Good reasons to buy a property in Portugal
Buying a property in Portugal is a solid investment. Every area has a great rental potential and Portugal stays in high demand, all through the year. If you buy as a foreigner the process is quite simple. There are no restrictions
for foreigner people to buy a house in Portugal. All you need is a VAT identification number, known as a ‘número de identificação fiscal’ (NIF) or número de contribuinte in Portugal. Anyone can get this by opening a Portuguese bank account or through a tax office. But you better use our full service in real estate because Portugal has amazing bureaucratic systems. Warning;-) To get things done, you must have lots of patience. Be prepared that once your decision to buy a house in Portugal is made, you activate the ‘Portuguese turtle process’; Steady going but slow.
Advantages to buy in Portugal
The climate is warm and the people are happy. At least, they look happy! Maybe that’s because in 2019, Portugal was ranked #4 of safest country in the world. That’s a big plus.
Many from around the world’s want to get the Portugal Golden Visa and obtain residence as well as citizenship after six years. If you are OK with your current residency and just want to enjoy Portugal, you can spend more: the cost of living is lower than in other Western countries.
Although English is not an official language in Portugal, Portugal ranks in 7th position in the 2021 Education First English Proficiency Index.
Portugal ranks higher than South Africa, a country where English is an official language. Yes, people in Portugal speak English very well indeed, and you will not face any language barrier unless you are in the backlands and speaking with older generations.
Due to the country’s cultural and historical significance, Americans are becoming more accepting of Portugal. Its beautiful coastline, up-and-coming tech scene, and summer sun are drawing comparisons with California.
In 2016, the biggest tech festival in the world, Websummit, relocated to Lisbon. There are also plenty of tech companies and startups in the country. Many young professionals and digital nomads are starting to consider Portugal as their next destination.
In Portugal, there’s plenty of sports to choose from, such as golf, tennis, and water sports. The country’s residents are also passionate about being outside, and there are numerous clubs that are dedicated to providing their members with the best possible experience.
The mild winters are a major advantage to Portugal, as temperatures rarely drop below freezing in most areas. The only place where there is snow are the Estrela mountains. During the summer season, the country’s weather is warm and dry, and it’s filled with beautiful beaches and natural beauty. There are also numerous national parks that are perfect for hiking and experiencing the wonders of nature.
If you’re looking for a place where you can try water sports, then Portugal is the ideal choice. The country is known for its beautiful coastline and is also a top surfing destination. There are numerous international competitions held in the country, where some of the world’s best surfers compete.
Portugal’s healthcare system is very robust, and anyone who lives there can access the necessary medical care. Healthcare costs in the country are lower than those in the US, making it very affordable even if you don’t have a lot of money.
Although the public healthcare system is very good, you’ll still have to pay an additional fee for certain procedures. However, if you’re looking for a more affordable option, then private healthcare can be a better choice. In addition to being able to make appointments faster, private healthcare can also help decrease the wait times.
Contact us for a new property in Portugal
We are present with our local partners In Lisbon, Porto and the Algarve to find your second or residential home. Invest in the best life in Portugal and buy an apartment or a villa with a pool. Email [email protected] or WhatsApp +33770186203 for a personal selection and full-service guidance.
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The best areas to buy a house in Portugal
The city of Cascais is known for its high real estate prices. This municipality in Portugal’s Riviera has a coastline that’s well-known for its numerous beaches. The area is also full of shops and restaurants.
This old summer home of Portugal’s Royal Family is known for its clean parks and excellent public schools. It’s also a great place to raise a family due to its high IMI. The city has plenty of infrastructure, which can be seen in its public transportation system.
Photo by Jeroen van den Otter (Unsplash)
The beautiful region of the Algarve is known for its warm weather and best seawater. It’s also a great place to retire due to its 300 days of sunshine a year. There are plenty of private and public schools in the area, as well as international schools. The region has a wide range of real estate options.
Photo by Paula Sotomayor (Unsplash)
Individuals and companies from all around the world have been investing in the real estate market of Lisbon. Due to its high prices and quality of life, it’s not a cheap place to buy. However, you can still find affordable homes in other areas. Lisbon is also a great place to raise a family due to its excellent public schools and reasonable transportation.
Photo by Aayush Gupta (Unsplash)
Situated 280 kilometers away from Lisbon, the city of Porto is a great place to invest. It’s known for its beautiful weather and low cost of living. It’s also a great place to raise a family due to its low crime rate and efficient transportation system. Over the years, Porto has attracted a large international community.
Photo by Nick Karvounis (Unsplash)
On the run for high prices in the other areas of Portugal, such as Porto, Lisbon, and the Algarve, we have good news. Alentejo is still a great alternative. It’s not as oversaturated with tourists as these other regions. The region features beautiful coastlines and dry areas that are ideal for farming.
Photo by Antonio Mendes (Unsplash)
Can you buy a house for Portuguese residency?
Does buying a house in Portugal give you residency? It could! It depends on your financial situation, nationality, time spent in the country, and other requirements. EU citizens can do this without a problem. But if you live outside the EU, you can buy a house in Portugal to obtain residency using the Portugal Golden Visa.
How to get a mortgage as a foreigner in Portugal
Although being a foreigner usually does not influence buying a house in Portugal, it does when it comes to getting a mortgage. If you are not a resident, this impacts how much you can borrow. Non-residents will only be offered loans up to 65-75% of the home’s value or the sale price (whichever is lower), while fiscal residents can borrow up to 90% of the sale price (whichever is higher).
Most banks will also not allow your existing debts and your new mortgage payments to go over 35% of your monthly income. Portuguese banks usually give you a mortgage for 25 years, sometimes up to 30.
So, how much does a mortgage cost you in the long run? The average mortgage rate in Portugal is now less than 1%, which is extremely low. In 2013, the mortgage interest was more than 3%. There are also mortgage-related fees that you might need to pay:
• Deed registration: 1%
• Mortgage arrangement: 1%
• Mortgage administration: 1%
• Non-refundable commitment fee: around €600
• Survey and appraisal: €500–€800
• Legal fees (optional): at least €1,000
You’ll also need to gather the following documents to apply for a Portuguese mortgage:
• Current proof of residency
• Proof of income
• Documentation of existing rent, mortgage and debt obligations
• Bank statements (last 60 days)
• Proof of deposit (last 60 days)
• Property details (Contract, property plan, or more)
Opening a Portuguese bank account
You will need your NIF number to open a bank account in Portugal. To open a bank account, you must also have a valid ID (passport), proof of address (utility bill in your name), and proof of employment. Some of the top banks in Portugal are Millennium BCP, Novo Banco, Banco BPI, and Banco Santander Totta. You will also need to present a deposit in many cases, and, for some banks, you will need to have a Portuguese phone number.
How much tax do you pay to buy a house in Portugal?
Beyond admin costs and legal fees, property owners must pay the government certain property taxes. You’ll need to calculate each of them, which a Portugal property tax calculator is helpful with. Property owners have to pay three types of taxes:
1. Municipal Property Tax (IMI)
The IMI translates to Imposto Municipal Sobre Imóveis and will be different in each municipality. This money is used to maintain public infrastructures in municipalities. The IMI rates usually range from 0.3% to 0.45%. To calculate the IMI, you multiply the value of the tax asset by the IMI rate. You must pay the IMI every year. For example, if your property is valued at €500,000 and you live in the municipality of Cascais with a rate of 0.34%, your yearly IMI is €1,700. You can be exempted from the IMI if your annual taxable income of the whole household does not surpass €15,295.
2. Property Purchase Tax (IMT)
The IMT is also the Imposto Municipal Sobre as Transmissões Onerosas de Imóveis. This tax is paid when a house is bought in Portugal, so it is a one-time payment for purchasing a house. The rate of the IMT will depend on the type and value of the property, as well as whether this property is a principal or secondary residence. You must pay for this before you buy a house. This is how you calculate the IMT = value of the deed or net worth tax (the more significant amount) x rate – tax reduction. You won’t have to pay IMT if you buy a house in mainland Portugal and the price doesn’t exceed €92,407. IMT usually will range between 2% to 8%, depending on the case. However, properties acquired by companies in a “blacklisted jurisdiction” pay 10% for IMT.
3. Tax on Stamps (IS)
You’ll also need to pay an Imposto de Selo, a stamp tax, contracts, loans, documents, and more. The rate also changes depending on the property and task, but it is usually between 0.4% and 0.8%. For example, for a mortgage of five years, the stamp duty tax is 0.6%.
Can you purchase a house in Portugal with crypto?
Portugal treats cryptocurrency as a currency, making it exempt from VAT and capital gains. That’s consistent with its policy on other currencies: Portugal does not tax the gain on the value or sale of any currency. The Portuguese Tax & Customs Authority (PTA) has announced that buying or selling cryptocurrency in Portugal is tax-free. So, Portugal is becoming one of the most crypto-friendly countries in the world.
To pay with crypto is still uncommon, but people purchasing properties with Bitcoin, Dogecoin, Ethereum, and Cardano in Portugal is possible.
The tax agency cited Article 135 (1)(e) of Council Directive 2006/112/EC, which exempts “transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, except collectors’ items, that is to say, gold, silver or L 347/28 EN Official Journal of the European Union 11.12.2006 other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest” from VAT. You will not be charged VAT or Personal Income Tax (IRS) as an individual. However, businesses that provide services related to cryptocurrency are taxed on their gains.
Unique tax benefits for French pensionados
In Portugal, the tax climate is particularly advantageous in terms of property, low-income and wealth tax, and the absence of inheritance tax. For retired expatriates from France, the Portuguese government offers a tax exemption for ten years from the first installation, with the primary condition of residing on Portuguese soil for at least six months of the year. However, you will have to pay taxes on your pension income after ten years.
For expatriates who have the non-habitual resident status, they benefit from a low-income tax cost, a cost generally lower than that they have on French soil. The Portuguese tax administration appeals to many ex-pats: they greatly appreciate their new tax status. Warning, do not move to Portugal solely for the advantages of this tax system and to have the sole ambition of being a tax resident with economic interests.
Portugal Golden Visa, still valid?
Since January 2022, you cannot purchase real estate in Lisbon, Porto, and coastal towns. Only properties in Azores and Madeira, as well as interior territories, are now eligible for the Portuguese Golden Visa, as these are low-density areas. Although Porto and Lisboa are the most common places to purchase property, other areas like Braga are also great investments.
Keep in mind that if you want to qualify for a Portugal Golden Visa, you cannot get a mortgage from a Portuguese bank to invest in property. The Portugal Golden Visa allows non-EU citizens to qualify for a residency permit (and eventually citizenship) if they invest in the country, such as buying a house. Created in 2012 to boost foreign investment, the Portugal Golden Visa is one of the most attractive in the world. With a Portugal Golden Visa, you can live in Portugal and travel within most European countries without an issue. However, you do not need to live in Portugal to be eligible for this visa. All you need to do is to stay in the country for at least seven days in the first year and 14 days in the subsequent years.
Top Benefits of the Portugal Golden Visa
• Visa exemption: The Portugal Golden Visa allows you to enter Portugal and the Schengen area (26 EU Countries). You can travel freely without requiring a visa, essentially granting you the travel privileges of European Union citizens.
• Stay in Portugal: The visa grants you the right to live, study and work in Portugal as if you were an EU citizen.
• Family reunification: The program includes family reunification, meaning that a spouse, minor children, children over 18, children over 18 who are studying, and parents who are financially dependent on the investor are all granted the same rights. They can all live and work in Portugal, travel freely within the Schengen area, and enjoy all the visa benefits.
• Permanent residence: The investor can apply for permanent residence if they follow all the requirements and complete the five years.
• Citizenship: After legally residing in Portugal for at least six years, the investor can apply for Portuguese citizenship and potentially obtain a passport.
• Tax incentives: You will not be faced with any tax responsibility unless you become a tax resident, meaning you spend more than 183 days of the year in Portugal. If so, under the Portugal Gold Visa, you can follow the Non-Habitual Resident (NHR) tax regime, where you transfer your tax residency to Portugal. One benefit of this tax regime is a 10% flat rate tax for pensions, which can only be taxed on your worldwide income after the first ten years of residence.
Contact us for an existing property in Portugal
We are present with our local partners in Lisbon, Porto and the Algarve to show you stunning properties. Contact us via mail [email protected] or WhatsApp +33770186203 for a personal selection and full-service guidance.