Portugal Property Investment Overview
Everything you need to know about buying property in Portugal
Portugal Property Real Estate Market
Portugal Property Location
Portugal Property Types
Portugal Property Search and negotiation
Portugal Property Purchase and Property Tax
Portugal Property Management and
Portugal Property management
Portugal Property Real Estate Market
Portugal Property was listed as one of the favourite countries in the world to buy and own a real estate. OECD did this listing in May 2013, and according to the same organisation, Portuguese real estate is currently undervalued with the price-to-rent ratio making Portugal arguably the most attractive property market in Europe. Such findings are further reinforced by news that 12% of banks are slashing home prices as a means to attract more buyers to reduce their stockpiles. Furthermore, Portuguese real estate agents in some prime locations are offering reductions of up to 30% from their initial asking price. According to Portugal’s National Statistics Institute (INE), the national average property price per square meter currently stands under €1000.
Portugal Property has a highly developed property market with a high quality of supply in all sectors and a significant number of foreign occupiers. The transparency of the market has attracted a good number of international consultants and agents. To add to this, the laws governing rental agreement has been made much more liberal while that on evicting a tenant that fails to meet up with his/her rent has been made more expedite.
The presence of a transparent Portugal Property market spiced by the falling prices of properties due to a reduction in prices by estate agents and banks together with the aforementioned points have helped to rekindle Portugal’s property market.
Portugal Property Location
The Lisbon-Cascais-Sintra property region holds the best residential and commercial properties in Portugal. Most big companies have their headquarters located in Lisbon or its vicinity, making this city the main decision centre. It is also recognised as a major tourist magnet hosting the country’s major airport which is the main hub for flight in and out of the country. Quite a good number of Portugal’s international schools are located in Lisbon.
Portugal Property Type
Residential Portugal properties stand as the most popular type of property thanks to the versatility of its use which includes private use and short or long term rentals for income generating.
Portugal Property Search and Negotiation
There are two basic options you can use to conduct a Portugal Property search. Either you do it yourself starting with a search over the internet and then proceed to contact the most promising estate agent or, you hire a search agent having a better knowledge of the market including unlisted properties to help you out with the search. These two options are also available to you when it comes to negotiating the purchase of the property. This means you can either negotiate the purchase yourself or preferably, you hire a Portugal Property buying agent who should be your search agent if you have one. It is preferable to hire a purchasing agent because he/she will have a better knowledge of the market which will enable him/her to be able to anticipate any future problem with the property you have interest in and recommend possible solutions. Most importantly, a Portugal Property purchasing agent has transaction experience that will, as a rule, enable you to buy at a lower price with a discount that will as a greater rule overwrite the fee you will pay for his/her services. This makes hiring a good Portugal Property purchase agent cost-effective.
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Portugal Property Purchase and Property Taxes
To purchase a Portugal Property, you sign a promissory contract and make a down payment. This is followed by you granting someone (normally your lawyer) a power of attorney enabling him/her to finalise the exchange of final contracts and the property conveyance immediately the necessary funds have been transferred to Portugal and all the paper works done. Apart from the legal fee involved, the Portugal Property buyer also has to pay the following taxes: one-off transfer tax (‘IMT’) and stamp duty (‘IS’) on the purchase price or on the tax office value for the property depending on which one is greater. While the stamp duty rate is 0.8%, the rate for transfer tax is influenced by the property type, its use as well as its value. These cause the rates to vary from one property to the other. The following example will throw more light on transfer tax rate. Let’s consider a residential property which will not be used as a permanent home. Such residential Portugal Property will have the following transfer tax rate: 1% on price of up to €93,407; 2% less €924.07 on prices from €92,407 to €126,403; 5% less €4,416.16 0n prices from €126,403 to €172,348; 7% less €8,163.12 on a price from 172,348 to 287,213; 8% less €11,035.25 on a price from €287,213 to 550,836. The tax is 6% at a price upwards of €550,836. The conveyance registration is subject to a small charge, typically €375 for each property. The property owner is also expected to pay annual municipal tax (‘IMI’) as at 31st December of each year. The rate is usually between 0.3% and 0.5% on the valuation of an urban property by the tax office. Rural properties are valued differently.
Portugal Property Property Management
With several real estate agents providing Portugal Property management services in areas like refurbishment and decorating, finding tenants, negotiating the rental agreements, checking tenants in and out, managing repairs and maintenance among many others, it has become easy for property owners to manage their properties by hiring these estate agents. The fee paid to property managers vary from one property to the other depending on the type of property, Portugal Property investment legal structure, rental type and others. Once all of these are defined, the fee can be negotiated with the agent. As a rule of thumb, long-term rentals management charges usually exceeding one year will vary between 10% and 15% of the gross income. For short term rentals usually below one year, this charge will vary from 20% to 25% of the gross property income. This rate can even go up to 40% when it comes to a daily rental where check-in/check-out, cleaning and maintenance services are included. Portugal Property Net rental income earned by a non-resident landlord (whether individual or corporate) or by an individual resident landlord is calculated for tax purposes as gross income less properly documented direct costs, except for financial costs (which are not tax deductible). This net rental income is taxed at 28% in the hands of a non-resident while in the hands of the individual resident landlord; it is included in the total taxable income and taxed at progressive rates. The taxation of short-term Portugal Property rental is more complex and a potential minefield for an inattentive property owner; you should, therefore, seek professional advice before entering this business. You can seek the advice by yourself through a manager. This is a relatively new market, and even some established Portugal Property managers are unaware of all the possible legal traps. For further information on this topic, take a look at the bottom section (“The Management of Short-Term Lettings”) of this page. For the resident corporate landlord (either a local business or the local branch of a non-resident business), the gross rental income and all eligible business expenses concur to the company’s profit, which is taxed at the normal corporation tax rate, currently 21% plus a municipal surcharge of up to 1.5%.
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Portugal Property Taxation of Capital Gain
For an individual or corporate nonresident seller, net capital gains are taxed at 28%. 50% of the net gains are (a) included in a resident individual’s total taxable income and taxed at progressive rates; (b) included in a resident business’ taxable profit calculation. The net profit is currently taxed at 21% plus a municipal surcharge of up to 1.5%. In the latter case, the proceeds from the 50% exemption are expected to be reinvested within a period of 2 years. In a case where an individual sells his/her property and use the money to purchase another mainstream residence in the EU, total tax exemption is granted on the capital gains realised from the sale of the property.
Portugal Property Investment Structuring
The best Portugal Property investment structure will vary from one person to the other depending on what they need a structure for. As an individual who just wants to own a property in Portugal, direct private ownership which is the most practical and cost-effective will be the best structure to invest in. For those who want to invest large sums in rental real estate, the best investment structure could be an EU company (for cost effectiveness, a UK private limited company or a UK LLP for tax transparency) with a branch in Portugal. This is because the branch will be taxed as a normal Portuguese company while the distribution of profits to the parent entity is tax-free.
It is important to note that, all business expenses, including financial costs (within certain limits). Will be tax deductible by the branch.
You can equally achieve tax-free capital gains and an IMT/IS if you dispose of the parent entity instead of the property itself.
Portugal Property Urban Rehabilitation Incentives Programme in Portugal
Portal has many official incentives aimed at rehabilitating urban areas Portugal Property, buildings and even apartments. Such rehabilitation is encouraged by a legal framework which provides for less red tape, great tax breaks and finance schemes among others.