Portugal, one of the world’s most ancient nations, is experiencing extensive and dynamic changes, seen in wide ranging initiatives, political, social, economic, health and well-being.

Eternal land for poets and adventurers, Portugal is now the home of surfers and architects, enologists and communication engineers, and an insatiable pursuer of new and sustainable energy solutions.

Europe’s West Coast is a wonderful place to enjoy life thanks to a healthy, inviting climate, to the friendly, hospitable people and to the unique and rich cultural heritage. Because we are proud of Portugal and welcome our visitors, we are happy, to share our great country with you.

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Property Purchase: In Portugal the purchase of a Portuguese property is a regulated process. To ensure that the Portuguese property you wish to buy is free of debts and restrictive clauses, it is essential to employ an English-speaking lawyer or solicitor to protect your own interests. We also recommend that you deal with Portuguese agent who are government licensed, they must be identified by an AMI number.

Banking in Portugal: Opening a bank account in Portugal is not required, but it is highly recommended. Many foreign banks have branches in Portugal, and they can help in transferring funds and setting up regular payments for utilities so you won't have to worry about keeping a close eye on bills when you are out of the country. Property management companies can work directly with banks to set up these payments, and they can also arrange to have your Portuguese property rented out.

Personal Fiscal Number (Numero fiscal de contribuinte): As a future owner of a Portuguese property you need to have Personal Fiscal Number, which you can obtain immediately at the Local Tax Office in Portugal. Sometimes, an advantage in opening a local bank account is that you are automatically assigned a Personal Fiscal Number by the Local Tax Office when you set-up the bank account, and therefore may not need to personally visit the Local Tax Office.

Stage 1: Preliminary "promissory buying and selling" contract: Once a price has been agreed with the vendor both parties will sign a preliminary "promissory buying and selling" contract, called a Contrato de Promessa de Compra e Venda and the buyer will make a deposit of 10%-30% of the purchase price (except in the case of new constructions where this deposit will be considerably less). The deposit can vary depending on the price, location and the property agency that you work with. Many purchasers also hire a lawyer to help to negotiate a 10% percent deposit, opposed to paying a larger deposit. The "promissory" contract, similar to an exchange of contracts in the UK, legally secures the purchase, and is subject to satisfactory searches having been returned. The Portuguese law protects both parties involved. The deposit is forfeited if the purchaser does not proceed, and if the vendor withdraws double the deposit is paid to the purchaser by the vendor. This contract must be signed in the presence of a Notary.

Before signing the preliminary "promissory buying and selling" contract, you or your legal representative will need to obtain the following legal documents:

Property Registration Certificate (Certidão de Teor): At the local Land Registry (Conservatória do Registo Perdial) check if the seller has the ownership of the property and no one else has those rights and also if it is free of charges and mortgages. A Registration Certificate should be issued with a time limit. The Registration Certificate describes the property's legal history and proof of ownership. The Registration Certificate is required to perform the completion process at the Notary's office.

Property Tax document (Caderneta Perdial): At the local tax office obtain an official tax document. The official tax document certifies the inscription of the property for fiscal purposes, the current owner and their fiscal number, a description of the property, and the property's unique fiscal number. The official tax document mentions how much the owner will pay in local yearly taxes. If the property is new then the official tax document will not exist and instead a temporary certificate will be issued by the building developer.

License of Use (Licença de Utilização): Obtain a copy of the usage license from the Local Town Hall. In this document you can check if the property is approved for the purposes of the original building permission. For residential property it is necessary to have a habitation license. For non residential it is necessary to have a commercial or industrial license. This usage license document needs to be presented at the stage of signing the "promissory buying and selling" contract.

Stage 2: Completion (escritura de compra e venda): The completion of the purchase should occur approximately 3 - 4 weeks after signing the "promissory buying and selling" contract, when the "escritura" contract, called a escritura de compra e venda is ready to be signed by both the vendor and purchaser. The signing of the "escritura" can be carried out on your behalf by appointing your lawyer Power of Attorney.

At this stage the purchaser must pay the remaining balance of the purchase price (purchase price minus the deposit), transfer tax (Imposto de Sisa) plus notarial fees to the notary advogado. It should be noted that the remaining balance and transfer tax must be in the notary advogado's possession before the "escritura" contract is signed. The "escritura" is the equivalent to the Deeds of the property. From the signing of the "escritura" contract the purchaser is responsible for the insurance of all the buildings on the property. It is recommended that the policy includes cover for fire, flood, storm damage and earthquake damage.

The signing of the "escritura" ends with the transfer and new registration of the property in the presence of the official notary. Once this has been done and the property is registered at the Land Registry Office and Local Tax Office, and is legally yours. You should make sure that the registration document (Registo) is in your name and is lodged with the Land office and also in the Local Tax Office as soon as possible after the signing of the "escritura".

Extra costs when buying property in Portugal: A variety of fees are payable when you buy a property in Portugal, which usually add between 10 and 15 per cent to the purchase price, which is higher than in many other    EU countries. Fees and Commission

  

  Transfer Tax (SISA): The purchaser is liable for transfer tax (known as SISA) and also the notarial, registration and al lawyers fees.

Transfer tax must be paid just before the "escritura" is signed. The transfer tax is Portugal's equivalent of the UK's Stamp Duty. Once the transfer tax has been paid a Transfer Tax (Imposto de Sisa) document is then issued by the tax office, which proves the payment has been made. The transfer tax to pay depends of the value of the property that is declared. The following table summarises the transfer tax rates for the year 2005 on residential property. On rural land the transfer tax is 5 %.

SISA is one of Portugal’s most controversial taxes and over recent years successive governments have made plans for legislation to either abolish the tax altogether or to substantially reduce its rates. However, in spite of much publicity and many hours of parliamentary time, SISA rates are much as they ever were and look like remaining so for the immediate future. This does not mean to say, however, that SISA won’t be abolished in the future.

At present SISA is payable on all resale properties (i.e. any property that isn’t being sold for the first time) and is adjusted annually for inflation. In 2002 SISA rates were as shown in the table below:

Price €

SISA%

Deduction €

Up to 60,015

0

3.000

60,015 to 82,207

5

3,000

82,207 to 109,678

11

7,933

109,678 to 137,908

18

15,610

137,908 to 166,055

26

26,578

Over 166,055

10

None

Note that SISA isn’t based on a sliding scale and the rate shown applies to the whole of the value of the property. The appropriate deduction is made after multiplying the property value by the relevant percentage. For example, if the declared value of a property is €150,000, SISA is 26 per cent (€39,000) minus €26,578, which equals a SISA bill for €12,422 (around 8 per cent). For a property declared as costing €200,000, SISA would be €20,000 (10 per cent).

SISA is charged at a fixed rate of 8 per cent on rustic (rural) property where no construction exists. Rural land with ruins and uninhabitable buildings registered as ‘urban property’ attract SISA at the rate of 8 per cent on the land and at the usual rates on the construction.

Note, however, that it’s unusual for a ruin to be valued at more than 8 per cent and many ruins are valued at a lower rate or are SISA exempt. SISA is payable at usual rates on building plots and land for construction. SISA must be paid before the signing of the final deed of sale ( escritura) and is usually paid a few days earlier. The receipt must be presented to the notary at the completion and is retained by him (so obtain a copy for your records).

If the sale isn’t made in euros, a statement must be obtained from a local bank stating the rate of exchange for the SISA calculation. If you’re buying a new apartment or townhouse and are the first purchaser, a proportion of the original SISA paid on the land should be deducted from the SISA payable (but you must apply for this concession). If you pay SISA on a property you may not be required to pay property tax for a period, depending on the property’s rateable value.

When looking at perspective Portuguese properties to buy, you should ask what the declared value of a property is. Often the Portuguese property is not registered at the price you are paying but at a lower value. In this case you could end up paying less transfer tax than on a similar property. Lawyers can advise further on a specific case. If you are having a property built, it is worth considering buying the plot and paying for the construction separately. This way the transfer tax is only payable on the land.

Value Added Tax: Value added tax ( IVA) of 19 per cent is levied on new properties purchased from a developer or builder and being sold for the first time. VAT should be included in an advertised or agreed price and not added afterwards, but you should check this carefully.

 

Notary’s Fees: The fees for the notary who officiates at a sale are fixed by law and used to depend on the sale price. However, new legislation has introduced a fixed system under which notaries charge around €153 per transaction plus additional charges of €1.25 per amendment or clause in the document. There may also be other additional costs (usually small amounts).

Legal Fees: Legal fees for the conveyance involved in a property sale are usually 1 to 2 per cent of the purchase price for an average property. The actual amount depends on the work involved, although there’s usually a minimum charge, e.g. €1,000. Fees, which should be agreed in writing beforehand, are much lower if a lawyer is engaged only to vet the sales contract. Engaging a lawyer and paying legal fees is optional, although it’s highly recommended.

If you take out a Portuguese mortgage a further cost will be passed on to you by your lawyer for registering the charge of the lender with the land registry. Valuations are carried out by the lenders and you as the purchaser will be liable for the fees.

It is advisable to make a will with a Portuguese lawyer to cover such items as the property, your cars, your Portuguese bank accounts and the contents of the property. By doing this bureaucratic complications should be avoided.

Deed Registration Fee: The registration fees for registering a deed of sale at the land registry ( conservatória do registo predial) are approximately 0.75 to 1 per cent of the property’s value. The deed registration fee is paid to the notary with his fee for completing the sale.

Surveyor’s Fee: If you employ a surveyor to inspect a building or plot of land, the fee will depend on the type of survey, any special requirements and the value of the property. A homebuyer’s survey and valuation for a property valued at up to €200,000 is usually from around €550 and a full structural survey on the same property is around €800.

Selling Agent’s Fees: The selling agent’s fees are usually between 5 and 10 per cent of the selling price, depending on the cost of the property and the type of contract, and are paid by the vendor. However, they’re usually allowed for in the asking price, so in effect are paid by the buyer.

Utility Fees: If you buy a new property you may need to pay for electricity, gas and water connections, and the installation of meters. If they aren’t included in the price, you should ask the builder or developer to provide the cost of connection to all services in writing.

Mortgage Fees: Mortgage fees may include a commitment fee, an arrangement fee (usually 1 per cent of the loan amount), an administration fee (e.g. 1 per cent), and an appraisal or valuation fee.

Differences between buying new and old Portuguese properties: Due to the high demand for new Portuguese property, most purchasers buy properties "from spec" from Portuguese property developers. This means that the purchaser will buy new Portuguese properties from the plans, and select which property they want within a particular development. Typically, purchasers who buy a new property have to make regular instalments during key stages of the property development (opposed to paying for the property when it is complete), and an initial deposit of 5% to 10%. The initial deposit and regular instalments vary from one Portuguese property developer to the other.

Note: If you have to make regular stage payments to the Portuguese property developer you should ensure that you receive bank guaranties for each payment. These bank guaranties protect you in the unlikely event that the Portuguese property developer has financial difficulties before the property is transferred to your name.

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Disclaimer: This guide is for information only and should not be relied upon as definitive. Details have been obtained from various sources and although we have done everything possible to ensure that it is correct, we cannot accept responsibility for it or guarantee its accuracy. This is because processes and laws change frequently, and may also vary dependant upon personal circumstances. You are welcome to use the information provided, but should always obtain confirmation of specific details and get independent specialist and legal advice in the country that the information refers to.

04-09-2009