In Portugal, the property rights that can be acquired are the following:
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No, real estate property can be freely acquired by foreign investors.
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Yes. There are several mandatory pre-emption rights, such as:
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In Portugal, private property transactions are mainly ruled by the Portuguese Civil Code. However, certain provisions of tax law, registration law, public law and corporate law are also applicable.
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No. Generally, there is not a special set of laws for each of these types of real estate.
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Transfer of real estate can be executed through the execution of a public deed with a public or private notary or through an authenticated private document. Subsequently, the transaction should be duly registered with the relevant Land Registry Office.
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Yes. Real estate is subject to registry with the relevant Land Registry Office. Registration is reliable.
Yes. Transfers of title must be recorded with the Real Estate Registry and afterwards registered with the Portuguese Tax Authority.
No, title insurance does not exist in Portugal.
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Structuring a real estate transaction commonly requires several steps. Including:
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Yes. Due diligence is usually carried out by buyers, in order to obtain information regarding ownership, charges, encumbrances, tax debts, licenses, contracts concerning the property, and other contingencies and/or liabilities. Part of the relevant information can be accessed directly with public authorities such as Land Registry Office, Tax Services and Municipalities, but in most transactions sellers provide themselves the documentation required by the purchasers.
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Yes. Civil law requires special specific consents for certain transactions, such as the consent by a spouse (depending of marital agreements), by the legal representatives of a minor, by co-owners of real estate and by individuals or entities with pre-emption rights.
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An SPA can be executed as a public deed or through an authenticated private document, subject to some formal requirements, including the registration in the Land Registry Office.
In Portugal, the parties are free to structure the SPA as they wish and there is no standard form mandatorily imposed. In any case, the SPA provisions should include full and exact description of the property in terms of registration number with the Land Registry Office, number of registration with the Tax Services, reference of the relevant license and the full description of the all conditions of the business (price, payment, liabilities).
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Seller is obliged to provide several warranties. In fact, property must not suffer from any defect with a negative impact on the property's value or which makes its normal use impossible. In addition to that, the real estate must also have the characteristics warranted by the seller and be free from any charges, liens or encumbrances if the seller has expressly declared so in the transaction agreement. It should be noted that this sort of warranties may be expressly waived by the parties.
In case of breach of warranties the buyer is entitled to ask for a refund, a reduction in the purchase price or may file a legal action for the annulment of the sale and purchase agreement. In the new construction the buyer must provide notice of the relevant breach to the seller within one year counted from the date of discovery of the defects and within five years of the date the property was handed over to the buyer.
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In case of misrepresentation by the seller, the buyer can, depending on the circumstances, terminate the agreement or file a legal action for the annulment of the agreement, and claim reimbursement of the amounts paid with a indemnification.
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Relevant areas of public law are:
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Yes. The buyer of a property may be deemed responsible for soil pollution or contamination based on strict liability, even if he did not cause the pollution or contamination.
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Buyers should check the relevant territorial planning laws and relevant licenses, in order to confirm that all legal conditions are met for the development of a real estate project.
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Yes. Typically, these agreements provide for the developer’s obligation of transferring certain compensations, areas or infrastructures to the municipality, such as roads, public parking places, bridges, public gardens, etc.
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Due to reasons of public interest, expropriation can occur, but this procedure entitles the former owner of the real estate to receive a compensation from public authorities.
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When buying real estate in Portugal as an asset the following taxes may apply: municipal property transfer tax (imposto municipal sobre transmissões onerosas de imóveis or IMT), stamp tax (imposto do selo) and VAT (imposto sobre o valor acrescentado or IVA).
Municipal property transfer tax (IMT) will be calculated on the price of the transaction or on the VPT (value of the real estate assessed by the Portuguese Tax Authority), whichever is higher.
IMT is calculated using the following formula:
(Taxable value x Rate) – Threshold deduction = IMT to be paid.
IMT is charged at the following rates:
To discourage the purchase of real estate in Portugal through offshore companies, IMT is levied at a rate of 10% if the buyer is a company established in a country, territory or region with a preferential tax regime or when the acquirer is an entity dominated or controlled, direct or indirectly by a company established in a country, territory or region subject to a preferential tax regime. In these cases, no exemptions are made available.
IMT exemptions may be available with respect to the first acquisition of urban buildings or apartments used exclusively for residential purposes that are intended for be the buyer’s permanent residence when the buyer is under 35 years of age and does not hold any other real estate, properties purchased to be resold, or to be subject to rehabilitation works, subject to specific legal requirements.
The transfer of property is also subject to a flat rate of 0.8% of stamp tax. Stamp tax will be calculated on the price of the transaction or on the VPT, whichever is higher.
Although, as a rule, the transfer of property and shares in Portugal is exempt from VAT, a seller may waive the exemption if certain conditions have been met and they have complied with various formalities.
If the exemption is waived, VAT can be recovered in accordance with provisions in the Portuguese VAT code.
Notary's fees are also payable.
According to the current Notary's Fee Schedule, public deeds are subject to a fee of €175, regardless of the value of the sale.
Registration of the public deed in the Land Registry Office costs €9.
Some reductions in the fees may be allowed when rural property is transferred by inheritance.
With the privatization of the notarial profession and where a deed is more complex than expected, notaries may charge an extra fee proportionate to the amount of work involved.
The usual average fee (as scheduled plus the extra fee) amounts approximately €250, plus VAT at the legally applicable rate of 23%.
Other costs include the registration of the transfer with the local land registry office, but land registry fees and related stamp tax are limited and strictly set by law and should not amount to more than €250 for each registration.
The buyer is normally responsible for the transaction costs. The buyer is also responsible for the assessment and payment of IMT and VAT, when the VAT exemption has been waived. Stamp tax is paid by the buyer (who pays the notary's fees and the VAT levied on such fees) and is charged by the Portuguese Tax Authority before the public deed of transfer is signed.
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In the case of a share deal, as of 1 January 2021, IMT applies to the purchase of an equity position both in a private limited liability company (Lda.) and in a corporation (S.A.) which holds real estate assets located in Portugal if the following requirements are cumulatively met:
If the purchase of shares involves a privately placed closed-end Real Estate Investment Funds, the transaction is subject to IMT if after the acquisition the acquirer holds 75% or more of the units in the fund.
The buyer is responsible for the assessment and payment of IMT, as well as VAT if applicable. IMT must be paid before the deed is executed and the notary is obliged to confirm that it has been paid.
Stamp tax, where applicable, is paid by the buyer (who normally also pays the notary's fees). The buyer must present the payment proof to the notary at the moment of the transfer signature. The tax is paid through a payment reference issued by the tax authority (the buyer can issue the document in the tax authority website or request it in a tax authority service).
In addition, the acquisition of immovable property by means of reimbursement in kind of participation units on the liquidation of a privately placed closed-end real estate investment fund, is subject to IMT.
IMT also applies to a transfer of immovable property arising from a merger of privately placed closed-end real estate investment funds.
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Do buyers usually carry out due diligence?
Yes. Due diligence is usually carried out by buyers, in order to obtain information regarding ownership, charges, encumbrances, tax debts, licenses, contracts concerning the property, and other contingencies and/or liabilities. Part of the relevant information can be accessed directly with public authorities such as Land Registry Office, Tax Services and Municipalities, but in most transactions sellers provide themselves the documentation required by the purchasers.
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