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Portuguese Algarve Buying Process

Buy Property In Algarve

What are the basic procedures and legal acts involved in acquiring a property in Portugal?

Having chosen a property, your Lawyer should search the local Land Registry (Conservatora do Registo Predial) to confirm that the vendor has clear title of ownership, charges or mortgages over the property and actual building and plot size being sold.

A fiscal number (numero de contribuinte), obtained at the local Tax (Finanças) office, is mandatory. This number will come in the form of a card, which you will need for payment of annual property taxes, supply of services to the property or to open a Portuguese Bank Account.

Your Lawyer will obtain the official tax document (caderneta predial) relating to the property from the vendor and check that the description of the property (number of rooms, area of house, area of land, etc) is the same as in the land registry.

A copy of the usage licence (licença de utilizaçao) will be obtained from the local town hall (Camera Municipal). For residential property, you will need a Habitation Licence (licence de habitçao). Non-residential licences need to stipulate the appropriate commercial or industrial use.

A Promissory Contract of purchase and sale will be drawn up (Contracto de Promessa de compra e venda) this should be signed by you and the vendor. It should include: Identification of the parties, Identification of the property, Agreed terms and conditions of the contract. A deposit of 10% of the full purchase price is normally payed at this stage.

Transfer Tax (IMT - Imposto Municipal sobre Transmissoes) must be paid prior to issue of the Final Deed of Sale. A certificate must be issued by the Local Tax Office (Finanças), which proves payment and must be submitted to the Notary prior to completion of the Final Deed. The value of tax due depends on the sale price the property.

On completion of the sale, the Notary issues a final deed (escritura) and title pertaining to the property in question. Prior to issuing the document all certificates referred to above must be provided to the Notary.

Finally, on completion of the sale, it is very important to ensure that the property is immediately registered in your name at the (Conservatõria do Registo Predial) and also in the Local Tax Office (Finanças).

What fees/taxes can be expected during the buying process?

There are 2 taxes that relate directly to the property:

  1. IMT rate - a one off tax that is payable when the property is deemed to have changed hands. The tax is related to the transaction value of the property or if this is deemed to be too low the evaluated value given by the local tax office. The tax is around 6% but as stated earlier is directly related to the value of the property.
  2. IMI annual tax that is paid in two payments over the year. The local authorities calculate this tax annually. As an example though this year the Loule council have set their local tax at 0.45% of the property's value.

Notary and registration fees are in addition and payable upon signing of the title deed. The notary fees are around the 200 euros mark and the stamp duty 0.8% of the property value.

With lawyers fee of 1%, you should budget for around 8% overall for the purchase of a property.