If you are interested in buying Algarve property then Portman Properties will assist you in all matters. In terms of buying a property in the Algarve, there are many similar and dissimilar aspects to the process than one may have experienced previously in differing countries. Portman will ensure that you are properly informed and equipped with all relevant information.
However, here are some notable points if you wish to investigate what may be needed and what may be gained through purchasing property within the Algarve, whether purchasing a property for permanent, vacation or vocational purposes:
All clients buying a property, apartment or villa in the Algarve will need a fiscal number 'número de contribuinte' from the tax office 'Finanças'. It is also needed in order to open a Portuguese bank account and for setting up utility accounts. New rules regarding tax evasion and money laundering mean that your Lawyer will decree that clients have a fiscal representative in Portugal. Your Lawyer will give you guidance in this respect.
This is the stage that both parties promise to enter into a final contract to buy/sell a property; the equivalent of exchange in the UK. A deposit is required at this point, usually between 10-30%. It is a binding document signed by both parties, which states all of the terms & conditions agreed, such as price and completion date. If the ownership is a corporate entity and you are keeping the same ownership, then your lawyer will have to do searches on the company and subsequently a Share Purchase Agreement is drawn up instead of a promissory contract and a deposit paid. Completion usually follows soon after which is normally straight forward with the monies being transferred between the parties’ lawyers on exchange of the company shares and documents.
If clients are taking a mortgage their lawyer must make a provisional registration in the Bank's name. This is why it is important lawyers are told at the start, as they must have a special clause in the Power of Attorney document that allows them to do this on clients behalf.
This is the conveyance of property held at the Notary office where the balance of the price is paid and the deeds are transferred to the buyer's name. The Notary reads a statement which both parties sign, stating that monies have been received/paid accordingly. This is read out in Portuguese; you do not need to be present but if you are, the wording will be carefully translated for you.
After the 'escritura' has been completed a notarized copy will be required to register the property in the buyer's name at the Land Registry 'Registo Predial'. It may take a few months to receive a copy, but it will be effective from the date the registration was submitted and signed.
It is advisable for clients owning a house to have a Portuguese will, even if they have one in the UK or Europe, as it makes the process easier for whoever will inherit the property. A lawyer will advise fully on each client's circumstances and can carry out this simple procedure at the Notary.
As an added incentive for residents, this has been abolished for a spouse, children or parents inheriting property. Any other parties will pay only 10%. If a client is not a resident in Portugal they may be liable to Inheritance Tax in the UK.
If clients are intending to live permanently in Portugal, or more than 183 days per year consecutively, they will be required to apply for residency. This is an identification document that entitles them, as a member of the European Union, to the same rights as a Portuguese national. It shows details such as name, address in Portugal, Date of birth, marital status, and passport number and requires a fingerprint and photograph. They will not become Portuguese citizens nor have to renounce their British status.
Below are the taxes involved when owning a property although CIMT is the only tax incurred at the point of purchase.
This is the equivalent of UK Stamp Duty and is a one off payment made before the final deed is carried out. Previously IMT was very high at 10%, so tax evasion was rife; therefore a new system was introduced from 01 June 2003 to encourage buyers to declare the true value of the property. Now the tax-free limit has been raised to 80.000€ and above this, there is a scale up to a maximum of 8%, whilst the top bracket of tax has been reduced to 6%.
Some taxes depend on whether you are classed as a resident or not. You will be considered resident if you spend more than 183 days in Portugal during the tax year (01 Jan-31 Dec); it does not have to be consecutive. You may also be considered resident if you own property and pay taxes in Portugal.
Council Tax - 'CIMI-Código do Imposto Municipal sobre Imóveis' (formerly Contribuição Autárquica)
This is like UK rates and is determined by two factors; the rateable value of your home and the percentage rate set by the council. Council rates for each town have recently been reduced from 0.7-1.3% to 0.4.-0.8% accordingly.
Capital Gains Tax - Mais Valia - This is the profit made from a sale.
Offshore - In the higher price ranges, usually in excess of €750.000, properties can be bought offshore and the company will own the property rather than an individual. If the property is bought by more than one person, all owners become shareholders of the company. The advantages of using this method are that the property is the sole asset of the company and no transfer tax, capital gains tax or inheritance tax are payable. No Notary fees are due and it is a very quick, confidential way to sell on a property as it only involves selling shares in a company. This is still a viable option for many with high net worth property owners and currently the 'white' listed locations are Malta and Delaware. Under the new legislation Offshore ownership now incurs some taxes and it is recommended to speak to your Lawyer.
There are various fees to take into account as in any other country, but as a general guide all costs usually come to:
|Property Value||Lawyers Fees(based on 1%)||IMT||Notary / Registration (based on 1.5%)||Total||Total %|
This is a general guideline only and full details should be obtained from your Lawyer.
There is no VAT 'IVA' payable for private individuals buying properties. Other costs that are to be taken into account are: