Martes, 06 Julio 2021

Buying a property in Portugal

VolverThe purchase of a property in Portugal - an apartment, a house, a farm, a plot of land, etc – can be a challenging process.

In order to avoid any surprises during the different stages of the acquisition process, it is recommended that both parties - but especially the buyer - are duly advised by an independent professional with expertise in real estate law.

This article explains the main steps that should be followed in a standard acquisition process of a property in Portugal, whether it is done for investment (long term rental, short term rental), or residential purposes.

1. Ownership of property by foreigners

Portugal does not have any restrictions based on nationality on the right to buy or own property. As so, it is possible for a foreigner to buy a house anywhere in the country under the same terms and conditions has a Portuguese citizen would do.

Furthermore, the Portuguese government incentivizes foreigners to invest in real estate property in Portugal through the Golden Visa program and the Non-Habitual Resident regime (NHR).

2. Pick the location where you want to buy

Like most countries, depending on where you choose to buy a property, the price will dramatically differ. That said, it is important to know the market value of the property that will be bought. You can do your own market study, by comparing the property you are interested in with others with the same number of rooms, state of conservation, areas, and location. The improvements that were made, parking space, sun exposure and other features such as balconies and storage are also relevant features to consider when evaluating a property.

3. Hire a real estate agency and/or search on your own

Nowadays there are several ways to research the properties that are available in the real estate market. In addition to the traditional sign with the word “for sale” with a mobile number attached to it, it is possible to search and contact any potential sellers by using social networks and the various sites dedicated to advertising properties, such as www.idealista.pt .

That said, you can also choose to hire a real estate agency (“Agências Imobiliárias”), who will do such research for you. All real estate agents need to be registered with the government and have a license number. Real estate agents in Portugal work on a commission basis that will be paid by the seller.

4. Obtain a Portuguese tax identification number

One of the first steps in the process of buying a property for anyone who is not a fiscal resident in Portugal, is to obtain a tax identification number ("Número de Identificação Fiscal -NIF") from the Portuguese Tax and Customs Authority. This is the administrative number that identifies each individual in Portugal before the Tax Authorities (“Autoridade Tributária e Aduaneira”) and is necessary for all contracts entered into when acquiring a property in Portugal.

In the case of natural persons, if the buyer is married it will be necessary to request the NIF of both spouses even if the property is only acquired by one of them.

5. Due diligence

Due to the large investment that the purchase of a property implies, it is recommended to perform a legal and technical due diligence to the property - survey and analysis of all information and data related to the property - before signing any agreement, so that the buyer can properly evaluate the property he intends to acquire and reduce as much as possible any risks during the purchase process.

Through a legal due diligence on the property the buyer will be able to confirm, for example, what encumbrances and charges are levied on the property, if the use of the garage space is exclusive to the owner of the apartment, if the garage is included when the property is transferred, among others.

Some of the most relevant documents are:

Land Registry Certificate (Certidão de Registo Predial)

This document can be obtained at the Land Registry Office. It shows the property's history, the rights that were registered, including those that are pending, and proves the ownership. The land registration certificate is valid for 6 months and can be requested online and it costs € 15.

Tax Land Registry Certificate (Caderneta Predial)

The tax land registry certificate reports the tax status of the property as well as other relevant information such as the location, description, identification of the owners and the property's equity value, which will allow the calculation of the Municipal Property Tax (IMI).

Licence of Use (Licença de utilização)

This document describes the type of use for which the property is intended, that is, whether it has a residential or non-residential purpose. To issue this document, it is necessary to go to the City Council of the region of the property.

Blueprints

This document shows the exact distribution of the property areas, in addition to containing information informing about the size and location of the garage, storage, etc. It is possible to consult the blueprints of the property in the municipality where the property is located.

Energy certificate

The Energy Certificate assesses the energy efficiency of a property on a scale from A + (very efficient) to F (inefficient), issued by technicians authorized by the Agency for Energy (ADENE). It is mandatory since 2013 for anyone who intends to either sell or rent a property.

Technical Document of the House (Ficha Técnica da Habitação)

This document contains relevant information regarding the architectural project, characteristics of the work and describes the changes made in the property. If the property was built before March 2004, this document is not be necessary for the deed to take place. In case a duplicate is needed, you must request it from the municipality for a fee.

6. Promissory agreement

In most cases, after an agreement is reached and before the public deed of purchase and sale takes place, it is recommended for the parties to draft and sign a promissory agreement of purchase and sale in order to bind them to the terms and conditions that were agreed.

In a promissory purchase and sale agreement, the terms of the purchase must be predicted, such as:

• Identification of the seller and the buyer

• Property identification

• Price

• Description of how the payment will take place

• A date for the purchase to be concluded

A promissory agreement is not mandatory. However, it is a common procedure that takes place, for example, when the buyer needs to apply for a bank loan or, for any other reason, the parties are not ready to move forward with the deed.

The promissory purchase and sale agreement should always be carefully reviewed by a qualified professional since the inadequate wording may result in the loss of the value of the deposit, which, in in some cases, it may reach up to 30% of the agreed price total.

7. Public deed of purchase and sale

The deed of purchase and sale may be carried out at a Notary's Office, Land Registry Office or even through Casa Pronta, a one-stop shops created so that all necessary formalities for the purchase and sale can take place at the same place.

Once the public deed or definitive contract is signed, the registration of the acquisition must be presented to the Land Registry Office. Usually the costs of both the Notary and the register our date by the buyer.

8. Property Taxes

The main taxes due for the acquisition and ownership of a property in Portugal are:

• Municipal Tax on Real Estate Transfer ("IMT") - This tax is due only once at the time of the purchase. The IMT rate varies from 0% to 8%, according to the acquisition value or the evaluation of the property by the tax authorities.

• Stamp Duty ("IS") - This tax is also due when the property is purchased. The rate is 0.8%, regardless of the value of the acquisition.

• Municipal Property Tax ("IMI") - This tax is due every year by the taxpayer who owns the building on December 31st of the year to which the tax relates and has a rate between 0.3% to 0.45% of the taxable patrimonial value of the property.

Departamento de Derecho Inmobiliario | Portugal

 

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