Step 1: Reservation Agreement

When Finding a property and reaching a deal, a “Reservation Agreement” is prepared for both the buyer and the seller. This document describes the agreed terms and conditions but is not legally binding; simply expresses intention. Once signed, it is sent to the legal representative of each party. Subsequently, the buyer's lawyer performs due diligence on the property, ensuring that all documentation is in order and that there are no impediments or outstanding fees that will affect the sale of the property.

Step 2: The Promissory Contract (CPCV)

With due diligence, the Promissory Contract is prepared, usually by the purchaser's lawyer and sent to the vendor's lawyer along with the vendor-approved inventory list, for signature.

The Promissory Contract is signed by both the vendor and the buyer. It is the legally binding preliminary contract of sale and purchase and should be accompanied by a deposit from the buyer to the vendor. This transaction is usually 10% of the purchase price and is customarily made via the buyers' lawyer. Portuguese law penalises vendors who withdraw after the Promissory Contract has been signed requiring them to return double the amount deposited by the buyer.

Step 3: The Final Deed

The Final Deed is signed by both parties at a notary's office, effecting the transfer of property ownership to the buyer. Should either party be unable to attend, they can grant power of attorney to their legal representative. The remaining balance of the purchase price, along with associated taxes is settled, finalising the transaction. Subsequently, the new owners' details are registered in the Land Registry by their legal representative, and utility bills are transferred into their name.

The process of purchasing a property, in addition to the purchase price, has other associated costs, namely:

  • IMT: Property Transfer Tax - is charged when property ownership is transferred. It is paid prior to signing the final deed of sale.
  • Capital Gains Tax: is calculated on the difference between the purchase and selling price of the property.
  • Stamp Duty, Notary & Legal Fees: applicable to many bureaucratic processes and transactions. For a property purchase, the buyer will have to pay stamp duty at a rate of 0.8% of the sales price or tax asset value - whichever is the highest. As with IMT, the stamp duty is paid prior to the signing of the final deed.
  • Registration of the acquisition: in the Land Registry Office costs €250 and is usually actioned by the lawyer.
  • Notary fees: fixed by law and work on a sliding scale dependent on sale price.
  • Real estate fees. In Portugal, real estate commissions are typically 4 or 5%, plus 23% VAT, paid by the seller.
  • Legal fees: will vary depending on the value of the property and the complexity and scope: of the deal but are generally around 1-2% of the property price.
  • Flat IMT Rates: For properties with a tax asset value of over €1,102,920.00 a 7.5% IMT rate applies. For construction plots and other urban non-habitational properties, regardless of the purchase price a flat rate of 6.5% IMT rate applies. For rustic land a 5% IMT rate applies.
  • IMI: Municipal Property Tax. This annual tax is fixed by the local council and can vary from 0.3% to 0.45% in urban areas. IM is levied against the tax asset value of property, rather than market value.
  • AIMI: Additional Municipal Property Tax. This tax was introduced in 2017 and applies to the combined VPT (Valor Patrimonial) of all urban properties owned by an individual or couple. AlMI is only paid on anything over the value of €600,000 per person (so €1.2 million for a couple) when the following rates apply:
    • Between €600,000 to €1 million: 0.7% rate.
    • Over €1 million: 1% rate.
    • Over €2 million: 1.5% rate.

Garvetur assists you throughout the entire purchase process. Please contact 00351 289 322 488 or info@garvetur.pt