This video covers a number of issues surrounding property including:
• The buying process
• How to hold – personal versus company ownership
• Tax issues – associated with the property itself and personal tax considerations
• If relocating to Portugal as your new home, how to establish residency
• Wills and succession planning
Buying process
Key stages:
RESERVATION – this is not compulsory but you are able to make a payment of (typically) €3-5k for a period of 15-30 days during which the seller agrees to take the property of the market. This allows you to work with a Lawyer who will start….
DUE DILLIGENCE, which involves checking:
o registrations
o ensuring property is unencumbered
o legalities of the building and structures
o legitimacy of the sale etc.
Surveys are not compulsory in Portugal, but it is recommended.
After you and your lawyer are satisfied with the checks, you can move to:
THE PROMISSORY CONTRACT or CPCV
It is signed by both the buyer and the seller and it binds them to exchange ownership of the property on an agreed date and price.
It includes all the deal:
Identification of buyer and seller
Identification of property
Price
Date of payment and completion
Itemised lists of everything included in the property and
CRITICALLY, the penalties for both parties if either withdraws from the agreement – the buyer typically makes deposit of 10% so if they pull out of the deal they lose 10%, and if the sellers pull out they lose 2x deposit
DEED
The next stage is the Deed of Purchase and Sale which records the official transfer of the title of the property and is signed by the buyer and seller and checked and witnessed by a notary or Lawyer.
Once this has taken place the property is then registered with the land registry office.
Tax implications property itself
One-off/initial taxes and fees
• Property transfer tax (IMT) – for properties above €1m = 7.5% of purchase price
• Stamp duty – 0.8%
• Legal fees and notary
• Land registration fees
The general guidance is to allow between 8-10% to cover initial taxes and legal fees.
Annual taxes and fees
• Council tax each year / IMI = 0.3-0.5% – based on tax value of property (not the market value of property)
• Additional IMI – for properties above €600k each – 1% on properties valued between €1-2m
Tax on rental income
• If tax resident here, then 28% or scale rates
• If non tax resident here then flat tax of 28%
SUCCESSION PLANNING
Tax issues / Inheritance Tax (IHT)
Portugal abolished IHT in 2003 and although stamp duty can still apply on the transfer of the assets, it does not apply when the assets pass to direct line descendants or direct line descendants, thus making it a tax that is limited in its scope.
Those coming from a UK context have domicile issues to think about as it is a person’s domicile that determines their liability to UK IHT.
From a control perspective, Portugal has forced heirship rules unlike the UK which has free testamentary disposition but this can be overcome by electing to use the Brussels IV provisions in EU legislation – this allows you to use the law of your nationality to apply to bypass forced heirship rules in Portugal.
Wills
You are able to use a UK will for Portuguese property but the legal wording and language does not sync well, so the recommendation is to use a Will for each jurisdiction in which you old assets.
IF YOU’RE LOOKING TO MOVE TO PORTUGAL AS YOUR MAIN HOME – residency options
If you are an EU citizen then you have an automatic right to residence here.
If you are a non-EU national then the most common routes are the Golden Visa and D7/D2 visas.
The Golden Visa route requires a large investment and fees are relatively high however there is little in terms of time requirement here.
Conversely, the D7 and D2 visas require less of a monetary commitment, but there is a necessity to spend more time in Portugal which is likely to bring you into tax residency in Portugal.
This may in fact be a good thing due to the Non-Habitual Residence (NHR) scheme and indeed I have clients living here under NHR that pay very little tax and in some cases no tax at all.
However, you need to do an individual assessment of your situation and how it will be treated under NHR.
LINKS
Please see video below for further detail:
Portugal property guide
Understanding domicile
Non Habitual Residence (NHR) Portugal tax regime for expats (2021)
Also, if you are considering the Golden Via route, please be aware of changes that are occurring from January 2022 – see video below: