General information about the buying process in Portugal

The buying process in Portugal differs in some points from other foreign countries. It is therefore recommended that you contact a good real-estate agent, who will guide you through the process. Or if you buy direct from the owner contact a lawyer for the legal guidance. If you buy a property, listed by a real-estate agency, you do not pay any commission to the agency.



The steps to take when you buy a property in Portugal:

1) You have found your dream house. Better ask the opinion of your real-estate
  agent about the price and condition of the property. If it all fits, you put in an offer through the real-estate agent. A good agent can better negotiate with the owners, because they know their situation and have experience with negotiations. A counter offer can be expected from the owners. When you want to buy a newly build or off-plan project the price might not be negotiable. A good real estate agent can try to get for instance appliances or extras included. You agree with the vendor about the price, what is next?
   
2) You have a first meeting with a lawyer or solicitor. The first thing the lawyer does
  after this is obtaining your fiscal number “Numero de contribuinte” for you at the financial department of the ministry. For this a copy of your passport or identity cart is sufficient. Because you probably do not live in Portugal at that moment you would need some one to take the fiscal responsibility for you to apply for this card. Family or friends living already in Portugal can take this responsibility but better is even to do that through your lawyer. Be aware of companies in Portugal that ask high sums for this fiscal responsibility, so ask you agent for the right adresses.
   
3) It is recommended to then have a promissory contract drawn up by a lawyer.
  In Portugal a type of reservation contracts can be signed, but these often are between you, the buyer, and the real-estate agent, thus does not bind the seller. Your rights and obligations are better guarantied as a buyer, if you secure the property through a promissory contract. If the seller does not keep what is written in the promissory, the seller has to pay you double the amount of the deposit back, due to Portuguese law.
 
  In the promissory contract the following details should appear:
* The identification of the sellers and the buyers
* Details of the property, inclusive the registration at the land registry office,
  licence a.o. (see below 1; document necessary).
* The period of time, as to when you and the owner or builder can
  exchange the final contract.
* Whenever your apply for a mortgage, a clause can be put in the
  promissory, that if the mortgage is rejected, the deposit would be paid
  back to you and the contract is of no effect.
* That the property will be delivered, free of debts.
* Whenever you get inclusive or buy furniture/ equipment or extra works
  agreed upon with the owner, a list could be added to the promissory contract.
* When you buy through an official real-estate agency, this has to be
  mentioned with their name and licence number.
   
4) The deposit or downpayment in Portugal is in general 20% of the purchase price.
  It is most common that if you are on a house-hunting tour that you have no access to that amount at that moment. A smaller amount (whatever you can withdrawn with your credit card at that time) can be agreed with the owner. When you are back in your country, you can then transfer the rest of the 20% deposit to either the owner or to a client account of your lawyer. These details should be of course written down in the promissory contract. To transfer down payments to the selling real-estate agency should be avoided. Except when you have your own buying broker to complete on buying the property for you.
   
5) Between signing the promissory and the exchange of the contracts, it is best
  if your real-estate agent or your lawyer helps you opening up a Portuguese bank-account in your name. Among others this is useful to transfer the larger some of the purchase (80%= plus cost of buying) to your own account to pay for the exchange and deed etc. Usually a guaranteed bank check will have to be handed over, when signing the deed. Also the cost of buying (see point 8 and 9) can be then paid directly from your account. In Portugal regular bank checks are still available.
   
  To open up a bank account in Portugal in general you need to hand in copies of.
   
* Your passport or identification card.
* Your fiscal number, so called “numero de contribuinte” (see 2).
* Proof of address of your residency: a copy of an electricity bill or water
  bill of your current residency, is most common used.
* Some banks want to know what your profession is, so payslips or proof
  of self-employment can be asked for.
* Bank Forms need to be filled in and signed by the accountholder.
   
6) For a mortgage request in Portugal you need to supply besides the above
  documents (point 5) the following:
   
* Payslips from the last 3 months
* A statement from your employer with your position, salary and date
  when you started working there.
* Tax-declarations
* Bank statements from the last 3 months
* Recommendation letter from your main bank
   
  Whenever these documents are not in Portuguese, English or French, they have to be translated by an acknowledged translator or the Portuguese Consulate. If the bank is flexible, better wait with translations until you know more or less if the mortgage will be granted in order to save costs. The bank will verify if your income is sufficient, after that a pre-approval will be given. Then the bank hires an external specialised company, who would then go to evaluate the property. In general this estimated value by the “bank” is below the market value, this is for security reasons of the bank. This estimate will be at your expense and varies between 300 and 500 euros. Depending on more factors, the bank may grant you 60 % to 70 % up of the estimated value for your mortgage. Your age, your credit rating, the pay-off time and the bank commission will determine the monthly payments of your mortgage. The interest rates are connected to the Euribor and therefore most are variable. At the time of the deed, some-one from your bank would be there, also to hand out the bank check to the owners, in the amount of the mortgage.
   
7) If you are not able to come back personally to Portugal to complete on the
  purchase, a power of attorney “Procuração” can be used for completion. A representative, such as your lawyer, buying broker, or family member can sign on your behalf. The best and easiest way to make a power of attorney is while you are still here and it should be made by the local notary, where the deed will be also made. It is recommended to have a lawyer involved in doing this. You could also have a power of attorney drawn up by the Portuguese consulate or a notary in your country. There is still a chance then that the notary in Portugal does not accept the power of attorney from other countries or notaries, so better present the power of attorney previous to the deed, to the local notary to make sure you can complete on the sceduled date.
   
8) The property tranfer tax IMT= Imposto Municipal sobre Transmissão Onerosa de
  Imóveis “and the stampduty “Imposto de Selo” have to be paid before you do the deed. Your lawyer can make these payments or the preparations of it, at the local financial department. Both these taxes you pay only once, before the deed. In Portugal the buying costs are for the buyers, among others these taxes. But the costs for instance to actualize or obtain documents of the property (see attachment 1) are the responsibility of the vendors, and they pay for that. There are 2 tables for the “IMT” property purchase tax, this depends on if you move permanently to Portugal (at least 6 months plus one day) or use the house only for holidays. Look at the price range within the purchase price, and multiply the price with the percentage behind that price-range and subtract the amount behind that (last column on right side).

Property transfer Tax "IMT" for permanent residency

Price range Tax rate Deduction
Less than € 90.418 0% No deduction
€ 90.418 - € 123.682 2% - € 1.808,36
€ 123.682 - € 168.638 5% - € 5.518,82
€ 168.638 - € 281.030 7% - € 8.891,58
€ 281.030 - € 538.970 8% - € 11.701,88
More than € 538.970 6% No deduction
This table is in effect as of 29 th of April 2010

Property transfer Tax "IMT" for non-permanent residency

Price range Tax rate Deduction
Less than € 90.418 1% No deduction
€ 90.418 - € 123.682 2% - € 904,18
€ 123.682 - € 168.638 5% - € 4.614,64
€ 168.638 - € 281.030 7% - € 7.987,40
€ 281.030 - € 561.960 8% - € 10.797,70
More than € 561.960 6% No deduction
This table is in effect as of 29 th of April 2010

If you buy a plot of land the following property transfer tax apply, depending on the designation written in the land registry:

* For plots without urbane destiny purpose so called “Prédio rustico” the tax rate is 5%
* Plots of land with a commercial or urbane destiny “Prédio urbano” the tax rate is
  6,5 % of the purchase price.
* Mixed land “Prédio mixto” on the rustic part you pay 5 % tax and on the urbane
  part you pay tax, according to calculation in the above chart.

The Stamp duty “Imposto de Selo” is also paid to the state and is 0,8 % of the purchase price. Recently it has been changed that you have to pay the stamp duty also before the deed and not at the notary’s office afterwards.

9) In Portugal it is advisable to go to a notary to make the deed “Escritura”.
  They are the specialized professionals for these types of documents. Also licensed lawyers may exchange contracts, however there is a chance that this law would become revocable, as the notaries order is fighting the government in court. It is not recommended that the buyers and sellers use the same lawyer, due to possible conflict of interest Your lawyer and / or the lawyer from the vendors deliver all necessary documents (See attachment 1) of the property in advance to the notary. The notary reads the deed first in Portuguese. If you do not completely understand Portuguese you can have your lawyer or buying broker do the translation afterwards in a language that you fully understand. When sellers, buyers or representatives  sign the deed, a guarantied bank check is handed to the owners and you get the keys of your new home. The notary itself costs between 200 – 500 euro, it differs from notary to notary and depends if you have taken on a mortgage in Portugal.
   
10) After the deed the last important step in the buying process is to have the property
  registered in your name at the land registry office. At the local land registry “Conservatorio de Registo Predial” you have to be registered as the new owners. When you obtained a mortgage this also will be registered here. Therefore this is the most important document of the property (see attachment 1 about the contents of this document). If some one else has the fiscal responsibility temporarily (see point 2) and you come to live here permanently, then you have to change the address at the finance department “Finanças”as well. If you come to live in Portugal permanently (mimimum of 6 months and 1 day), you can apply for exemption of the yearly property tax the so called “IMI” = Imposto municipal sobre Imóveis”. This only applies if you are buying your first property here in Portugal.

Because of all the documentation needed, the buying process in Portugal is a secure procedure. If you op to build a new house in stead, the process can be long to obtain all the paperwork needed, see below.

When you want to buy a plot of land, it is recommended to ask for a written confirmation of the local council with the permission that you can build on it. The laws and building planning (PDM) per council in Portugal can varie from district to district.

It is therefore recommended that you are being advised and helped by the right people such as your buying broker or lawyer.

Documents concerning the property.

The notary verifies before and during the reading of the deed (see point 9), the following original documents concerning the property.

* “Certidao de Conservatoria de Registo Predial is the inscription at the local land
  registry office (see point 10). This important document has namely the names of the owners and states if there are debts like mortgages on the property. It also states data like: the size in m2 of the building and the land, the address of the property and its destiny (rustico / urbano). The number of the inscription and the council in which it is situated, will be written in the deed and the promissory.
* “Caderneta Predial” is issued by the finance department (Finanças) and contains
  data like, sizes of the property, the address, the boundaries, the year of inscription and the patrimonial value.
* Houses build or rebuild after 31 of December 2003 must have a technical description
  the so called “Ficha tecnica de habitação”. This stack of papers states the data of the building, which materials and suppliers a.o are used (= the identity card of the construction)
* Houses build after 1951 must have a habitation licence “Licença de habitação or
  utilização, which is issued by the local council after they have inspected the house, once completed. Houses build before 1951 should have a document from the local council with the exemption of this habitation licence.
* Since January 2009 houses need to have an energy certificate
  “Certificado energetico” for the deed. In this document a scale (from A till E) is applied for the properties energy level. You might recognise this from fridges etc.
* The notary archives the proof of the payment of the property transfer tax “IMT”
  (see tables at point 8) IMT stands for “ Imposto Municipal sobre Transmissão Onerosa de Imóveis“.
* Also the proof of the payment of the stampduty “Imposto de Selo” will be archived
  at the notary. As in point 8 mentioned this tax is 0,8% on the purchase price.
* Passports or identification card and the fiscal numbers (see point 2) from the buyers
  as well as the sellers will be verified by the notary and the names and numbers will be written in the deed.
* If there is a power of attorney “Procuraçao” for either buyers or sellers, this document
  has to be presented and the identification of the representative will be written in the deed.
* If you have been granted a mortgage by a Portuguese bank, then the so called
  “Minutas” with the terms and conditions on the mortgage will be signed by you and the representative of the bank and added to the deed.

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