20 March 2025
Portugal’s stunning coastlines, warm climate and relaxed lifestyle make it a top choice for UK residents looking to buy property abroad. But, like in the UK, purchasing a home comes with important financial considerations – including taxes.
But don’t worry! This guide breaks down the key property taxes you’ll encounter at each stage of your buying journey so you can navigate the property buying process with confidence.
While this guide might not include every tax associated with overseas property buying, we hope it helps you take the first step towards planning your property purchase.
Which taxes apply to property in Portugal?
Taxes will usually apply during two stages of the property-buying process:
- When you buy a property: The first taxes you’ll have to pay will be when you are buying property in Portugal. Typically, these taxes are paid in one lump sum when you buy.
- After you buy a property: Just like in the UK, when you buy a new property, there are a set of taxes that you’ll need to pay on an ongoing basis.
Understanding tax residency in Portugal
Once you’ve bought a property in Portugal, your ongoing tax considerations could change if you stay in the country long enough to be considered a Portuguese tax resident. Here’s a rule to keep in mind so you know whether or not your residency status is due to change:
- The ‘183 day rule’: If you spend more than 183 days in Portugal during a calendar year as a UK resident, you will be considered a Portuguese resident for tax purposes.1
If your residency status changes, it could impact some of the taxes you are paying on an ongoing basis, as well as the taxes you would need to pay if you sold your property. This guide is written exclusively for UK residents and will not cover the tax implications for individuals considered to be Portuguese residents under the 183-day rule. For more information, you can visit Portugal’s Tax and Customs website.
Taxes on purchasing a property
The first taxes you’ll need to pay on property abroad apply when you buy the property, and the type of tax you’ll need to pay will depend on whether it’s second-hand property or a new build.
Resale properties
A ‘resale’ or ‘second-hand’ refers to a property that has been previously owned and is now being sold again. If you’re a UK resident buying a resale property in Portugal, property purchase tax is one of the main taxes to be aware of.
Property purchase tax (IMT)
When you first buy a property in Portugal, you’ll need to pay Property Purchase Tax or Imposto Municipal sobre a Transmissão Onerosa de Imóveis (IMT) as it’s known in Portugal.
IMT is levied on the transfer of ownership of real estate and the rates are progressive, ranging from 1% to 8%.1
Rates are determined by several factors, including:
- Whether it is your main home or not
- The price paid for the property
- The type of property – rural or urban.1
New properties
A ‘new build’ property is a home that has recently been built and has never been lived in. For these properties, there are a slightly different set of taxes to consider.
Value added tax on new properties
If the property you’re buying is being sold for the first time, it’s subject to the Portuguese version of Value Added Tax (VAT) called Imposto sobre o Valor Acrescentado (IVA).
You may be subject to VAT if you purchase:
- A new property
- A property that has undergone renovation or restoration to improve its condition is known as a ‘rehabilitated’ property
- A property within a tourist development.
Called IVA in Portugal, the standard rate is 23% (22% in Madeira and 16% in the Azores) and usually will be included in the property’s advertised purchase price.2
Stamp duty
Stamp Duty, or Imposto do Selo as it’s known in Portugal, will apply regardless of whether you’re buying a resale or a new build.
This tax is usually charged at a fixed rate of 0.8% of the property’s registered fiscal value. This tax covers the official paperwork, such as deeds and contracts, making your property sale legal and official.3
Which taxes apply to property ownership in Portugal?
With the keys to your dream home in Portugal secured, it’s time to get a better understanding of the ongoing taxes you’ll need to pay on your property. These ongoing taxes will apply to both new builds and resale properties.
Annual property tax
Once you’ve purchased a property in Portugal, you’re subject to an annual tax on it. This tax is called Imposto Municipal sobre Imóveis (IMI) in Portugal and works similarly to council tax in the UK. The tax rate is set at a rate of between 0.3% to 0.8% depending on:
- Type of property
- Location of the property
- Age of the property
Having purchased a property in Portugal, you are subject to an annual tax on it (Imposto Municipal sobre Imóveis – IMI). This annual property tax in Portugal works similarly to UK council tax and is set at a rate of between 0.3% and 0.8% depending on the type, location and age of the property.4
Property wealth tax
If you purchase a property worth over €600,000, you will need to pay property wealth tax known as Adicional ao IMI (AIMI) in Portugal. This is taxed at a rate of 0.7% for individuals.5
However, the €600,000 threshold is only triggered if an individual exceeds it. So, if you’re in a couple with joint ownership, you would only need to start paying AIMI on a home with a value of €1.2 million.5
Lumon: helping you simplify your overseas property purchase
Negotiating your way through the Portuguese property tax system can be complex and that’s why we always recommend consulting a tax professional. Lumon specialises in helping you manage the currency side of your property purchase, ensuring your international payments align with your property goals.
Our service is tailored to your requirements, ensuring you can benefit from tools and market insights to help shield your property budget against currency risk. Your dedicated currency specialist can guide you through every step of your property purchase so you can get great value when you send money to Portugal.
When you buy:
- Forward contracts: Our forward contract options allow you to fix an exchange rate before the property is purchased or secure the price of a foreign property sale. This gives you the certainty of knowing what the value will be in your desired currency when the time comes to transfer.
- Experienced personal account manager: Your experienced personal account manager will help you develop a currency strategy that empowers you to make your property purchase with confidence
- Lumon EU bank accounts: Our EU bank accounts facilitate the direct receipt of funds from foreign solicitors.
After you buy:
- Online account: Set up your online account so you can take control of your ongoing property payments and make them in minutes.
- Regular Payment Plan: Once you know the property payments that you’ll need to pay on an ongoing basis, Lumon can set up a Regular Payment Plan so you can automate recurring transactions with ease.
Contact Lumon to learn more about how we can help you manage your international payments when buying property abroad.
FAQs
Does owning property in Portugal make you a tax resident?
No, owning property in Portugal does not automatically make you a tax resident. Tax residency in Portugal is generally determined by physical presence: if you spend more than 183 days in Portugal within a 12-month period, you are considered a tax resident.1
However, if you are considered as having ‘habitual residence’ in Portugal, you may also be deemed a tax resident, even if you spend less than 183 days in the country.1
What are the pitfalls of buying property in Portugal?
Buying property in Portugal can be a great investment, but there are potential challenges to be aware of:
- Legal complexities – Some properties may have unclear ownership records or require additional legal checks. It’s essential to hire a qualified lawyer.
- Debts tied to the property – In Portugal, outstanding taxes or utility bills can transfer with the property, so it’s important to keep an eye on these costs.
- Hidden costs – Beyond the purchase price, buyers should factor in taxes, legal fees, and maintenance costs.
To avoid these pitfalls, we highly recommend working with local legal and real estate professionals.
Is Portugal tax-free for expats?
No, Portugal is not tax-free for expatriates. However, Portugal has offered tax incentives to attract foreign residents, such as the Non-Habitual Resident (NHR) regime. This regime provides certain tax benefits for qualifying individuals, including reduced tax rates on specific income types for a limited period. It’s important to note that tax laws and incentives can change, so it’s advisable to consult official sources or a tax professional for the most current information.
For detailed and up-to-date information, you can refer to the Portuguese Tax and Customs Authority’s official website.
Sources used:
1 PWC Tax Summaries – Portugal, Individual, Other Taxes
2 PWC Tax Summaries – Portugal, Corporate, Other Taxes, IMT
3 PWC Tax Summaries – Portugal, Corporate, Other Taxes, VAT
4 PWC Tax Summaries – Portugal, Corporate, Other Taxes, IMI
5 PWC Tax Summaries – Portugal, Corporate, Other Taxes, AIMI
Sources last checked on date: 19/03/2025
The information provided in this material is accurate to the best of our knowledge at the time of writing 19/03/2025, but it is subject to change. The content is for informational purposes only and does not constitute tax advice. It is essential that individuals seek advice from professional services regarding tax matters. We do not accept liability for any errors or outdated information, and individuals should not rely on the information presented without consulting an expert.
