Making the decision to buy a property in Portugal is very exciting, but regardless of whether this is to be a holiday home, an investment or a relocation, it is important that you approach every stage of the process with care. Although the process of buying is relatively straightforward, it includes some important steps that must be carried out carefully. For this reason, it’s recommendable to work with a reputable real estate agent, lawyer and notary.
- The fiscal number for non-residents - A fiscal number is known in Portugal as Número de Identificação Fiscal (NIF) and it’s also referred to as a Número de Contribuinte. In order to undertake any official process in Portugal, such as buying a property, opening a bank account or even setting up an account with a utility company you will be required to have a fiscal number. Thus, before starting the process of buying a property in Portugal you must acquire a fiscal number. For European residents, applications can be made at any local tax office upon presentation of a valid passport and a proof of a European address valid for the last 6 months. For non-European residents, you will need a fiscal representative.
- Bank account - Although not strictly necessary in some cases, opening a bank account could be useful and becomes essential for Golden Visa applications. You also may need it to transfer the funds or to pay local taxes. The process of opening a bank account in Portugal is quite straightforward and can be completed in one visit.
- Bank loan or mortgage - If you choose to finance your property purchase with a bank loan or a mortgage, the loanable amount varies from the bank valuation price of your property, which is usually lower than the market prices. Make sure you get started with the bank pre-approval before you consider to buy a property as the bank processing can take a long time.
Once you have found the right property and the owner has accepted your offer you will enter into the transaction process, together with your real estate agent, lawyer and notary.
- Reservation - A reservation document can be signed in some cases and a deposit typically starting at €5000 euros will be paid to the owner. The purpose of the reservation is to take the property off the market to allow time for the Due Diligence to be carried out. During this time the buyer’s lawyer will review all documents and, along with the cooperation of all parties, prepare the final details of the negotiation.
- Due diligence - The lawyer will take a set amount of time (typically two to four weeks) to collect and analyse the legal documents and other necessary information relating to the property. The promissory agreement, commonly referred to in its acronym form as ‘CPCV’ is also prepared during this period and discussed by both parties (Buyer and Seller), the due diligence process is essential to avoid any future problems regarding the purchase.
- Promissory Agreement - Following the reservation and due diligence both buyer and seller will sign the first official binding document that is the Promissory Agreement of Purchase and Sale (CPCV). This promissory agreement will include all the information regarding the owner and seller identification and the agreed terms and conditions of the sale. The buyer is also expected to make a down payment of usually 10-20 % of the property purchase price.
- Final public deed - The deed is a legal document that is signed and delivered, transferring the ownership title of the property from the seller to the buyer. It is made in the presence of a notary, who confirms the validity of all the legal documentation before both parties (or their representative) sign the document. The deed usually occurs between 15 days and 2 months after the CPCV signature but this period is typically much longer for those buying a property in a new development that is under construction. The signing of the deed is also the point at which you pay the remaining balance of the agreed purchase price, take formal ownership of the property and receive the keys.
- Registration - After the deed has been signed, your property will need to be registered in your name at the Land Registry Office and at the Tax office. This process is usually carried out at the time of public deed by the notary.
When buying a property in Portugal, you will have to pay some taxes and expenses. But don’t worry, when reserving your property you will be given an exact breakdown of the costs involved, so you will be able to plan ahead. Also, note that in Portugal, the agency fees are usually paid by the seller.
- IMT - this is the property purchase tax that is payable when buying a property in Portugal. The amount payable (ranging from 1% to 6%) varies according to the purchase price but also the ultimate use of the property and whether it is your main or second home. In most of the transactions is usually charged 6% and this tax must be paid before the property transfer that is before the public deed.
- Stamp duty - the stamp duty rate is always 0.8 % independently of the purchase price of the property. When taking out a mortgage, another 0.6% has to be paid over the value borrowed. The stamp duty can be paid either together with the IMT tax or at the notary during the deed signature.
- Notary and registration fees - notary costs may vary according to the purchase price but you can expect to pay an average of € 400 for the notary and € 250 for the registration fee. It will have to be paid to the notary after signing the final deed.
- Lawyer’s fee - most lawyers will charge between 1% and 1.5% on the property purchase price. Their role is to safeguard all the legal aspects of the purchase and to take care of the due diligence process, doing the necessary analysis, searches and prepare the documentation needed for both the promissory contract and the final deed.
Ownership ongoing related costs
- IMI - this tax is also known as Imposto Municipal sobre Imóveis and is related to the property ownership. The applicable rate can vary between 0.3% and 0.8% of the tax value of the property, assessed by the Tax Authorities (not over the purchase price of the property). It’s payable yearly, in one or two instalments to the City Hall. Depending on its location a property may also be subject to a Sewage Tax. In the Municipality of Lisbon, there is a sewage tax corresponding to 0.8% of the IMI tax.
If you need any further assistance on the buying process in Portugal, please contact us.