The purchase of property in Portugal of all types i.e. land, villa or apartment and others is a regulated process and you should only use a fully licensed Real estate Company or Agent.

Once you have found the property that you are looking for, and your offer has been accepted you will be asked to leave a reservation guarantee deposit, normally € 1.000 to € 2.500, this deposit is hold by the Real Estate Company until the promissory contract is signed.

Your deposit will be refunded if you do not proceed with the purchase.

To avoid any disappointment please remember that Real Estates do not normally accept credit cards for the deposit, but cash, euro cheques, or drafts are accepted.  Failure to leave the deposit will result in the property remaining on the market for sale.

At this point you will require the services of a properly qualified property lawyer who speaks your language. Prior to the signing of the Promissory Contract the lawyer will ensure that the property you wish to purchase is free of debt, restrictive clauses and in the case of land purchase that you are able to build on the land.

Both parties will sign a “Contrato de Promessa de Compra e Venda”* (Promissory Contract – equivalent to Exchange in the U.K.) and pay deposit of usually between 10%-30% of the purchase price.

The vendor will forfeit double the deposit paid, if unable to proceed with the sale.

Each property should have the following documents: “Certidão de Teor”*, “Caderneta Predial”** and the “Licença de Utilização”***.

What is the Final Deed?

Act (contract) by which is transmitted the property of one owner to another through a written document and signed by both parts in front of a public or private notary or his representative, who makes sure that all documentation is in order.

In accordance with the law, the act of purchase and sale of a property is always subject to a public title. The contract by a particular document constitutes the only exception.

Who is the Notary?

The notary is an independent public or private identity who acts as official witness and legal guarantor of the property transfer ownership.

After the Final Deeds is signed:

The lawyer should take a copy of the Final Deeds to register your name at the:

3 – Electricity Department - to request a new contract for the electricity meter

5 – Gas company - to request a new gas meter and inspection

6 – Town Hall “Camara” to request the water meter

7 – Condominium company (applicable only to specific properties)

Direct Debits

All your bills can be paid through your private account via direct debit with the exception of the annual tax (equivalent to the English POLL tax).

COSTS AND CHARGES WHEN BUYING A PROPERTY:

IMT (Municipal Property Transfer Tax)

Tax payable at the Finance Department, must be paid prior to signing the final Deeds. The amount payable varies with the value of the property and we or your lawyer always advise you of this amount before you incur in any expenditure, this however, is not applicable to off-shore owned properties.

You must keep the receipt of the payment issued by Finance Department, as this will be asked at the time of the signing of the deeds.

IMT Property Tax Application:

Plots of land to build, commercial and industrial properties is 6,5%

There are other fiscal benefits on special transactions (ask for details)

IMT Property Tax Exemption:

Properties under €87.500 for permanent habitation

Table for calculation of this tax for the apartments and houses for the year of 2008:

Permanent home:

Permanent home: IMT TABLE for 2009
Value	Percentage	Deductive amount
up 89.700 euros	0%	€ 0,00
From 89700 up to 122.700euros	2%	€ 1.794,00
From 122.700up to 167.300euros	5%	€ 5.475,00
From 167.300up to278.800 euros	7%	€ 8.821.06
From 278.800up to 557.500 euros	8%	€ 11.608,95
More than 557.500 euros	Unique rate of 6%

i.e.:  Property costs 150.000 x 5% minus 5.475,00 = € 2.025,00

Second home:

Second home: IMT TABLE for 2008
Value	Percentage	Deductive amount
up 87.500 euros	1%	€ 0,00
From 87.500 up to 119.700 euros	2%	€ 875,00
From 119.700 up to 163.200 euros	5%	€ 4.466,01
From 163.200 up to 272.000 euros	7%	€ 7.729,97
From 272.000 up to 521.700 euros	8%	€ 10.449,97
More than 521.700 euros	Unique rate of 6%

Council tax on Properties (IMI).

It is a rate paid to the Council entities of the area where the property is located and which is calculated on the basis of percentage of the value mentioned in the matrix document. This value may not coincide with the current value of the property; therefore this register normally is only updated when a public title deeds act is taken place. Payment is carried out in the Finance Department of the area where the property is located.

Annual Council tax is calculated accordingly the patrimonial value tributary of the property. The property can be exempted of this tax by one period from 3 to 6 years, according to its tributary patrimonial value within 6 month after the title deeds act. For this purpose, the owner will have to require this exemption in the Service of Finances of the area of the property, no later then 60 days.

It is based on the patrimonial value mentioned on the matriz predial of the rustic, urban and mixed buildings

Council Tax (IMI)  D.L. nº 287/2003 from November 12th
Tributary Patrimonial Value	Period of Exemption (Years)
Up 157.500 euros	6
Up 236.250 euros	3

Tax due by the purchaser at the time of the title act, referring to the value of acquisition/title deeds of the property (8/1000) and on the value of the loan by the Bank. When there is a change of Institution of Credit, the purchaser has a tax exemption on the value of the inherent loan to a new mutual contract, up to the sum of the capital in debt.

The regime of the Official Stamp Tax foresees the tributary by the value of the granted credit and in accordance with the duration planned for the reimbursement of the credit: according to the credit time lower than one year, one to five years, or more than five years.

This value is already included on the Notary fees above mentioned.

Notary and registration fees

These will have to be paid by the purchaser after signing the Final Deeds and it is approximately 1% to 1,2% of the property purchase price (again not applicable if off-shore) and if buying with a mortgage this percentage amount will vary.

Lawyer’s fees

Most lawyers will charge between 1% and 2% of the purchase price as their fee, they will carry out all the necessary searches and prepare the documentation needed for both, promissory contract and final deed (completion).

Capital Gains (Mais-valias)

They are taxed on IRS (Category G: Patrimonial increment) the profits obtained with the sale of a property. The tax must be paid by the vendor, after the celebration of the title of purchase and sale.

As established by the artº 10 of the Code of IRS, "more values" or "less values" will have to be included in the context of the liquid income received in terms of Income tax of Singular People (IRS) in the Category G of IRS in "Patrimonial Increment" (drafting of the Law of Budget for 2001). For effects of calculation of the income, "more Values"/"less values" only are considered in 50%, still affected by a monetary coefficient of correction, established by Law and by the supervision.

1. The profits of the sale of the property, within the maximum period of 2 years, can be reinvested in the purchase of the new property;

2. Acquired new property in the period antecedent of 12 months with effect from the date of the sale of the current property;

3. If the building is rustic, connected to a commerce/agriculture/industrial activity, and was acquired before 01/01/1989.

Mortgages in Portugal

Mortgage (Hipoteca)

Real guarantee security that confers to the creditor the right of being paid for the value of the debtor’s property, having preference to the any other creditors. This type of guarantee usually is demanded by the banks regarding loans of long stated period (long term) (i.e. mortgages loans to the habitation).

In order to guarantee you loan you can, normally, constitute a specific mortgage.

For guarantee of your loan, normally it can constitute specific mortgage. Alternatively, and if you wish, you can constitute generic mortgage to used simultaneously or posterior to other loans for any purpose.

Mortgages in Portugal can be arranged for acquisition of property, renovation and construction, the mortgage secured against the property in Portugal.

All mortgages are full status and proof of income (means tested) and outgoings will be required by all lenders.

We recommend the following Banks; “Millenium BCP”, “Banco Santander”, “Banco Bilbao Vizcaya & Argentaria”, BPI, Banif. Should wish to work with any particular Bank, we will be pleased to assist you.

The interest rate can vary from 4% to 4,5%

Bank Arrangement Fee to open a credit process:
Approximately €150 EUR

Non-Resident Status:
Maximum loan available is 75% of the loan to value (with no upper limit) with a maximum term of 35 years up to the age of 75 years, (e.g. a 20 year loan is available for a person aged 55 years at the time of purchase).

Resident Status:
Maximum loan available is 90% of the loan to value (with no upper limit) with no maximum term up to the age of 75 years (80 years in exceptional circumstances) (e.g. a 55 year loan is available for a person aged 20 years at the time of purchase).

DOCUMENTS REQUESTED FOR A MORTGAGE

General
- Portuguese Fiscal Number (“Número Fiscal de Contribuinte” or “NIF”);
- Copy of ID card(s) or passport(s).
- Marriage certificate (if applicable);
- Last 3 months personal bank statements – current & savings;
- Bank references; (if applicable)
- Copy of the signed “Contrato Promessa de Compra e Venda”, (Promissory Contract);
- Plans / Drawings of the site and or of the property;
- If constructing / renovating the property – copies of the Planning Permission and Building Licenses;

If Employed
- Last two years tax returns (P60 or equivalent in the UK);
- Last three months pay slips;
- Reference from employer (simple letter stating that has been working with the company for a certain time, plus the normal considerations in this regard);

If employed by a limited company with a shareholding of 20% or more
- Last two years audited accounts;

- Letter from Accountant confirming current salary and dividend payments for the last two years;
- Last two years tax returns;
- Last six months business bank statements;

If self-employed
- Last two year’s Audited Accounts;
- Letter from Accountant confirming net profit figures for the last two years;

- Last two year’s tax return / tax computation;
- Last six months business bank statements;

Other Income (if applicable)
- Confirmation of Pension received for the last six months;
- Confirmation of Rent received – copy tenancy agreement plus:
- Accounts for the last two years and copy of latest tax return;
- Copy of bank statements showing rent payments;

Liabilities (if applicable)
- Latest mortgage statement;
- Details of personal loans (principal due, monthly instalments);
- Copy of tenancy agreement;
- Maintenance / Alimony payments;

Bank evaluation Fee:
All banks in Portugal mostly charge a evaluation fee of the property to be purchased unless the bank concerned has already pre-valued properties on a new development (if you apply for a mortgage in the same bank as the developer).

The charges vary from bank to bank but range from €150 EUR +IVA to €400 EUR + IVA.

Some banks in Portugal will insist on you taking out their own life insurance together with Building & Contents Insurance. Other banks will allow a foreign Life Insurance policy providing it can be assign to the bank as cover for the loan.

Open a bank account:

In order to open a bank account you must have the following documents: Birth certificate with parents names, copy of passports, Identity Card, Fiscal number, utility bill stating your address.

OTHERS

Power of attorney

This is when you sign a legal document on a notary in favour of your lawyer or solicitor in order for him/her to sign on your behalf the transaction, saving you all the bureaucracy involved, which we highly recommend.

Making a will in Portugal

We strongly advise you to do so, although, your English/foreigner Will (if you have one) will probably be recognised as valid by the Portuguese authorities, however the cost of having it recognised in Portugal will be far greater than making a Portuguese Will.

Medical and health

Residents who contribute to the Portuguese Social Security are entitled to treatment at the Public hospitals and local health centres at a small charge.

It is also possible to be treated at the local or district hospital by presenting the E111 Form, which can be obtaining from your local post office.

Foreign residents normally take out a Private Health Insurance with one of the specialised International Companies. This give them affordable access to a large number of specialists practising in the private hospitals or clinics, which are in time, staffed and equipped to give a more personalized service than state institutions can provide

Resident’s permit

Non-Portuguese who wish to be permanent residents in Portugal must, by Law, apply for a residence permit through an official foreign office (“Serviço de Estrangeiros e Fronteiras” known as “SEF”).

Most EU citizens are automatically entitlement to the Residence Permit but this does not mean that the bureaucratic process can be ignored.

If you own a property and have a Resident’s Permit you can be exempted from paying the “IMI” (annual tax) for the first 3 to 6 years.

The Portuguese government provides good standard education schools for your children.

Your child will attend the school in your catchments area.

There are also international private schools with they own transportation and also meals for those who require them.

Do I need permission to buy a property in Portugal?

Generally no, where necessary, we can apply for the permission on your behalf.

Do I need to apply for a survey?

When purchasing a property anywhere, it is often prudent to have the property surveyed; we can arrange a professional Surveyor for you.