If you’re the kind of person who likes to know exactly what you’re getting into, this article is for you. It offers essential information and practical advice about the bureaucratic side of buying property in Portugal.
Learn everything about buying property in Portugal—from the types of real estate contracts to tax obligations like IMT, IMI, and Stamp Duty. Avoid legal pitfalls with our expert guide.
Common Contracts
There are three main types of contracts that typically arise in Portuguese real estate transactions.
1. Promise Contract (Contrato de Promessa)
Let’s start with the most important one, and possibly the most misleading. The final binding contract between a buyer and a seller is known as a “Promise Contract” (Contrato de Promessa). Many foreign investors mistakenly believe this is just a reservation agreement. In reality, it’s much more serious.
The usual structure includes:
- If either party defaults, they are typically required to pay double the deposit amount to the other party.
- A percentage of the total amount paid upfront as a deposit.
- A fixed time frame for the registry of the transaction.
2. Hold Contract (Contrato de Reserva)
This is a lighter form of agreement where the property is temporarily taken off the market, usually for 1–2 months. The potential buyer pays a small holding amount—generally between €1,000 to €5,000. Most importantly:
- These contracts can be annulled without penalties if the property ends up not being up to the desired standards.
- The holding deposit is refundable under those conditions.
3. Real Estate Agency Contract
These contracts here are usually made with the buyer. Some key points:
- Contracts may be exclusive or non-exclusive.
- The agency is entitled to a percentage of the sale price, typically 5%, but ranging from 3% to 7% depending on the agreement.
- All commissions are subject to a 23% VAT.
⚠️ Important Note: If you’ve signed an exclusive contract, the agency is entitled to their commission even if you sell the property independently during the contract period (usually 6–12 months).
Agency fees can be claimed as deductible expenses on your IRS declaration. Depending on your income, you might even receive a partial tax refund. Typically, the commission is already included in the listed price of the property.
🛡️ Legitimacy Check: All agencies and agents must have an AMI license. This license number should appear in contracts and listings.
Taxes & Fees
There are three key taxes related to property transactions and ownership in Portugal. As a buyer, you’re responsible for all three. Two are paid during purchase, and one is annual.
1. Imposto de Selo (Stamp Duty)
This is pretty much an outdated but still-enforced tax applicable to nearly every official transaction in Portugal. For real estate:
- It has a flat rate of 0.8% of the sale price.
- It’s paid at the time of registry, along with the IMT.
✅ Note: This is one of the immediate costs associated with buying.
2. IMT Imposto Municipal sobre Transmissões Onerosas de Imóveis)
IMT is the transaction tax, it’s always triggered when changes on ownership take place, it is calculated based on the value of the property.
There are two property values to understand:
- Estate value (valor patrimonial), which is assessed by Finanças based on original construction values and depreciation, not current market demand.
- Transaction value (what you pay)
In secondhand properties the estate value is usually significantly lower than the transaction value. This happens because the estate value is calculated by “Finanças” (governmental financial regulation entity) based on the appreciation made when the construction took place and then automatically devalues over time but does not take into consideration the location demand value. Property owners can request a reevaluation of the property, but this rarely happens because it is not advantageous (as taxes are calculated based on that value).
This distinction is relevant for buyer too because IMT is calculated based on the higher amount (so, usually the transaction value). And IMI is always calculated based on the estate value.
IMT has to by paid when the transaction contract is made (on an official government authorized organ), its amount depends not only on the value of the property but also on the use the property is destined for.
IMT Rates for 2025
The IMT rates for 2025 have been adjusted by 2.3% compared to the previous year. The rates vary depending on the property’s purpose (primary residence, secondary residence, or other) and its value.
🏠 Primary Residence (Main Home) – 2025 IMT Rates
| Property Value (€) | Marginal Rate (%) | Effective Rate (% at upper limit) |
|---|---|---|
| Up to 104,261 | 0% | 0.00% |
| 104,261 – 142,618 | 2% | 0.54% |
| 142,618 – 194,458 | 5% | 1.73% |
| 194,458 – 324,058 | 7% | 3.84% |
| 324,058 – 648,022 | 8% | — |
| 648,022 – 1,128,287 | 6% flat rate | — |
| Over 1,128,287 | 7.5% flat rate | — |
🏘️ Secondary Residence or Rental Investment – 2025 IMT Rates
| Property Value (€) | Marginal Rate (%) | Effective Rate (% at upper limit) |
|---|---|---|
| Up to 104,261 | 1% | 1.00% |
| 104,261 – 142,618 | 2% | 1.27% |
| 142,618 – 194,458 | 5% | 2.26% |
| 194,458 – 324,058 | 7% | 4.16% |
| 324,058 – 621,501 | 8% | — |
| 621,501 – 1,128,287 | 6% flat rate | — |
| Over 1,128,287 | 7.5% flat rate | — |
IMT Exemptions and Reductions
You may be eligible for a full or partial exemption from IMT in the following cases:
- Purchase of property for resale by licensed real estate companies.
- Acquisition of urban properties designated for or undergoing urban rehabilitation.
- Transfers under corporate restructuring or cooperation agreements.
- Properties officially classified as of national, public, or municipal interest.
- Acquisitions considered significant investments under the Investment Support Tax Regime (RFAI).
- First-time home purchases (up to €324,058) for personal residence by buyers aged 35 or younger, not claimed as dependents for tax purposes in that year. For properties priced between €324,058 and €648,022 under this youth benefit, an 8% IMT marginal rate applies.
3. IMI (Imposto Municipal sobre Imóveis)
IMI is an annual tax any property owner pays to the corresponding town hall. You can be exempt from it but usually only for a few years. It is calculated based on the estate value of the property. The estate value is calculated by “Finanças” (governmental financial regulation entity) based on the appreciation made when the construction took place and then automatically devalues over time, so it is usually lower that the actual purchase value, and that is good.
✅ Exemptions: Some buyers (especially first-time owners or in rehabilitation zones) may be exempt from IMI for a few years.
Need Help or Have Questions?
If you have any questions or wish to consult with anything don’t hesitate to ask, we have a legal advisor and will investigate further if necessary. Feel free to contact us anytime, links on footer.
Hope this article was helpful, any questions you might have feel free to contact us! We are always available at contact@savvycatrealty.com if you need any assistance 😉
Frequently Asked Questions (FAQs)
1. What is a “Promise Contract” in Portugal and why is it important?
A Promise Contract (Contrato de Promessa) is a binding pre-sale agreement between a buyer and seller. It involves a deposit and outlines terms for finalizing the sale. If either party backs out, they may be liable to pay double the deposit amount.
2. Can I cancel a Hold Contract without losing my deposit?
Yes. Hold Contracts (Contrato de Reserva) are designed to temporarily take a property off the market. If the property doesn’t meet agreed standards during due diligence, the buyer can cancel the contract and get their deposit (usually €1,000–€5,000) refunded.
3. How much is the real estate agency commission in Portugal?
Real estate agency commissions typically range from 3% to 7%, plus 23% VAT. The most common rate is 5% + VAT, and this is usually already included in the listed property price.
4. What is IMT and when do I pay it?
IMT (Imposto Municipal sobre Transmissões) is a property transfer tax based on the higher of either the transaction price or the estate value. It must be paid when the final purchase contract is signed. Rates vary based on the property’s use and price.
5. Are there any IMT exemptions available to buyers?
Yes, several exemptions exist. These include purchases in Urban Rehabilitation Zones (RU), long-term rental programs (FIIAH/SIIAH), foreclosures, and culturally protected properties. Some exemptions also apply during company restructurings or inheritance settlements.
6. What is IMI and do I have to pay it every year?
IMI (Imposto Municipal sobre Imóveis) is an annual property tax paid to the local municipality. It is based on the estate value rather than the market price. Some buyers qualify for temporary exemptions, particularly in rehabilitation areas or for first-time homeowners.
