Suggestion: Watch the 5 minutes video tutorial before reading this article
Have you ever considered becoming a European resident and getting full access to the Schengen area? A property purchase in Portugal can help you to fulfill that goal.
With properties that cost a fraction compared to places like Singapore and China, Portugal offers a high quality of life with a pleasant climate, great food, just next to the Atlantic Ocean.
In this article, I explain the basics when buying property in Portugal as a foreigner.
- Can foreigners buy property in Portugal?
- Can foreigners buy land in Portugal?
- The 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 have no particular issues to buy properties in Portugal and the prices are still comparatively low.
As a result, we’ve seen many foreign buyers, particularly from Europe and Mainland China, that have entered the market. Portugal is currently one of the five most popular countries for Chinese property investors, for example.
If you buy real estate here as a non-EU citizen, you also have the chance to become a permanent resident, if you reach a certain amount. This is something I will explain more later.
Can foreigners buy land in Portugal?
Foreigners have no issues buying land, allowing you to buy a house close to the coastline if that’s your preference.
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 ocean view can cost equally much as a small apartment in Hong Kong.
The process when buying property in Portugal
The buying process has many similarities to Spain’s. Let’s have a look at the main steps included when you purchase a property in Portugal.
1. Getting a NIF number (Numero de Indentificacao Fiscal)
One of the first things you should do is getting a 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 Portuguese bank account.
Simply speaking, the NIF is comparable to the ITIN, which is required for non-resident property buyers in the US.
How can I get a NIF number?
The same as for Spain, you can get a NIF number if you visit a local tax office. If you decide to travel to Portugal looking for properties, this should be one of your first tasks.
Yet 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 visit Portugal.
Open a local bank account
If you intend to buy property in Portugal, you should open a local bank account. The process will become simpler and you’ll be able to pay for utility bills, for example.
A recommendation is to book a trip to Portugal and open a bank account when you arrived. At the same time, you can apply for a NIF number, check properties, meet your agent, property lawyer, and get to know the local market better.
The biggest and most popular banks are:
- Banco Portugues de Investimento
- Banco Comercial Portugues
- Novo Banco
- Caixa Geral de Depositos
Contact the banks before you leave your home country, to assure that you have up-to-date info and bring all documents needed.
Some banks allow you to open a bank account online. Contact a handful of banks and see what options you have.
What documents are needed to open a bank account?
If you’re a non-EU citizen, you must provide more information. Some of the documents needed 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 a non-EU citizen, you’ll need to have a Fiscal representative. A Fiscal representative has many roles and will prove that you’re capable of paying taxes in Portugal, such as VAT.
3. Find a property lawyer
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 lawyer, but sometimes, it can be better to work with a property lawyer that works independently from the agent.
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.
Ask your property lawyer for testimonials and case studies, preferably they should have helped other buyers from your home country. 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 the 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 time and money.
4. Find a real estate agent
You should find a real estate agent that can help you to scout and finalize 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 an AMI license.
This can be done at the INCI’s website. INCI is the institute that issues AMI licenses to the agents. Compared to Spain, you’ll have less risk of coming across unreliable agents in Portugal.
Real estate agent commissions
Real estate agent commissions typically range up to 5%. Rates are higher in Portugal 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. Find a notary
Notaries are commonly found in Southern Europe and countries like Italy, Spain, and Portugal (even if you have the option to hire one in some states in the US).
The same as for Spain, the notary will help with the transaction and manage legal parts of the process. One of their main duties is to act as witnesses when transferring the property in your name.
In Portugal, you’ll be required to hire a notary by law.
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 can be friends or relatives that 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 responsibilities 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
You must 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 can 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. Encumbrances, liens, or other problems with the property can reduce its value and need to be discussed with the seller if existing.
One option is that you negotiate down the price and manage the issues yourself, or that the seller fixes 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 are 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 proof that you’ve paid the deposit. You also need to bring the preliminary sales contract, that I explained earlier.
The bank will also inspect the property to make a final assessment of the mortgage to be offered.
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 needs to act as a witness.
After, your property lawyer will be able to transfer the property in your name to the Tax authorities and at the Land registry.
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 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.
Property tax (Immovable Property Tax, IMI)
The property tax starts from 0.3% for non-residents and can range up to 0.45%. Properties in rural areas are subject to a rate of 0.8%. Properties in more urban areas enjoy the lower rates stated.
Rental income tax (withholding tax)
The rental income tax is 15% and withheld by the tenant. The tenant is responsible to pay the tax to the local tax office.
Wealth Tax (AIMI)
The Wealth Tax was introduced in 2017 and is charged to investors that own property worth more than EUR 600,000.
Companies are charged a rate of 0.4% on the total value, individuals 0.7%, and owners of property worth more than EUR 1 million are charged 1%.
The rate progresses as follows:
- EUR 600,000 – No AIMI is payable
- EUR 600,000 to EUR 1 million – 0.7% on the value between EUR 600,000 and EUR 1 million
- Valued above EUR 1 million: 0.7% on €400,000 + 1 % on Value in excess of EUR 1 million
Capital gains tax
Non-residents pay a capital gains tax of 25%. This is quite a normal rate in Europe, but in places like Singapore and Hong Kong the rate is generally 0%.
If you re-invest money from the sales of a property, only 50% of the net taxable income will be subject to capital gains tax.
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, Portugal has introduced a so-called Golden visa, which made it possible for Asian property buyers to get long-term residency.
The minimum amount is set to at least EUR 500,000 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.
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.
Real estate agencies in Portugal
Below you can find some of the biggest real estate agencies available in Portugal.
ERA is a US-based, franchised property company that has been active in Portugal since 1998. ERA has around 200 offices and 2200 agents in Portugal, making it one of the biggest firms in the country.
The company primarily helps individual investors to find and acquire residential properties such as villas and apartments.
Portugal Property belongs to Berkshire Hathaway HomeServices, a website that focuses on educating prospective property buyers and help with investment services.
The company has 51,000 agents and 1,500 offices in the US, Canada, Mexico, Dubai, London, Spain, Italy, and Germany in addition to Portugal.
There are currently around 45 professionals that work in Portugal or elsewhere, helping investors to find units in Portugal.
Sotheby’s Realty PT
Sotheby’s Realty is a premium real estate agency located in dozens of countries worldwide. founded in 1744, is undoubtedly one of the oldest players in the industry.
In Portugal, they help investors to find units in Lisbon, Cascais, Porto, Vilamoura, Carvoeiro, and Madeira.
Sotheby’s typically helps foreigners to buy premium units that cost millions of US dollars. Having said that, they can also help you find units that cost as little as EUR 100,000.
Portugal Property Prices
Property prices have increased much in Portugal over the years thanks to its competitive prices. As late as 2018, the average price per square meter for houses was less than USD 1,200, which speaks for itself.
In the first quarter of 2021, prices increase by 17.4% compared to a year earlier, an astonishing number that has benefitted early investors. In 2020 overall, house prices increased 5.9%, reaching EUR 2,147 per square meter.
Portugal is one of a few countries that have seen such high increases during the pandemic.
Looking at demographics, around 35% of all property investors were foreigners in 2019. However, if you look at premium real estate priced above EUR 6,000 per square meter, as many as 59% are foreign investors.
Below I have included some commonly asked questions and my replies. Feel free to write a comment below if there’s anything else you wonder about.
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 buying 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, you must apply for a Portuguese residency visa or long-term visa before arriving.
2 Responses to “Buying Property in Portugal: The Ultimate Guide for Foreigners”
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