Suggestion: Watch the 5 minutes video tutorial before reading this article
Have you ever considered becoming a European citizen and to get full access to the Schengen area? A property purchase in Portugal can help you to fulfill that goal.
And with properties that cost a fraction compared to places like UK or China, you’ll be able to reside in a sunny country with great food, nice weather and long beaches.
In this article, I explain how it works when buying property in Portugal as a foreigner.
- Can foreigners buy property in Portugal?
- Can foreigners buy land in Portugal?
- Process when buying property in Portugal
- Property taxes in Portugal
- Can I get a resident permit if I buy property in Portugal?
- Can I rent out my property as a non-resident foreigner?
Can foreigners buy property in Portugal?
Yes, foreigners, including Asian investors, have no particular issues to buy properties in Portugal.
Many foreign buyers (especially from the UK and Mainland China) have taken this path, in fact, Portugal is one of the five most popular countries for Chinese property investors.
You’ll also have the chance to become a permanent resident if you invest in property here (more about that later in this article).
Can foreigners buy land in Portugal?
Foreigners have no issues to buy land, which gives you the opportunity to buy a house close to the coastline, if you wish to. Owning land on a freehold basis is rarely heard of in Asian countries where Malaysia, Japan, Korea, and Taiwan are the only exceptions.
A big house with an astonishing view of the ocean scenery can cost you equally much compared to a small apartment in the suburbs of Hong Kong.
Process when buying property in Portugal
As mentioned, foreigners have no general issues to buy property in Portugal, the buying process has many similarities with the one in Spain, and that you should study well in advance.
Let’s have a look at some of the main steps included when you purchase a property in Portugal.
1. Getting an NIF number (Numero de Indentificacao Fiscal)
One of the first things you should do is to get an NIF number. NIF is a tax number and will help you to pay for utility bills and to make transactions locally.
You’ll also need a NIF number to open a Portugese bank account.
Simply speaking, the NIF is comparable to the ITIN, which is required for non-resident property buyers in the US. The NIE number in Spain is pretty much the same thing (it even has a similar spelling, but in Spanish).
How can I get an NIF number in Portugal?
The same as it goes in Spain, you’ll be able to get the NIF number if you visit a local tax office. If you decide to travel to Portugal looking for properties, you should put this task at the top of your to-do list.
However, keep in mind that you don’t necessarily need to apply for the NIF number on site. You can also make the application in your home country.
Your property lawyer can also help you to verify your identity and submit your application in person, if you can’t go to Portugal.
Open a local bank account in Portugal
If you intend to buy property in Portugal, you should open a local bank account. Things will become generally simpler and you’ll be able to pay for things such as utility bills.
A good option is that you book a trip to Portugal and open a bank account when you’ve arrived.
At the same time, you can apply for your NIF number, review some properties, meet your agent, property lawyer and get to know the local market better.
So which are the biggest banks in Portugal? Some of the biggest and most popular one include:
- Banco Portugues de Investimento
- Banco Comercial Portugues
- Novo Banco
- Caixa Geral de Depositos
But you’ll also find Spanish banks like BBVA and Santander. Contact the banks before you leave your home country, to assure that you have up to date info and bring all documents needed.
Can I open a bank account online in Portugal?
Yes, many of the banks allow you to open a bank account online.
Contact a handful of banks and see what options you have.
What documents do I need to bring when opening a local bank account?
If you’re not a EU citizen, you’ll need to provide a bit more information compared to EU-citizens. Some of the documents include:
- Passport (bring a copy and a couple of photos as well)
- Proof of residential address, like a utility bill (showing name and address)
- Your NIF number and relevant documents
- Bank statements
- Documents that prove you have a Fiscal representative
- Tax returns
- Documents related to your occupation. That is, an employment agreement in case you’re employed, or company registration documents in case you’re self employed
Fiscal representative for non-resident foreigners
In case you’re not a citizen in Europe, you’ll need to have a Fiscal representative.
So what’s a Fiscal representative?
A Fiscal representative has numerous roles, but will prove that you’re capable of paying taxes in Portugal, such as VAT.
3. Finding a property lawyer in Portugal
You should try to find a reputable property lawyer earliest possible, before engaging in the market.
Your real estate agent can help you to find a property lawyers, but sometimes, it can be better to work with a property lawyer that works independently from the agent.
Because the property lawyer and estate agent might cooperate in a way that doesn’t serve you the best, trying to earn some extra money from you.
How can I find a property lawyer in Portugal?
The easiest way is to check online first. When you search online, you’ll need to look for a lawyer that’s fluent in English.
Many buyers from the UK invest in Portugal properties, therefore the UK Government has a directory with a summary of all English speaking property lawyers.
I recommend you to check it out. But unfortunately, fluency in English is not sufficient to verify the credibility of a lawyer.
Ask your property lawyer for testimonials and case studies, preferably they should have helped other buyers from your home country.
And most importantly, make sure that the property lawyer is licensed.
What can the property lawyer help me with?
Most importantly, the property lawyer will help you with all the legal matters, including drafting of documents, to check title, and to handle parts of the conveyancing process.
You’ll also have a great benefit if you hire a property lawyer as they’re fluent in Portuguese and will help you with translations of documents and to communicate with the seller.
The extra cost can save you a great amount of time and money.
4. Finding a real estate agent in Portugal
As a foreign buyer, you should find a Real estate agent that can help you with the purchase of your property.
If you find real estate agents online, one of the first things you should do is to check whether they have a so called AMI license.
You can check whether an agent is licensed by visiting INCI’s website. Simply speaking, INCI is the institute that issues AMI licenses to the agents.
Compared to Spain, you’ll have less risk coming across unreliable agents in Portugal.
Real estate agent commissions in Portugal
You’ll need to pay the agent a fee of up to 5%. This is slightly more compared to places like Hong Kong, where you pay a fee of around 1%.
But take into consideration that the average property price is way lower in Portugal, from that point, it makes sense.
5. Hiring a notary in Portugal
Notaries are most commonly found in Southern Europe, like Italy, Spain and Portugal (even if you have the option to hire one in a couple of states in the US).
The same as it goes in Spain, the notary will help with the transaction and manage the legal parts of the process. One of his or her main duty is also to act as a witness when you transfer the property in your name.
In Portugal, you’ll required to hire a notary by law, while that’s not the case with property lawyers.
How can I find a notary?
You can search on the internet or ask anyone who has a relation to Portugal, in your local community.
That might be friends or relatives that already bought property there before. Or maybe they know someone who has bought a property in Portugal and can give you recommendations.
Don’t forget that you can visit your home country’s local embassy in Portugal and ask them for help too.
When you’ve found a notary, you can contact the IRN (the Institute of Registries and Notaries), to confirm the notary’s credibility.
One of IRN’s main responsibility is to monitor and control the activities that notaries are involved in.
6. Get a Preliminary mortgage agreement (approval in principle)
Before you continue with the conveyancing process, you need to assure that you can get sufficient financing.
You don’t want to end up spending a lot of time and money on deposits, inspections and other services, and finally find out that you’re not capable to finalize the transaction.
Set up appointments with local banks in Portugal, or with banks in your home country, to get a rough figure at least.
Bear in mind that the bank will make a personal assessment when deciding how much mortgage you can get.
They can check, for example:
- Mortgages that you already have
- Your age
- Your current employment and salary
- From which country you come from
Contact the banks to see what documents you need as they might have different regulations and options.
Consider using the same bank for your bank account, mortgage and insurance as it can be easier to keep the communication with one entity.
7. Check the Title deed
It’s important that you get help from your property lawyer to check the title of the property.
The title will confirm that the seller is the owner of the property. Also, you’ll be able to assure that there are no hidden mortgages, encumbrances or unpaid taxes attached to the property.
In Portugal, unpaid fees and mortgages are automatically transferred to the buyer.
So, I think you understand the importance the make a thorough check of the title, before you finalize your purchase.
Encumbrances, liens or other problems with the property can reduce its value and need to be discussed with the seller in that case.
One option is that you negotiate down the price and manage the issues yourself, or that the seller fix the problems before you finalize the purchase.
8. Hiring a surveyor in Portugal
This step is optional, but can reduce the risk of coming across problems later.
A surveyor will help you to check the property physically and to confirm that the property and land area is equal to that stated in the title.
He or she will also help you to check if there are any problems with the property, that might be unknown and not included in the title.
The cost of the service will of course depend on the size and therefore also the property value. You’ll not need to pay more than a couple of hundred euros in total.
9. Sign the Preliminary Sales contract with the seller
When you’ve come up with an offer, you should sign a preliminary sales contract together with the seller.
At this stage, the seller will remove the property from the listings and you’ll later need to pay a deposit of at least 10%.
The contract will also include details regarding the final steps needed to close the deal completely.
That includes when you should pay the remaining balance and the settlement date, just to name a few.
10. Finalize your mortgage at the bank
When you’ve come up with an offer, paid the deposit and signed the preliminary sales contract, you need to finalize your mortgage at the bank.
At this stage, you’ll need to bring a proof that you’ve paid the deposit. You also need to bring the preliminary sales contract, that I explained earlier.
The bank will also do an inspection of the property to make a final assessment of the mortgage that can be offered to you.
11. Sign the Deed of purchase and sale (the final sales contract)
In this final step, you’ll need to pay the remaining balance and sign the Deed of purchase and sale in front of your Notary, who need to act as a witness.
After, your property lawyer will be able to transfer the property in your name at the Tax authorities and at the Land registry.
Property taxes in Portugal
As in many other countries, you need to pay a stamp duty, property tax and capital gains tax.
But on top of that, you also need to pay another tax called IMT. Let’s have a look at the rates of these taxes in Portugal.
The stamp duty is currently 0.8% for non-residents.
However, stamp duty is only paid for established (existing) properties.
In case you buy an off-plan property, you’ll need to pay a VAT of 23%, instead of the stamp duty.
Transfer tax (IMT)
The transfer tax (IMT) is 10% for non-residents. This tax is usually paid at the time you sign the final sales contract.
The property tax starts from 0.3% for non-residents and can range up to almost 0.5%.
Rental income tax (withholding tax)
The rental income tax is 28% for non-residents.
Capital gains tax
Non-residents pay a capital gains tax of 28%. This is quite a “normal” rate in Europe I’d say, but in places like Singapore and Hong Kong the rate is generally 0%.
Can I get a resident permit if I buy property in Portugal?
You’ll not get a resident permit automatically, if you buy a property.
But the past years, Portugal introduced a so called Golden visa, which made it possible for Asian property buyers to get a long term resident permit.
The minimum amount is set to at least EUR 500,000, in order to get the visa.
However, the Golden visa program has faced some issues recently and some Chinese property buyers have been waiting for years to get their Golden visas.
I recommend that you contact your local Portuguese embassy in your home country, or an embassy in Portugal to find out if you’re eligible to get a Golden visa or not.
You can also contact companies and websites in Portugal that handle Golden visa applications.
Can I rent out my property as a non-resident foreigner?
Yes, you can rent out your property as a non resident.
Your Estate agent can help you to find and manage the communication with tenants. This is not an easy task if you live on the other side of the planet.
When it comes to rental yields, Portugal is in the top segment in Europe. The rental yields stretch almost up to 6% in places like Lisbon, at the time I’m writing this article.
The tenants might not only be Portuguese, but maybe from other European countries, such as the UK.
Can a US citizen buy property in Portugal?
Yes, US citizens have no particular issues to buy property in Portugal. The paperwork might be a bit more, as Americans aren’t EU-citizens.
Can a Canadian buy property in Portugal?
The same as it goes with Americans, Canadians have generally no issues to buy property in Portugal.
Can foreigners get a mortgage in Portugal?
Yes, non-residents are capable of getting loans covering up to 70% of the purchase value.
Where is the best place to live in Portugal?
According to Nomadlist, some of the most popular and best places to live in Portugal are:
- Ponta Delgada, Azores
- Funchal, Madeira
How long can you stay in Portugal as a non-resident?
Non-EU nationals can stay for up to 3 months. If you want to stay longer than that, you need to apply for a Portuguese residency visa or long-term visa before arriving.
Portugal is one of the top five most popular countries for Chinese investors, many Europeans invest here as well.
The house prices are still reasonably low and the country offers a great nature, with opportunities to get a so called Golden visa. It’s not strange why so many people like Portugal.
If you buy a property for at least EUR 500,000 and manage to stay just a couple of weeks each year, you’ll be eligible to get citizenship after 6 years.
With long beaches, cheap prices and many golf courses available, many Asians don’t hesitate to invest in this place.