Since the Portuguese government introduced the immigration policy of obtaining residency rights through a property purchase of 500,000 euros, it has attracted numerous international investors, including those from China. However, during the property investment immigration to Portugal, investors may not be fully aware of the taxes they need to pay. In Europe, as long as the property is privately owned, the owner is required to pay property taxes, which are calculated based on the actual value of the property owned by the investor. Therefore, familiarizing oneself with the tax obligations before purchasing property is one of the important tasks to be done prior to investment immigration.
1. Value Added Tax
Value Added Tax (VAT) is a tax that Portugal began to levy after joining the European Community in 1986. All transactions of goods and services conducted within Portugal, as well as goods imported from outside the European Union, are subject to VAT. Portugal has three VAT rates: the standard rate is 23%, the reduced rate is 12%, and the super-reduced rate is 6%.
2. Property Transfer Tax
All properties and real estate transactions within Portugal are subject to the property transfer tax, which is the tax payable by the buyer on the purchased property. The tax base is determined by the higher of the transaction price or the registered value of the property. For rural properties, the transaction tax is 5% of the transaction price. For urban properties, the tax rate varies based on the transaction price: properties with a sale price below 92,407 euros are exempt from the property transfer tax; properties priced between 92,407 and 574,323 euros are subject to a sliding tax rate of 2% to 8%; properties exceeding 574,323 euros have a fixed property transfer tax rate of 6%. The property transfer tax is paid by the buyer, typically at the time of payment for the property or on the first working day after payment. For property transactions conducted abroad, the tax must be paid within the following month after the transaction.
3. Property Tax
Property owners are required to pay property tax annually, which falls under local taxes. The tax rate for rural properties is 0.8%, while urban properties have a tax rate ranging from 0.2% to 0.5%. The tax base is calculated based on the registered value of the property and is periodically reviewed by local governments. The taxable base is usually 80-90% of the market price of the property.
4. Stamp Duty
Stamp duty is levied on various contracts, property transfer documents, business books, and other documents signed during economic activities. Portugal collects stamp duty in two ways: one is a fixed rate for items such as checks, commercial books, wills, and property registrations, with fees ranging from 0.05 to 25 euros; the other is a percentage of the total contract amount, with rates ranging from 0.04% to 25%, applicable to contracts such as real estate sales, donations, guarantees, mortgages, and insurance policies.