Property Tax

This is the Portuguese Purchase Tax and is paid before the Final Deed, and a document is issued by the Local Tax office which proves that the tax has been paid. This is presented to the Notary at the time of the Deed. The amount payable varies with the price of the property, and your lawyer will advise you of this figure before you incur any legal costs. The table below shows the IMT tax payable for a second home, which applies to residential villas or apartments. Different percentages are applicable on land or non-residential property and in these cases it is a fixed percentage, which doesn't vary with the price. Rustic Land is charged at 5% and commercial property or land for construction is charged at 6.5%.

Value of the Property Transaction for 2007 for a second home	% of Tax	Amount to deduct
Under €85,500	1%	€0
From €85,501 up to €117,200	2%	€855
From €117,201 up to €159,800	5%	€4,371
From €159,801 up to €266,400	7%	€7,567
From €266,401 up to €532,700	8%	€10,231
Above €532,701	6%	€0

A very important exception has been introduced to the above figures in that whenever the purchasing entity is an offshore territory resident/company, tax percentage will always be 15% regardless of the purchase price or the nature of the property.

Taxable Value (Valor Patrimonial)

The vast majority of taxable values of properties are out of date. From 1st January 2004, the Local Tax Departments will be updating the values of all properties; obviously this will take a long time to carry out. However, any property which is sold after 1st January 2004 will automatically be re-valued and the Portuguese valuation commissioners have advised that the new taxable values for both IMT and IMI purposes will be between 80% and 90% of the property's market value. It is estimated that the annual tax applied in 2004 will be between 0.4% and 0.5% of the taxable value (but 5% for offshore).

Taxation

If you intend to become a resident in Portugal, advice should be taken from a local Accountant/ Tax Adviser. If you don't intend to become resident, there are only two taxes that will concern you, Capital Gains Tax and Tax on rental income if you decide to let your property. Your lawyer and if necessary your Accountant/ Tax Adviser can advise you of your future liability to any of these taxes. If you are acquiring the shares of an offshore company, care should be taken as to any past Capital Gains Tax liability that the company has accrued (25% of gain).

Inheritance Tax

Property owners are advised to make a Will in Portugal dealing with the assets in Portugal. If this is not done, probate in the country of residence has to be taken out and then translated into Portuguese. Making a Will in Portugal will reduce the expenses and avoid time delays. The Portuguese Will is in addition to and not in place of your existing Will. As from 1st January 2004 inheritance tax will be zero-rated for residents leaving assets to immediate relatives. The rates for non-residents will be very low and off set against any double taxation agreements in place with the owner's home country.