Buying and Selling Costs in Portugal

Beyond the purchase price, buying or selling property involves other costs. Everyone involved wants his cut, from the government right down to the lawyer. The realtor and your attorney have to make a living, too. The government of course is looking for revenue and when property changes hands, it’s a perfect opportunity to take a percentage.

When deciding on the price to pay, don’t forget to figure in fees and taxes.

Buyer’s costs

Resident buyer costs run between 8.5% – 10.5%.

Property taxes vary by municipal jurisdiction.
Unless it’s a cash sale, there are mortgage costs to consider, too.

Buyer’s costs (as percentage of purchase price)

Transfer tax: 6.5%
Stamp tax: 0.8%
Registration fee: 0.2% – 1.2%
Legal fees: 1% – 2%

Seller’s costs

A licensed realtor, who is also bonded by the government, has marketing costs and overhead.

Seller pays the agent’s fees, usually 3% – 5% of the sale price, plus value-added tax (VAT) of 21%.
Word of warning, not all but some developments/resorts can charge up to 10% + Vat!
A savvy buyer will also want to be sure your property taxes and utilities are paid up to avoid being on the hook for them.
Unpaid property taxes can mean the property is auctioned off for back taxes as opposed to sold.

If you’ve sold your Portuguese home and intend to buy another:

You’re exempt from capital gains tax (up to 25%) if you buy it 2 years before or 3 years after the sale and apply the sale proceeds toward the new home purchase.

Resident or foreign buyer/seller?

Buyers and sellers are not required to be Portuguese residents.

Nonresident buyers will incur a 10% transfer tax instead of the usual 6.5%.
Different tax rates apply to resident and nonresident sellers.

Residents are subject to personal income tax on all income, even overseas income.

The tax rate ranges from 11.5% – 46.5%.
There are tax treaties to avoid double taxation, so consult a tax professional.

Nonresidents pay 20% personal income tax on Portugal-sourced income.

Income from Portuguese real estate transactions is taxed at 10%.
The capital gains tax on real-estate proceeds is quite stiff for nonresident sellers at 25%.

Thinking of living, retiring or buying property in Portugal?

Click here for guides on living in Portugal []

Click here for guides on buying real estate in Portugal []

James Harrison has lived on four continents with his family and is now the founder of PropDom:

PropDom – worldwide guides to help buying a second home, investing in property and retiring abroad.

PropDom has guides for the following countries: UK – France – Portugal – Spain – Mexico – Brazil – Australia – New Zealand – Kenya – Morocco – South Africa – Egypt – Mozambique – Singapore – Thailand – Pakistan

PropDom knowledge: Investment – Financing – Construction – Design – Legal – Furniture – Valuation – Surveying – Terminology – Glossaries – and more

Real Estate Tips For Beginners

Have you always wanted to invest in real estate but don’t know where to start? Here are some of the different areas of the industry that you can invest in:

Areas That You Can Invest In

Residential: these are properties such as townhouses, apartment buildings and vacation houses. Here a person or a family will pay you in order to live in your property. The length of time that an individual lives in your house depends on your rental or lease agreement.

Commercial: commercial real estate consists mainly of office buildings. When you construct office buildings you can rent them to companies and small business owners. Again the length of time that the business owners use your property depends on your agreement.

Industrial: this one consists of car washes, storage units and any other special type of real estate where customers use your facility on a temporary basis.

Retail: it consists of trip malls, shopping malls and any other retail storefronts. When you construct a mall, you can rent it to a person interested in running it or you can run it yourself.

Mixed-use: this is where you combine any of the above categories into one project. For example, you can construct a storied building with offices, malls and residential areas.

Real estate investment trusts (REITs): this is where you invest in real estate trusts. When the mortgages generate profits, you get a share of it.

Tips on How to Be Successful In The Industry

For you to be successful in the real estate business you need to do a number of things:

Involve an attorney: regardless of the area of the industry that you are interested in always involve an attorney. A good attorney will help you in finding the right construction company. The attorney will also help you in writing professional rental contracts.

Neighborhood: the area where you invest in greatly determines the amount of money that you will make from your investment. To be on the safe side always go for a neighborhood that is growing or has the potential of growing.

Run the numbers: many investors assume that when they construct a building they will have a tenant, which is usually wrong. Before you invest in a building you should run the numbers and find out if you will be able to pay the mortgage if the property sits empty. If you find that you can’t be able to repay the mortgage in the event that the property doesn’t have a tenant for a month or two, chances are that you are stretching yourself too thin.

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