When buying a property in Portugal, in addition to the purchase price, there are various additional costs that must be considered. These costs may vary depending on factors such as property location and financing method. Here are the main additional costs:
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Municipal Tax on Onerous Property Transfers (IMT):
This tax is mandatorily settled before the execution of the deed and is applied on the Tax Patrimonial Value (VPT) or on the value declared in the deed (the higher of the two values). Rates are progressive, depending on the value and purpose of the property (Own and Permanent Residence or Secondary/Rental). The applicable fixed rates are: 5% for rural properties and 6.5% for other urban properties (commerce, services, construction land). The rate is 10% if the buyer is an entity based offshore.
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Stamp Tax:
This tax has two components: Stamp Tax on acquisition, with a rate of 0.8% on the higher value between VPT and purchase price (paid at the time of the deed), and Stamp Tax on Mortgage Credit, which applies to the financed capital with rates of 0.6% (term $\ge$ 5 years) or 0.5% (term $< 5$ years).
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Notarial Expenses and Property Registration:
Notarial and property registration expenses correspond to fees charged by the Notary, Lawyer, or Solicitor who formalizes the act, and fees paid to the Property Registration Office for registering the new owner and, if applicable, for Mortgage Registration.
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Legal Expenses:
Hiring a lawyer to assist in the purchase process may cost between 1% and 1.5% of the purchase price, plus VAT.
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Valuation Costs and Bank Commissions:
If resorting to mortgage credit, there are costs such as the Opening/Process Study Commission and the mandatory cost of Property Valuation. In addition, the buyer must cover the premiums of Mandatory Insurance (Life and Multi-Risk), whose values and commissions vary from institution to institution and influence TAEG.
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Initial Down Payment:
Most banks finance up to 80% to 90% of the property value, which means the buyer must have available between 10% to 20% of the property value as initial down payment (own capital).
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Municipal Property Tax (IMI):
This is an annual tax calculated based on the property’s tax patrimonial value, with rates ranging between 0.3% and 0.45%.
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Other Costs:
May include insurance premiums (in addition to mandatory ones and if not paid by the bank), condominium costs, and property maintenance expenses.
It is important to plan financially to cover all these additional costs when considering buying a property in Portugal.