, and must be completed before signing of Promissory Contracts.
COSTS: The costs of employing a fiscal representative vary, however a figure of €200 per person per annum is normal.