IF A VALUABLE PROPERTY IS BEING BOUGHT THEN TAX PLANNING ADVICE IS ESSENTIAL 

In many ways Portugal can be said to more tax planning friendly than either Spain and especially France. The reason is that notwithstanding the introduction of corporate ‘white’ and ‘black’ lists way back in 2004, it is still possible to use tax friendly companies* from jurisdictions that have a double taxation treaty with Portugal. The means that provided the right company and management facilities are selected it is often still possible to legally avoid inheritance* and capital gains taxes on Portuguese property investments. Portugal also provides non-EU nationals with a method to obtain a Portuguese identity card/passport under their ‘Golden’ Visa investment scheme, which basically allows those investing in Portugal or purchasing a villa worth over €500,000.00 to gain the right not just to reside in Portugal but freely move around the rest of the Schengen area. In precis, if a property is being bought for more than €500,000.00 or if you have valuable investments (in or outside of Portugal) and intend to reside in Portugal it is highly recommended that before doing anything you first seek advice from a firm such as SCF.

* It should be noted that whilst corporate ownership can be beneficial since 2018 where 50% or more of the value of the entity rests with Portuguese property, the gain on the transfer of shares may be subject to a 25% corporate tax.

PROPERTY TAX RATES – BUYING & SELLING

In Portugal there is both a property transfer tax called the Imposto Municipal sobre Transmissoes Onerosas de Imoveis (IMT) which can be up to 8% plus 0.8 stamp duty or Imposto de Selo. In addition, there is also a council tax called the Imposto Municipal sobre Imoveis (IMI) of between 0.3 and 0.8% annually. However, where a property is owned by a company from a jurisdiction which appears on the Portuguese ‘black’ list then the IMI tax increases to 10%. With respect to ongoing property taxes, there is a de facto property wealth tax that applies to properties worth more than €600,000.00 called the Adicional ImpostoMunicipal Sobre Imoveis (AIMI) of between 0.4% and 1.5% depending on how the property is held (i.e. by a corporate or non-corporate etc.) and its location. In Portugal, as with many jurisdictions there is an exemption from GCT if a property is the principal residence. However, when this is not the case, when a property is directly sold (i.e. not by transferring shares) the seller may be subject to capital gains tax which, for tax residents, will be between 14.5% and 48% but with only 50% of the gain actually being taxed at these rates. For non-Portuguese residents 28% CGT is payable.

INCOME TAX LEVELS 2023

Portugal taxes resident individuals on their worldwide income with rates progressively varying from 14.5% to 48% with the thresholds being:

• Up to €7,479.00 = 14.5%
• €7,480.00 – €11,284.00 = 23%
• €11,285.00 – €20,700.00  = 26.5%
• €20,701.00 – €26,355.00  = 28.5%
• €26,356.00 – €38,632.00  = 37%
• €38,633.00 – €50,483.00  = 43.5%
• €50,484.00 – €78,834.00  = 45%
• €78,835.00 and above  = 48%

WEALTH TAX LEVELS 2023

Portugal charges an annual property wealth tax called the called the Adicional Inposto Municipal Sobre Imoveis (AIMI) of between 0.4% and 1.5% per annum for properties valued over €600,000.00. However, it should be noted that as the €600,000.00 exemption is per individual and not per couple this means that, for example, a husband and wife could have a property worth up to €1.2m and not be subject to AIMI.