Process of buying a Portuguese property
In Portugal the purchase of a Portuguese property is a regulated process.
To ensure that the Portuguese property you wish to buy is free of debts
and restrictive clauses, it is essential to employ an English-speaking
lawyer or solicitor to protect your own interests. We also recommend that
you deal with Portuguese estate agents who are government licensed, they
must be identified by an AMI number.
Banking in Portugal
Opening a bank account in Portugal is not required, but it is
recommended. Many foreign banks have branches in Portugal, and they can
help in transferring funds and setting up regular payments for utilities
so you won't have to worry about keeping a close eye on bills when you
are out of the country. Property management companies can work directly
with banks to set up these payments, and they can also arrange to have
your Portuguese property rented out.
Personal Fiscal Number (Numero fiscal de contribuinte)
As a future owner of a Portuguese property you need to have Personal Fiscal
Number, which you can obtain immediately at the Local Tax Office in Portugal.
Sometimes, an advantage in opening a local bank account is that you are
automatically assigned a Personal Fiscal Number by the Local Tax Office
when you set-up the bank account, and therefore may not need to personally
visit the Local Tax Office.
Legal process for buying a Portuguese property
The legal side falls into two parts, the preliminary "promissory
buying and selling" contract (Contrato de Promessa de Compra
e Venda) and the completion contract (escritura).
Stage 1: Preliminary "promissory buying and selling" contract
Once a price has been agreed with the vendor both parties will sign a
preliminary "promissory buying and selling" contract, called
a Contrato de Promessa de Compra e Venda and the buyer will make
a deposit of 10%-30% of the purchase price (except in the case of new
constructions where this deposit will be considerably less). The deposit
can vary depending on the price, location and the real estate agency you
work with. Many purchasers also hire a lawyer to help to negotiate a 10%
percent deposit, opposed to paying a larger deposit. The "promissory"
contract, similar to an exchange of contracts in the UK, legally secures
the purchase, and is subject to satisfactory searches having been returned.
The Portuguese law protects both parties involved. The deposit is forfeited
if the purchaser does not proceed, and if the vendor withdraws double
the deposit is paid to the purchaser by the vendor. This contract must
be signed in the presence of the Notary.
Before signing the a preliminary "promissory buying and selling"
contract, you or your legal representative will need to obtain the following
Property Registration Certificate (Certidão de Teor)
At the local Land Registry (Conservatória do Registo Perdial)
check if the seller has the ownership of the property and no one else
has those rights and also if it is free of charges and mortgages. A Registration
Certificate should be issued with a time limit. The Registration Certificate
describes the property's legal history and proof of ownership. The Registration
Certificate is required to perform the completion process at the Notary's
Property Tax document (Caderneta Perdial)
At the local tax office obtain an official tax document. The official
tax document certifies the inscription of the property for fiscal purposes,
the current owner and their fiscal number, a description of the property,
and the property's unique fiscal number. The official tax document mentions
how much the owner will pay in local yearly taxes. If the property is
new then the official tax document will not exist in and a temporary certificate
will be issued by the building developer.
License of Use (Licença de Utilização)
Obtain a copy of the usage license from the Local Town Hall. In this
document you can check if the property is approved for the proposes of
the original building permission. For residential property it is necessary
to have a habitation license. For non residential it is necessary to have
a commercial or industrial license. This usage license document needs
to be presented at the stage of signing the "promissory buying and
Stage 2: Completion (escritura de compra e venda)
The completion of the purchase should occur approximately 3 - 4 weeks
after signing the "promissory buying and selling" contract,
when the "escritura" contract, called a escritura de compra
e venda is ready to be signed by both the vendor and purchaser. The
signing of the "escritura" can be carried out on your behalf
by appointing your lawyer Power of Attorney.
At this stage the purchaser must pay the remaining balance of the purchase
price (purchase price minus the deposit), transfer tax (Imposto de
Sisa) plus notarial fees to the notary advogado. It should be noted
that the remaining balance and transfer tax must be in the notary advogado's
possession before the "escritura" contract is signed. The "escritura"
is the equivalent to the Deeds of the property. From the signing of the
"escritura" contract the purchaser is responsible for the insurance
of all the buildings on the property. It is recommended that the policy
includes cover for fire, flood, storm damage and earthquake damage.
The signing of the "escritura" ends with the transfer and new
registration of the property in the presence of the official notary. Once
this has been done and the property is registered at the Land Registry
Office and Local Tax Office, and is legally yours. You should make sure
that the registration document (Registo) is in your name in the
and is lodged with the Land office and also in the Local Tax Office as
soon as possible after the signing of the "escritura".
Fees and Commission
The purchaser is liable for transfer tax (known as SISA) and notarial
/ registration / lawyer fees.
Transfer Tax (SISA)
Transfer tax must be paid just before the "escritura" is signed.
The transfer tax is Portugal's equivalent of the
UK's Stamp Duty. Once the transfer tax has been
paid a Transfer Tax (Imposto de Sisa)
document is then issued by the tax office, which
proves the payment has been made. The transfer
tax to pay depends of the value of the property
that is declared. The following table summarises
the transfer tax rates for the year 2005 on residential
property. On rural land the transfer tax is 5
table of the Land Tax (SISA Tax) for the year
Published by the Government on (Law n.º 14
/ 2005) , 30 of May 2005
Value of the property
Amount to deduct
€ 80,000 to €110,000
€110,000 to €150,000
€150,000 to € 250,000
€250,000 to € 500,000
The following example shows you how much transfer tax you have to pay
for a property with a declared value of €100,000.
€100,000 X 2% = €2,000
€2,0000 – €1,600 = €400
Therefore the total transfer tax to pay on a property with a declared
value of €100,000 is €400.
When looking at perspective Portuguese properties to buy, you should
ask what the declared value of a property is. Often the Portuguese property
is not registered at the price you are paying but at a lower value. In
this case you could end up paying less transfer tax than on a similar
property. Lawyers can advise further on a specific case. If you are having
a property built, it is worth considering buying the plot and paying for
the construction separately. This way the transfer tax is only payable
on the land.
Avoiding transfer tax
In order to avoid transfer tax, buying a property in Portugal through
an offshore company has been popular. Many properties in the higher price
ranges are available for purchase 'offshore'. In these cases a registered
offshore company owns the property. If you buy an offshore company with
a property as its sole asset there is no transfer tax to pay, the property
will be more saleable and the selling costs are generally lower. There
is no capital gains tax on the sale, no death duties, the company can
be held through a trust and the ownership of the property remains confidential.
Before you look for an offshore account, however, you should note that
legislation passed in January 2002 can sometimes make using offshore companies
just as costly as paying the transfer tax. It depends on the cost, size
and location of Portuguese property you intend to buy. If you intend to
buy a Portuguese property over the value of €500,000 then you should
consider getting professional financial advice with respect to seeing
if it is worth while setting up an offshore company to undertake the purchase.
Other fees are one-time Notarial, registration fees and administrational
fees (Omposto de selo) related to the number of types of documents
that were processed (i.e. certain contracts, deeds, receipts etc.). These
one-time fees normally account for approximately 2.5% of the declared
purchase price. Lawyers and legal fees can account for between 1.5% and
2% of declared purchase price.
If you take out a Portuguese mortgage a further cost will be passed on
to you by your lawyer for registering the charge of the lender with the
land registry. Valuations are carried out by the lenders and you as the
purchaser will be liable for this cost. The valuation fee is approximately
If the property is not purchased with an 'offshore' company it is advisable
to make a will with a Portuguese lawyer to cover such items as the property,
your cars, your Portuguese bank accounts and the contents of the property.
By doing this bureaucratic complications should be avoided.
Example breakdown of costs related to buying a Portuguese property
The following table shows a typical total cost breakdown of purchasing
a Portuguese property for €100,000.
|Purchase tax (see breakdown
|Notaires fees (2.5%)
|Lawyers fees (2%)
Differences between buying new and old Portuguese properties
Due to the high demand for new Portuguese property, most purchasers buy
properties "from spec" from Portuguese property developers.
This means that the purchaser will buy new Portuguese properties from
the plans, and select which property they want within a particular development.
Typically, purchasers who buy a new property have to make regular installments
during key stages of the property development (opposed to paying for the
property when it is complete), and an initial deposit of 5% to 10%. The
initial deposit and regular installments vary from one Portuguese property
developer to the other.
Note: If you have to make regular stage payments to
the Portuguese property developer you should ensure that you receive bank
guaranties for each payment. These bank guaranties protect you in the
unlikely event that the Portuguese property developer has financial difficulties
before the property is transferred to your name.