By: PEDRO SIMÕES
Pedro Simões is licensed in fiscal law and management, and is the Managing Director of ACOQ Consultancy Lda, based in Lisbon.
IF YOU want to buy a property in Portugal, you have to pay taxes when you are buying the property. Also if you will not be living in the property you will also have to pay a yearly tax for holding the property. If you will be living in the property, in specific situations you can be exempt from the yearly property tax.
I am planning to buy an apartment in Lagos for 170.000 euros and would like to know what tax I will have to pay on the purchase?
The tax you need to pay on the purchase is not a fixed rate, it is a progressive one. The tax to pay on your apartment is around two per cent of the purchase price – 3,295 euros. However I must warn you to be careful if the purchase price is lower than the tax value of the property. The basis for tax is the highest of these two values.
What will be the yearly property tax that I will need to pay?
That will depend on the amount the apartment was valued at by the Tax Authorities. Newer properties valued after 2003 have a different tax rate for the yearly property tax. For example, Lagos has a tax rate of 0.35 per cent of the value of the property for fiscal purposes. This value is not the price of the apartment. If, for example, the apartment has a value for the tax authorities of 130,000 euros, the tax to pay would be 455 euros per year. If the apartment has the same fiscal value, but is located in Tavira, for example, the tax would be 650 euros per year.
Can I get exemption on any tax with this purchase?
If you will be residing in the apartment, you have 60 days to request the exemption, and six months to move into the apartment. If you are non resident you cannot become exempt.
I am also considering renting the apartment. Do I need to get a license for that?
In fact you do need to have proper licensing. You need a license from your local Câmara. The Portuguese Government very recently approved a general Law that rules these situations. The information we now have is that the Câmaras are adjusting their local rules to incorporate this new Government Law.
And what about taxes I need to pay regarding the rent?
Non-residents need to pay 15 per cent tax. This is a yearly tax regarding the turnover from rents. If you live here but are renting out that property, the tax rate is a progressive rate starting at 10.5 per cent. In this particular case it will depend on the amount of the rents received.
Can I claim any expenses against taxes?
Yes, you can claim the yearly property tax, the condominium fees and all maintenance and repair expenses.
To summarise, if you buy a property to live in you have to pay tax on the purchase which is the same if it is for investment purposes. The only difference from these two options is the yearly property tax, because you can get exemption if you will be living there. Please note that each person or family can only ask for this exemption twice.
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