The legal requirements buying property in Portugal

Buying a property in Portugal is a legal process that has strict requirements in terms of documentation, the role of the notary and compliance with Portuguese regulations.

However, there are no special requirements for non-EU citizens apart from obtaining a foreigner’s tax number.

Essential legal documents

Documents you’ll need to provide to buy a property in Portugal will be largely similar to those you’d have to produce in your home country. These include a passport, obviously if you are going there to sign, but also as proof of identity if you are using power of attorney.

Buyers also need a Portuguese tax number for foreigners, called a NIF, from the local tax office. As a foreign buyer (non-EU) you will in any case need a fiscal representative or accountant.

If applying for a mortgage, you will also need to provide:

• Bank statements from the past year
• Income tax declaration for the past two years
• Proof of income for the past six months
• List of mortgage loans already held
• Statement of your assets and liabilities, confirmed by an account

The Portuguese buying process

The process of buying in Portugal goes like this:

Offer and reservation fee

Once you’ve found a property you like, the first official step when buying a property in Portugal is making an offer via your estate agent. When the offer is accepted a small deposit (around €5,000) usually changes hands and the property is taken off the market. This is the point at which you instruct your solicitor, who perform all the necessary checks, such as ensuring the property legally belongs to the owners and they have the right to sell.

The promissory contract

The next step in the legal process of buying a home in Portugal is your solicitor preparing the contrato de promessa de compra e venda (promissory contract). At this point, you’ll pay the official deposit on the property. There’s no hard and fast rule on the value of this deposit. That said, 10-30% of the purchase price is quite standard, unless the reservation deposit already paid.

This deposit is very rarely refundable. As the buyer, you would expect to forfeit the funds if you were to pull out. If the seller pulls out of the deal, they are legally obliged to pay back double the deposit to the buyer.

To pay, your property lawyer should release the deposit and transfer it to the vendor’s representative, then you should be given a target date for transferring the escritura (final deed). Typically, this will be anything from three weeks to three months from when the initial contract is signed.

The final deed

The signing of the escritura (final deed) requires both you and the property vendor to be present (or someone with suitable power of attorney) in the presence of a notary. After you have transferred the funds via your currency specialist, the documents are read aloud and signed by both parties.

It’s at this point that you also pay the purchase tax (IMT). It’s the notary’s job to ensure that this is paid before the property changes hands.

Registration

The final legal step when buying a property in Portugal is to register the property. This is done via the local tax office and Land Registry (Registo Predial). Your property lawyer will be able to assist you in registering your property with the necessary officials.

Please note: Many people prefer to be present for the significant transactions in the legal process of buying a home in Portugal, but that’s not always feasible. If so, you can grant your solicitor power of attorney, ensuring it’s limited just to what you require.

Understanding Portuguese property laws

While there are no laws restricting who can buy property in Portugal, there are financial obligations one will have to consider when buying there. They include:

If your property is not going to be your full-time permanent home and you wish to rent it out, you will need to obtain a letting license, known as a Alojamento Local. To receive this, you must be inspected by the local camara (town hall) for adherence to local regulations.

Imposto Municipal Sobre Transmissões (IMT) is the equivalent of property purchase tax which the notary will collect from the buyer when signing the escritura. It’s a progressive tax based on the property’s purchase price and intended usage (permanent residence, second home or investment) that usually varies between 0.4-0.8% of the property price. If you’re buying a new-build property in Portugal, you’ll pay between 0.2-0.5%.

Imposto do Selo (stamp duty) is an additional transaction tax that needs to be paid when buying a property in Portugal. It is the oldest tax levied by the state and real estate transactions are subject to a stamp rate tax of 0.8%.

These are just a few legalities one should consider when buying property in Portugal. For a full break down of fees buyers could incur in Portugal, click here.

Working with legal professionals

One important thing to remember is the difference between your property lawyer in Portugal, who’s employed by you alone to protect your interests, and a notary. Portuguese notaries are legally trained and their role is compulsory in any property transaction in Portugal. However, they officially act for the government, and not for either the buyer or vendor.

The role of a notary is to oversee and rubber-stamp the paperwork in a property transaction. In addition, they check all necessary taxes are paid, and register the property with the Portuguese Land Registry. You can find a notary on the European Directory of Notaries if need be.

When you purchase a property in Portugal, all documents must be signed in the presence of a notary for them to be legally binding. The notary is usually involved from the signing of the initial contrato de promessa de compra e venda until the point of completion and the signing of the escritura de compra e venda (final contract).