Buying a Property in Portugal

1. The Starting Point
Once you have found a property that you want to buy, it is common practice to make the seller an offer through your estate agent. Once a price is agreed upon between the parties, you should appoint a lawyer to guide you through the buying process and sign a Promissory Contract as soon as possible. The whole purchasing process can take between a week or some months, depending on how quickly you and the seller wish to proceed and whether all the necessary paperwork is in order.

2. The Promissory Contract (Contrato Promessa de Compra e Venda)
The Promissory Contract is a legally binding contract signed between the seller and buyer and includes the following information:
•  Identification of the parties;
•  Identification of the property;
•  Stage payments;
•  The standard penalty clause;
•  What is included in the purchase, e.g. furniture, golf membership, etc, in the form of an attached inventory list;
•  Completion date.

On the day the Promissory Contract is signed, the buyer (either directly or through their appointed lawyer) pays the seller the agreed deposit (normally between 10% and 20% of the purchase price).
The Promissory Contract protects the buyer and the seller, in that if the seller withdraws from the contract they are required to return the deposit in double to the buyer, whilst if the buyer withdraws from the contract, the seller is entitled to keep the deposit.

3. The Portuguese Fiscal Number (Número de Contribuinte or Número de Identificação Fiscal)
Before you are able to purchase a property and open a bank account in Portugal, you need to obtain a Fiscal Number from the local tax office (Autoridade Tributária e Aduaneira). To obtain this number, you will need a valid passport and a document which proves your residence (driving license, German Identity Card, etc.).

4. The Deed of Purchase and Sale (Escritura de Compra e Venda)
The Escritura is the official Deed of Purchase and Sale and can either be signed straight away, without a Promissory Contract being signed before or after the latter was signed. There is usually a period of time between these contracts, which depends on the terms agreed between the parties, although it is normally not more than 90 days.
After the Deed has been signed in front of a Portuguese Notary, your lawyer will register the property in your name at the Land Registry (Conservatória do Registo Predial) and change all utility contracts from the previous owner(s) into your name. Registration at the Tax Office (Autoridade Tributária e Aduaneira) is nowadays automatically done by the notary.

5. Your Lawyer’s Duties
In Portuguese law, an attorney-at-law is known as advogado. His or her job equals that of both solicitors and barristers.
It is normally the buyer’s lawyer who prepares the Promissory Contract after carrying out all the necessary legal searches on the property and after making sure that the property has no debts, i.e. that there are no outstanding charges against the property, such as utility bills, taxes, mortgages, condominium fees, amongst others. Your lawyer will also help you obtain a Portuguese fiscal number.
As long as you give your lawyer Power of Attorney (Procuração), he/she can represent you and sign the Promissory Contract and the Deed on your behalf, as well as any other documents directly or indirectly related to the purchase of the property.
After the Deed has been signed, your lawyer will register the property in your name at the Land Registry (Conservatória do Registo Predial) and change all utility contracts from the previous owner(s) into your name.

6. Legal Expenses
Some lawyers charge a fixed rate for their work (minimum 800€ + VAT), whilst others charge a percentage of the purchase price, which can go up to 1.5%.

7. Real Estate Transfer Tax – IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis)
This tax must be paid by the buyer prior to completion, i.e. prior to the signature of the Deed. The amount payable varies according to the purchase price. Up to a purchase price of 550,836.00€, the percentage is variable on a sliding scale up (from 1% to 8%). If the purchase price is higher than 550,836.00, there is a fixed percentage of 6%. The applicable IMT tax for plots or properties within a tourist complex is always 6,5%. The IMT tax is slightly higher for second homes than for permanent homes. Your estate agent and your lawyer will be able to provide you with an exact simulation.

8. Stamp Duty, Notary and Registration Fees
These need to be paid by the buyer as well. The Stamp Duty is currently 0.8% of the purchase price and can either be paid together with the IMT tax or at the notary where the Deed is signed. Notary fees vary according to the purchase price. Registration fees apply when the new owner(s) are registered at the Land Registry and are currently 225€ (online) or 250€ (Land Registry).

9. Estate Agent’s Fees
In Portugal, these are generally paid by the seller.

10. Corporate Ownership
Some properties are owned by companies which offer you the possibility of buying the company instead of the property. Most of these companies have their domicile in Delaware, the U.S.A., and although some properties may also be owned by Portuguese companies, this is rather seldom.
The purchase of a company located in a jurisdiction with a more favourable tax regime, such as Delaware or Malta, usually involves the purchase of the seller’s ‘beneficial interest’ in the shares of the company, rather than the actual shares themselves.
Most of the companies are set up using nominee shareholders, who are the registered owners. They, in turn, hold the shares or share capital, in trust for the true owner. The company administrators will also provide directors and other company officers and take care of all the legal requirements of filing returns and preparing accounts, which may be necessary for certain jurisdictions.