LEGAL ADVICE ON PURCHASING YOUR HOME IN PORTUGAL
Our aim is to give you a general idea about the main steps and phases involved in a Portuguese Property Purchase in an individual name as follows:
BEFORE CONTRACT/RELEVANT DOCUMENTS:
On negotiations phase the most important issues to be discussed between parties are the price, condtions of payment, deposit togheter with any special extra clause that parties agree. At this stage you should instruct your Lawyer to undertake thorough pre-contract enquiries and all the needed searches on the legal paperwork.
Relevant documentation:
a) Land Registry
This certificate is a public record for each property with details of: Ownership – (contains the property’s legal history); Title; Description of property; Mortgages or any third party interests;
b) Caderneta Predial
Every property needs to have a Caderneta Predial, which is a tax identification and sets the rateable valuation. This valuation is important for the determination of local property tax (IMI/rates).
c) Habitation License
All residencial properties constructed since 1951 need a Habitation License, which confirms that the Câmara (Town Council) has inspected the property and that it complies with planning permission and building regulations.
EXCHANGE OF CONTRACT AND COMPLETION
The parties lawyers will prepare a draft of a promissory contract, which will be signed by vendor and purchaser. At this point, the parties will agree namely on the price, details of the property, penalty clauses in the event that any of the parties do not fulfill the contract, completion date, schedule of payments, etc.
On the signature of it the purchaser will pay the agreed deposit. The purchaser should have Portuguese Fiscal number. Completion of a property purchase takes place at the offices of a Notary. The Notary records the transaction - «Escritura». The purchaser will now take possession of the property. Under the new Portuguese legislation all non residents or foreign companies that wish to purchase a property should appoint a fiscal representative resident in Portugal in order to perform all the tax duties in Portugal. You should be aware of some legal expenses connected to the purchase of a property (described in paragraph A) in Portugal as follows:
a) IMT Tax
This is the Portuguese property acquisition tax and should be paid by the purchaser prior to completion. The amount payable varies with the price of the property, if it is for habitation, on a sliding scale up to 6%, this rate is applicable to all properties with a price higher then € 532.700,00 – value reffered to 2007. If it is a plot of land for urban construction, is always 6,5% of the price, and if it is a rustic plot is 5% in both cases withouth any variation.
b) Notary and Registration Fees
These needs to be paid by the purchaser upon signature of the deeds of conveyance of purchase and sale at the Private Notary and on the Land Registry Department when the registration of the transfer of the ownership of the property is applied for. These fees includes the stamp duty and will be approximately between 1% and 1,5% of the purchase price.
c) Yearly Expenses
Per year you need to pay the rates of the property calculated at the present for the coucil of Lagos (Algarve) in 0,80% of the rateable value of the property. Usually, 50% is payable in April and the balance in September. Your fiscal representative will receive the respective payment’s notifications from the local tax department.
d) Portuguese Capital Gains Tax
On a transfer of the property ownership in Portugal all vendors must pay the Portuguese capital gains tax, which is 25% calculated on the difference between base costs (original purchase costs and IMT) and selling price.
e) Inheritance Tax
At the present moment there is no Portuguese inheritance tax between parents/children and spouses. In all other situations is 10%.
We strongly advice you to do a Portuguese Will, after the purchase of the property.
REGISTRATION AT THE LAND REGISTRY DEPARTMENT
A copy of the “Deeds” is registered at the land registry office – public record after completion.
Our aim is to give you a general idea about the main steps and phases involved in a Portuguese Property Purchase in an individual name as follows:
BEFORE CONTRACT/RELEVANT DOCUMENTS:
On negotiations phase the most important issues to be discussed between parties are the price, condtions of payment, deposit togheter with any special extra clause that parties agree. At this stage you should instruct your Lawyer to undertake thorough pre-contract enquiries and all the needed searches on the legal paperwork.
Relevant documentation:
a) Land Registry
This certificate is a public record for each property with details of: Ownership – (contains the property’s legal history); Title; Description of property; Mortgages or any third party interests;
b) Caderneta Predial
Every property needs to have a Caderneta Predial, which is a tax identification and sets the rateable valuation. This valuation is important for the determination of local property tax (IMI/rates).
c) Habitation License
All residencial properties constructed since 1951 need a Habitation License, which confirms that the Câmara (Town Council) has inspected the property and that it complies with planning permission and building regulations.
EXCHANGE OF CONTRACT AND COMPLETION
The parties lawyers will prepare a draft of a promissory contract, which will be signed by vendor and purchaser. At this point, the parties will agree namely on the price, details of the property, penalty clauses in the event that any of the parties do not fulfill the contract, completion date, schedule of payments, etc.
On the signature of it the purchaser will pay the agreed deposit. The purchaser should have Portuguese Fiscal number. Completion of a property purchase takes place at the offices of a Notary. The Notary records the transaction - «Escritura». The purchaser will now take possession of the property. Under the new Portuguese legislation all non residents or foreign companies that wish to purchase a property should appoint a fiscal representative resident in Portugal in order to perform all the tax duties in Portugal. You should be aware of some legal expenses connected to the purchase of a property (described in paragraph A) in Portugal as follows:
a) IMT Tax
This is the Portuguese property acquisition tax and should be paid by the purchaser prior to completion. The amount payable varies with the price of the property, if it is for habitation, on a sliding scale up to 6%, this rate is applicable to all properties with a price higher then € 532.700,00 – value reffered to 2007. If it is a plot of land for urban construction, is always 6,5% of the price, and if it is a rustic plot is 5% in both cases withouth any variation.
b) Notary and Registration Fees
These needs to be paid by the purchaser upon signature of the deeds of conveyance of purchase and sale at the Private Notary and on the Land Registry Department when the registration of the transfer of the ownership of the property is applied for. These fees includes the stamp duty and will be approximately between 1% and 1,5% of the purchase price.
c) Yearly Expenses
Per year you need to pay the rates of the property calculated at the present for the coucil of Lagos (Algarve) in 0,80% of the rateable value of the property. Usually, 50% is payable in April and the balance in September. Your fiscal representative will receive the respective payment’s notifications from the local tax department.
d) Portuguese Capital Gains Tax
On a transfer of the property ownership in Portugal all vendors must pay the Portuguese capital gains tax, which is 25% calculated on the difference between base costs (original purchase costs and IMT) and selling price.
e) Inheritance Tax
At the present moment there is no Portuguese inheritance tax between parents/children and spouses. In all other situations is 10%.
We strongly advice you to do a Portuguese Will, after the purchase of the property.
REGISTRATION AT THE LAND REGISTRY DEPARTMENT
A copy of the “Deeds” is registered at the land registry office – public record after completion.
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