One of the most common questions clients ask when considering property purchases in Portugal is:

“Besides the purchase price, how much additional budget should I prepare?”

This is a crucial question. In Portugal, the total cost of acquiring property includes not only the agreed purchase price, but also one-time transaction taxes and ongoing annual ownership taxes.

By understanding the full cost structure in advance, buyers can make more informed decisions and avoid unexpected financial pressure during the process. This article provides a comprehensive overview of the key taxes associated with purchasing property in Portugal.

NO.1

Transaction Stage: One-Time Taxes

When completing a property transfer in Portugal, the two primary taxes payable are:

• IMT (Property Transfer Tax)
• IS (Stamp Duty)

1. IMT: The Largest Tax During the Purchase Process

IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is Portugal’s property transfer tax and typically represents the largest tax expense at the time of purchase.

IMT is calculated using a progressive tax system and depends on:

• The higher of the purchase price or the government-assessed value
• The intended use of the property (primary residence or investment)
• Whether it qualifies as a first permanent primary residence

For a first permanent primary residence, the applicable tax brackets are as follows:

Property Price (€)	Tax Rate	Deduction Amount
0 – 97,064	0%	€0
97,064 – 132,774	2%	€1,941.28
132,774 – 181,034	5%	€5,306.44
181,034 – 316,772	7%	€8,163.59
316,772 – 633,453	8% (marginal)	None
Above 633,453	Flat 6%	None

Calculation formula:

IMT = (Property Price × Applicable Tax Rate) – Deduction Amount

For example, if purchasing a €300,000 first permanent primary residence, the IMT payable would be approximately €12,000, based on the progressive calculation.

2. Stamp Duty (IS)

Stamp Duty (Imposto do Selo) is calculated at a fixed rate:

IS = Property Price × 0.8%

For a €300,000 property, the Stamp Duty would be approximately €2,400. Although smaller than IMT, this amount must also be paid in full at the time of transfer.

3. If Financing Through a Mortgage

If the purchase involves bank financing, additional mortgage-related registration taxes apply. These typically range from 0.6% to 1% of the loan amount, depending on the financing structure and the bank’s terms.

NO.2

Ownership Stage: Annual Taxes

After the transaction is completed, the property enters the ownership phase. The main recurring tax during this period is IMI (Imposto Municipal sobre Imóveis), functions as an annual property holding tax.

The rate generally ranges between 0.3% – 0.5% of the government-assessed property value (VPT)

It is important to note that IMI is calculated based on the official assessed value rather than the market purchase price. Since the assessed value is usually lower than the transaction price, the effective tax burden is often moderate.

If the property is rented out, rental income is subject to taxation.Under standard conditions, a flat tax rate of 28% applies.Deductible expenses may include property maintenance and repairs, mortgage interest, management fees and ongoing operational costs.

With proper tax planning, rental returns can be structured efficiently and compliantly.

NO.3

Overall Budget Recommendation

In general, buyers in Portugal are advised to reserve approximately 5%–10% of the purchase price to cover taxes and transaction-related costs.

This typically includes: IMT,Stamp Duty, Mortgage registration taxes (if applicable), Notary, legal, and land registration fees.Careful financial planning ensures a smooth and predictable acquisition process.

Portugal’s real estate tax framework is transparent and clearly regulated. With a thorough understanding of the tax structure and proper preparation in advance, the purchasing process is both manageable and structured.

We will continue to publish practical insights on Portuguese real estate to help investors and homeowners better understand the local market and make informed decisions.