Nestled along the sun-kisses shores of the Iberian Peninsula, Portugal beckons with a myriad of opportunities for property ownership. Then whether for a dream vacation home, an investment venture, or a permanent residence. As the allure of this European gem continues to captivate individuals worldwide, understanding the intricacies of property ownership in Portugal becomes paramount.

In this comprehensive guide, we embark on a journey through the rights, responsibilities, legal nuances. Also and cultural considerations that accompany property ownership in Portugal.

Types of property ownership in Portugal

In Portugal, there are several types of property ownership structures. The most common forms include:

Freehold (Propriedade Plena): This is the most complete form of ownership, providing the owner with full rights over the property and the land it sits on. Freehold ownership allows for the property to be inherited or sold without significant restrictions.

Leasehold (Usufruto): Under leasehold ownership, the owner holds the rights to use and enjoy the property, but the land itself is own by someone else. This arrangement often has a set time limit or may be based on the life of the leaseholder.

Horizontal Property (Propriedade Horizontal): This is commonly associate with condominiums or apartment buildings. In this type of ownership, individuals own their private living spaces while sharing ownership of common areas and facilities.

Usufruct (Usufruto): This form of ownership grants someone the right to use and derive income from a property that belongs to another person. It can temporary or for the lifetime of the usufructuary.

Co-Ownership (Compropriedade): Co-ownership involves two or more individuals jointly owning a property. Each co-owner has a share of the property, and decisions regarding the property typically require the agreement of all co-owners.

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Taxes on property ownership in Portugal

When purchasing a property in Portugal, there are ongoing taxes and fees associated with property ownership: 

Annual property taxes (IMI)

IMI is an annual tax based on the tax value of the property. The tax rate ranges from 0.3% to 0.8% for urban properties and 0.8% for rustic properties. You can IMI tax details cost using IMI Calculator.

Additional Annual wealth property Tax (AIMI)

AIMI stands for “Adicional ao Imposto Municipal de Imóveis” which translates to Additional Municipal Property Tax. It is an annual property tax in Portugal that is levied on the combined fiscal value of all residential properties own by a taxpayer as of January 1st of each year worth above €600.000.

There are three levels of AIMI Tax in Portugal:

  • 0,7% on properties value between €600,000 and €1M
  • 1,0% on properties valued between €1M and €2M
  • 1,5% if the total properties value is over €2 million

Tax on rental income generated by the property

If you rent out the property, you’ll need to pay an income flat rate tax of 28% on the rental income generated. You may consider deductible expenses that include property management fees, repairs and maintenance costs, insurance premiums. And also local property taxes (IMI), financing costs such as loan interest, and other relevant expenses like advertising and professional fees.

Non-resident individuals may have the option to be taxed under the Non-Habitual Resident (NHR) regime or applicable tax treaties.

Pre-emption rights in Portugal

In Portugal, pre-emption rights, or “direito de preferência” in Portuguese, refer to the legal concept that grants certain individuals or entities the right to acquire a property before the owner sells it to a third party. 

This right is designed to provide protection and ensure that specific individuals, often neighbors or co-owners, have the opportunity to purchase the property on the same terms and conditions. And they offered by an outside buyer. Key aspects of pre-emption rights in Portugal include:

Legal Framework: The right of pre-emption is regulated by Portuguese law, and its specific details can vary based on the nature of the property and the relationship between the parties involved.

Applicability: Pre-emption rights are commonly associated with rural properties, agricultural land, and properties located in certain urban areas. The applicability of pre-emption rights depends on the property’s classification and local regulations.

Notification Process: Property owners are typically required to notify individuals or entities with pre-emption rights when they decide to sell the property. This notification includes details of the proposed sale, allowing those with pre-emption rights to decide whether to exercise their option to purchase.

Timeframe: There is usually a specified timeframe within which the party with pre-emption rights must indicate their intention to buy the property. Failing to respond within the prescribed period may result in a waiver of the pre-emption right.

Equal Terms: If the party with pre-emption rights decides to exercise them, they are entitled to purchase the property on the same terms and conditions offered by the third-party buyer.

For more videos about investing or moving to Portugal, explore our YouTube channel here: YouTube Channel Portugal Residency Advisors®.

Home insurance in Portugal

Home insurance in Portugal is a legal requirement for properties under horizontal property. In Portugal, there are two primary types of home insurance policies available to homeowners and property owners. These insurance options are designed to provide protection and financial security in various scenarios:

Fire Insurance (Seguro de Incêndio)

Fire insurance, or “Seguro de Incêndio,” is the mandatory basic insurance for property owners in Portugal. It covers damages directly caused by fires, which can include structural damage to the building itself. 

This type of insurance also often extends its coverage to other perils such as floods, storms, electrical damage, heat, smoke, steam, lightning, explosions, and damage caused by natural elements.

Multi-Risk Insurance (Seguro Multirriscos)

In addition to the mandatory fire insurance, many property owners opt for a more comprehensive policy known as “multi-risk” or “Seguro Multirriscos.” This type of insurance offers broader coverage, often tailored to individual needs. 

It typically includes protection against various risks, such as public liability, contents coverage, legal protection, earthquake protection. And coverage for alternative accommodation expenses. If your home becomes uninhabitable due to a covered event. Multi-risk insurance provides an extra layer of security and peace of mind for homeowners.

Portugal Inheritance Property Tax

In Portugal, there is no specific inheritance tax, known as “Imposto sobre as Sucessões e Doações,” imposed on the transfer of assets to beneficiaries upon an individual’s death. Unlike some other countries, Portugal does not levy a tax based on the value of the inherited assets or the estate left behind.
 
Instead, Portugal applies stamp duty, known as Imposto do Selo, which is a tax on certain legal acts and documents, including property transfers.
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Why investing with Portugal Residency Advisors?

Local Expertise

We know Portugal. Due to our extensive local knowledge, we believe that concentrating our services in a single country destination is the best way to give you the most thorough and useful information. 

Holistic Approach

We offer a streamlined communication channel for the entire process. Which will be delivering a comprehensive service that encompasses all facets of your real estate investment journey. It’s include property search, negotiation, legal matters, due diligence, and property management.

Independent Service

As an independent buying agent, we have the flexibility to collaborate with any agent, seller, promoter, or developer, providing you access. This access to all available options in the real estate market. This enables us to objectively analyze every opportunity and find the right property for you at the best price, free from complications.

Simple Process

Technology plays a significant role in our company, allowing us to provide you detailed property market information and minimize our clients’ involvement in paperwork. As customers ourselves, we understand how to best serve your needs.

Frequently Asked Questions About Property ownership in Portugal

Yes, non-residents can buy property in Portugal with some restrictions on certain types of properties.

The process typically involves signing a promissory contract, paying a deposit, and then completing the purchase at the notary’s office.

Costs may include property transfer tax, notary fees, legal fees, and potentially real estate agent commissions.

While it’s not mandatory, hiring a lawyer is highly recommended to navigate legalities and ensure a smooth transaction.

Portugal has a property tax known as IMI (Imposto Municipal sobre Imóveis), which is an annual tax based on the property’s fiscal value.

Yes, non-residents can apply for a mortgage in Portugal, and several banks offer mortgage products for foreign buyers.

Generally, there are no significant restrictions, but you may find some limitations for obtaining short rental licenses in some Lisbon parish.