The pros and cons of living in Portugal: sun, ocean and “saudade” for every day

Buying a flat in Portugal means taking a step towards life in one of the most colourful and welcoming countries in Europe. Portugal beckons with its mild climate, rich history, delicious food and magnificent nature. From picturesque mountain landscapes to the lively urban rhythm of Lisbon and the quiet corners of the Algarve, there is something for everyone.

Peculiarities of the property market in Portugal: why here?

The Portuguese property market continues to gain momentum, and for good reason. Firstly, the country offers one of the most favourable rental income schemes in the world. The average growth in property values here is 3-4% per year, which makes Portugal attractive to those looking for a reliable way to invest their capital. Tax incentives for new owners and the possibility of a Golden Visa for investors are also key advantages.

Step-by-step instruction: how to buy a flat in Portugal

The first step in buying a property in Portugal is to determine your goals and budget. Decide whether you need the property for permanent residence, seasonal holidays or rental income. For example, flats in Lisbon cost from 3 500 euros per square metre, while in the Algarve – from 2 500 euros per square metre. These prices allow everyone to choose the right option. The best places to rent are in popular tourist areas, such as Lisbon and the Algarve, where renting can bring an income of up to 10-12% per year.

Selection of region and type of facility

Portugal offers different housing options depending on preferences. Lisbon offers the most rental investment opportunities, while Porto is suitable for those who value a quiet lifestyle. It is important to take into account that the cost of metres also depends on the infrastructure: for example, apartments with an ocean view will be more expensive in the Algarve. It is also worth paying attention to the proximity to transport, schools, hospitals and other infrastructure, which significantly increases the value of the property.

Working with an agent

Look for a professional who knows the market. Hiring an experienced agent is an important step as the agent will help you avoid pitfalls and suggest the best properties to suit your budget. Portuguese professionals usually charge a commission of 3-5% of the transaction value. Agents can also help with document verification and legal clearance of the property, which is critical to avoid fraud.

Document preparation

In order to buy a flat in Portugal, you will need to obtain a taxpayer identification number – NIF. You will also need documents proving your financial solvency, such as a certificate of income. The NIF can be issued at the local tax office or through the consulate. It is also necessary to provide bank statements confirming the availability of funds for the purchase, and a certificate of absence of debts. All documents must be translated into Portuguese and notarised.

Closing the deal

At the first stage, a preliminary contract – Contrato-Promessa de Compra e Venda (CPCV) – is concluded, in which all the terms and conditions of the transaction are stipulated. The deposit is usually 10-15% of the value. The notary then draws up the final contract of sale, which guarantees the legality and transparency of the procedure. Notary costs are about 1-2% of the property value. It is also necessary to pay property transfer tax (IMT), the rate of which varies from 1% to 8% depending on the value of the property.

Secondary housing or new buildings

What to choose:

1. Secondary housing in Portugal is usually located in historic neighbourhoods and offers a unique atmosphere. However, it is important to bear in mind that renovating such properties can be a significant expense. For example, the average cost of renovation is 500-1,000 euros per square metre, depending on the condition of the building and the materials chosen. In addition, such flats often require modernisation of water supply and heating systems.

2. New buildings are an opportunity to live in modern and energy efficient housing. The cost of new buildings in Lisbon starts from €3,500 per sq.m., and buyers can often take advantage of convenient instalment schemes from the developer. There are also swimming pools, car parks and gated communities to add to the level of comfort.

Mortgage in Portugal: what do foreigners need to know?

Portuguese banks are open to co-operation with foreign buyers, and a mortgage for a flat in Portugal is available even for non-residents. Banks require a down payment of 20-30% of the cost of housing, and the average rate is 2.5-3.5% per annum. The maximum loan term is usually 30 years, but it may depend on the age of the borrower.

The stages of obtaining a mortgage:

1. Pre-approval. Before you start looking for a flat, get bank approval for a mortgage. This will make the buying process much easier and help you plan your budget more accurately.
2. Documents. You will need bank statements, proof of income for the last two years, as well as NIF and pre-sale agreement. You will also need a property valuation, which will be carried out by a licensed valuer.
3. Mortgage formalisation. The bank will carry out an appraisal of the selected property to ensure that it is of market value, after which a mortgage agreement will be drawn up. Please note that the bank may require additional insurance policies such as life and property insurance.

Lisbon, Porto and the Algarve

Where is the best place to buy a flat in Portugal?

1. Lisbon. It is the capital and cultural centre of the country. Buying a flat in Lisbon means getting access to all the benefits of civilisation: universities, hospitals, business centres and excellent transport infrastructure. The neighbourhoods of Alfama and Bairro Alto are particularly popular, as they retain the traditional atmosphere of the city and offer many opportunities for renting out accommodation to tourists.

2. Porto. The city is known for its wine production and historical atmosphere. Here you can find more affordable housing options – an average of €2,500 per square metre. Porto is also famous for its unique views of the Douro River and its bridges, which create a special atmosphere. Neighbourhoods such as Foz do Douro are popular with those who want to live closer to nature and the ocean.

3. Algarve. The best choice for those who want to live by the sea. Properties are often purchased here for holidays, as well as for investment purposes to rent to tourists. Prices for flats start from 2,000 euros per square metre and the climate and nature make the Algarve an ideal place to live. Albufeira and Lagos offer plenty of options with ocean views and access to beaches.

Conclusion

Buying a flat in Portugal means choosing a country where quality of life, comfort and tradition are valued. Favourable conditions for foreign investors, affordable mortgage programmes, stable growth in property prices and a high level of security – all this makes Portugal an excellent choice for those looking for a second home or a reliable investment.

In addition, obtaining a Golden Visa grants the right to reside in the country, which is particularly attractive for those who want to ensure that they and their family have access to a high level of education and medical care. Portugal combines European stability with a unique lifestyle where everyone can find their place in the sun.

Portugal continues to attract investors from all over the world due to its favourable tax system, warm climate and stable property market. Purchasing a home in this country entitles you not only to a comfortable stay, but also to additional benefits with proper planning. Before buying, it is necessary to carefully study what property taxes Portugal imposes on residents and non-residents, as well as how to optimise the financial burden.

Portugal’s tax system: general principles

Portuguese tax legislation is governed by the Serviço de Finanças, which establishes compulsory payments for owners. The structure of the system includes both mandatory one-off contributions and annual fees depending on the characteristics of the property.

There are three main taxes to consider when purchasing a home:

1. IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) – for property transfers, charged on purchase.
2. IMI (Municipal Property Tax) – ежегодный.
3. IS (Imposto de Selo) – stamp duty, which is paid when a transaction is concluded.

In addition to these fees, tax residency status affects the amount of mandatory deductions.

Buying a property in Portugal: taxes and additional costs

There are significant costs involved in formalising a property title. The first mandatory fee in Portugal is the IMT property transfer tax, which varies from 0% to 8% depending on the price of the property and its type. For example, when buying a property worth up to 92,407 euros, the fee is not charged, while for luxury apartments – over 1 million euros – the rate will be 7.5%.

Next is the stamp duty (IS), which is paid when signing the sale and purchase agreement. It is calculated as 0.8 per cent of the value of the property and is payable in a lump sum. In addition, it is necessary to take into account notary and registration fees, which can vary from 500 to 2,000 euros depending on the complexity of the transaction.

Annual property tax in Portugal (IMI)

Once contracted, owners are required to pay an annual fee known as IMI. Its rate is:

• 0.3% to 0.45% for urban facilities,
• 0.8 per cent for agricultural land,
• 7.5% for real estate registered in offshore jurisdictions.

The amount of tax is based on the cadastral value, not the market price of the property. For example, if you own a flat in Lisbon with a price of 200,000 euros, the annual fee will be between 600 and 900 euros. There is a benefit for new residents: exemption from IMI for 3 years for dwellings up to 125,000 euros if they are used as a primary residence.

Portugal’s exceptional tax regime: NHR programme

To attract foreign capital, the government has developed the NHR (Non-Habitual Resident) system to minimise the tax burden on income earned abroad.

The main benefits are:

1. 0% inheritance and gift tax on real estate in Portugal for immediate family members,
2. 10% commission on pension payments,
3. 20% levy on income from the activities of highly qualified professionals (e.g. IT, finance, medicine).

NHR status is granted for 10 years, after which the commitment is reviewed.

Property taxes for non-residents in Portugal: features and key rates

Foreign investors acquiring property in the country face different tax conditions than local residents. Taxation varies depending on the nature of ownership of the property – rental, sale or long-term ownership without income. The main liabilities include tax on rental income, capital gains on sale and annual property tax (IMI).

Charge on rental income: 28% of profit received

If the property is rented out, a non-resident of Portugal is liable to pay 28% tax on rental income. The amount is charged on the net income after deducting allowable expenses, which include:

1. Utility bills (if paid by the landlord).
2. Housing maintenance and repair costs.
3. Fees to management companies (if the property is rented through an agency).

For example, if you rent a flat in Lisbon for €1,500 per month (€18,000 per year) and have allowable expenses of €3,000, your taxable income would be €15,000 and tax would be €4,200. There are no progressive tax rates for non-residents, so optimisation of payments is only possible through proper cost accounting or registering the property through a legal entity.

Capital Gains Tax: 28% of the difference between purchase and sale

When selling property, non-residents are required to pay a commission, which is calculated as the difference between the purchase and sale price less allowable expenses.

Example of calculation:

1. The original cost of the flat is 300,000 euros.
2. The selling price is €450,000.
3. Costs for renovation and legalisation of the transaction – 20 000 euros.
4. The taxable base is EUR 130 000 (450 000 – 300 000 – 20 000).
5. The final tax is €36,400 (28% of 130,000).

Residents of the country can reduce the tax burden if they reinvest in new housing, but there is no such benefit for foreign investors.

Tax liability that arises each year

The fee is charged annually and is calculated on the basis of the cadastral value of the object.

IMI rates depend on the location of the dwelling:

1. For urban properties, 0.3%-0.45%.
2. For agricultural plots, 0.8 per cent.
3. For objects registered in offshore jurisdictions – 7.5%.

For example, if the cadastral value of a flat is €250,000, the IMI would be €750-1,125. The authorities of some municipalities provide incentives to new owners, exempting them from paying the commission for 3 years, but this rule does not apply to non-residents.

Investing in real estate: benefits for investors

Portugal continues to attract foreign investors due to sustained growth in property prices, strong rental demand and favourable tax conditions:

1. High rental demand. The country’s main cities of Lisbon, Porto and the Algarve remain popular with tourists and expats, keeping rental demand strong. In central Lisbon, the average rental rate for a one-bedroom flat is €1,500-2,000 per month, giving an annual yield of 6-10%.
2. Golden Visa Programme. Investors purchasing property in the country for an amount of 500,000 euros or more (or from 280,000 euros in regions with low population density) can apply for the Golden Visa – a residence permit with the possibility of obtaining citizenship after 5 years.

Results

Foreign investors planning to buy property should take into account the peculiarities of taxes in Portugal. Commissions for non-residents in the country are higher than for residents, but competent use of preferential regimes allows to minimise costs. Optimisation of tax liabilities requires a professional approach and planning, so it is recommended to consult with lawyers and qualified specialists before buying.