Costs
Costs: (and charges when buying a property)- IMT - "Imposto Municipal sobre Transmissões" (Municipal Property Transfer Tax)
IMT is payable on the transfer of immovable assets located in Portugal e.g:
- On the purchase of a property
- A rental agreement with a duration superior to 30 years
- The exchange of properties when they have different values
The acquisition of company shares in a LDA company, when the company owns a property and a shareholder holds at least 75% of the shares
- A rental agreement that states that once all the rent payment have been made, the tenant will become the property owner
IMT is payable at the "FINANÇAS" (Tax Department) and before the property transmission becomes effective (paid prior to signing the "Escritura Pública" (Final Deed-title) at the Notary).
- Who is liable for the IMT payment?
- The buyer is liable in the case of a purchase and sale contract
- In the case of a "CPCV - Contrato de Promessa de Compra e Venda" (Promissory Contract) that includes a clause allowing the assignment of the buyer's contractual position to a third party, IMT is then due by the promissory buyer and by the subsequent(s) third party(ies). The same rule applies when the buyer's contractual position is assigned as stated in the "CPCV - Contrato de Promessa de Compra e Venda" (Promissory Contract).
- IMT is due by the agent (normally a lawyer) in the case of an irrevocable "Procuração Pública" (Power of Attorney). The lawyer is normally authorised to conduct the transaction on behalf of the principal.
- The sale price stipulated on the contract or the VPT- "Valor Patrimonial Tributário" (Property Rateable Value) assessed by the "FINANÇAS" (Tax Department). When an exchange occurs, the taxable amount is the difference between the properties declared values or the difference between VPT, if higher.
- This Tax is not applicable to off-shore owned properties.
Note: The VPT on most buildings was established according to the previous Council Tax Law and has not been revised under the new IMI Law. In these situations, IMT is temporarily computed on the value stated in the contract e.g. "Escritura" or on the current VPT whichever is the higher value. The "FINANÇAS" (Tax Department) may later on correct the temporary IMT tax if the new VPT (assessed in accordance with the new IMI Law) is higher than the value used for the computation of the intitial IMT.
Your solicitor will usually pay the IMT before the "Escritura" (Final Deed-title) is signed. The following documentation will need to be supplied:
- Identification of the Vendor(s)
- Identification of the Buyer(s)
- Description of the property
- Value at which the property is transacted
The "FINANÇAS" (Tax Department) will then compute the due IMT and produce a document necessary for payment. Once this has been paid (document must be stamped), this will then be presented at the Notary as proof of payment, prior to the "Escritura" (Final Deed-title). Should the deed not be carried through, you may request the refund of the tax paid within a period of 3 years from the payment date (IMT may be requested by filing a formal request).
- Tax Inspection
If there is a reliable indication of misconduct i.e. if there is any omission of assets or values subject to taxation with the interest of reducing the amount of tax to be paid, the "FINANÇAS" (Tax Department) can perform the necessary corrections, so an additional amount of tax will become due. The Government through the "Câmara Municipal" (Town Halls) may exert the right of preference on the purchase of the property if the value declared in the Deed is very low when compared to the market price. The "FINANÇAS" (Tax Department) has mechanisms available to verify whether the due IMT has been effectively discharged. It is required that you keep the payment receipt issued by "FINANÇAS" on file, as this will be needed at the time of the signing of the deeds.
- After the "Escritura" ( Final Deed ) i.e Property Transfer
On completion of the "Escritura" (Final Deed-title), the lawyer should take a copy of the Final Deed to register your name at the:
- "Conservatoria do Registo Predial" (Land registry Office)
- Change of ownership must be passed on to the "FINANÇAS" (Tax Department).
- Electricity Department - to request a new contract for the electricity meter.
- Telephone Company (if applicable).
- Gas company - to request a new gas meter and inspection (if applicable)
- "Camâra Municipal" (Town Hall) to request the water meter.
- Condominium company (applicable only to specific properties)
Please note: this registration is not obligatory until the owner wishes to sell the property, but we strongly recommend that the buyer proceeds with this registration immediately after the Notary act as a preventative measure against a possible financial abuse by the previous owner.
- Direct Debits:
All your bills can be paid through your private account via direct debit with the exception of the annual tax (equivalent to the English POLL tax).
- IMI - Imposto Municipal sobre Imóveis (council tax on Properties)
This tax is paid to the "Câmra Municipal" (Town Hall) of the area where the property is located and the rate is calculated on the basis of a percentage of the value mentioned in the matrix document. This value may not coincide with the current value of the property; therefore this register normally is only updated when a public title deeds act has taken place. Payment is carried out at the FINANÇAS (Finance Department) of the area where the property is located.
The Annual Council tax is calculated according to the "patrimonial" (Tributary) of the property. The property can be exempted of this tax by one period from 4 to 8 years, according to its tributary patrimonial value requested within 6 month after the title deeds act. For this purpose, the owner will have to request this exemption at the "FINANÇAS" (Tax Department) of the area of the property, no later then 60 days.
- Imposto de selo" (official stamp tax)
Stamp Tax is charged on a variety of deeds, contracts, donations, inheritances etc. In property purchases, the purchaser will pay the tax at the time of the title act (tax levied by the Notary and included in his/her charges) referring to the value of acquisition/title deeds of the property and on the value of the loan by the Bank.
Exemptions are e.g.:
- Interest on mortgage loans granted for the purchase, reconstruction or improvement of residential property
- Transfer of the mortgage from one financial institution to another (any increase in the capital will result in the payment of Stamp Tax)
The "Imposto de Selo" (Stamp Duty) is levied on the value of each taxable deed or operation at a tax rate, varying according to the type of deed or contract. Also, if more than one Imposto de Selo is applicable, only the highest is levied (exemptions are: property acquisition, donations and inheritances).
- Notary and registration fees
These will have to be paid by the purchaser after signing the "Escritura" (Final Deed-title) and the total costs are approximately 1% to 3% for the Notary charges, if the property purchase price (again not applicable if off-shore) and if buying with a mortgage this percentage amount will vary.
- Lawyer's fees
Most lawyers will charge between 1% and 1,5% of the purchase price as their fee. They will carry out all the necessary searches and prepare the documentation needed for both, "CPCV - Contrato de Promessa de Compra e Venda" (Promissory Contract)and "Escritura" (Final Deed-title) as well as draw up the CPCV for the buyer.
The total costs associated with the investment on a property in are up to 10% of the price, made up as follows:
- 1% to 1,5% lawyers
- 1% to 3% notary and registration
- 0% to 8% IMT (sisa)
- IVA - (Value Added Tax)
IVA is not deductible in property investment or construction (unless the purchaser is an IVA registered entity and to the Tax Department to deduct IVA. In this case, IVA will be charged on the sale/resale of the property).
Please note: These are for guidance only and we cannot accept responsibility for any mistakes or misinformation. We strongly recommend Legal and Fiscal Consultations at all times prior to any transaction as the laws are constantly changing.
