Investors Guide to Portugal

The Purchasing Process

The buying process can vary slightly between development companies, although the purchasing process is often very similar between developments. It is advisable to use a lawyer when purchasing a property in Portugal, the legal firm will be able to check all for the documents are in order and the property is sound for purchasing.

Once the property to be purchased has been found, a reservation deposit is paid to hold the property, amounting to the Euro equivalent of approximately 3,000 GBP. After the deposit is paid, the Private Purchase Contract (PPC) will be issued, approximately 30 days after the reservation deposit is paid. Upon issuing the PPC, the initial staged payment of between 10% and 30% of the purchase price will be paid. The amount will depend upon the developer’s requirements.

Often developers do not arrange staged payments throughout the construction for the project, with the remainder of the payment due upon handover at completion. At the completion, all of the fees and taxes will also be paid, however part of the legal fees may also be required at the initial issuing of the PPC.

Fees & Taxes

Purchasing a property in Portugal requires the payment of fees and taxes upon the completion or handover of the real estate and follows a very similar process to other countries in the EU, with fees and taxes amounting to between 10 and 15% of the purchase price, including:

• VAT – 17%, however this charge is often included in the sale price
• Stamp Duty is calculated on various factors such as the size, age and intended use of the property
• Notary fees – 1.33%
• Land registry fees – 0.65%
• Legal fees – approx. 1.5%
• Plus further miscellaneous costs, such as deed registration fees, mortgage fees, etc
• Transfer tax – up to 6%, depending upon the property (only applicable to re-sale properties)
• Capital gains tax – 25% for non residents and 50% for residents, charged on the difference between the declared value and the sale value of the property when selling

Financing the Property

Mortgages are readily available in Portugal for foreign investors, with banks lending approximately 80% of the property purchase price. As the Portuguese bank loans are in the Euro currency, the rates are set by the European Central Bank.

Mortgages can also be taken out through banks in the UK, as Portugal is an established market and the country is a member of the EU, providing further security for the loans. Some investors prefer to take a loan in their own currency to allow security against fluctuating exchange rates.

Other options for financing include re-mortgaging and releasing equity on a currently owned property. If financing is required to purchase, it is ideal to receive assurances from the lending company that the intended borrower is eligible to receive the financing required, or it is possible that the deposit paid to hold the property while the loan is being arrange, may not be refunded.

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