Buying a property in Portugal - be it a flat, a house, a farm, or a plot of land - is a rather complex process and implies compliance with several legal requirements. Before diving into this adventure, and to ensure that everything runs smoothly, without hassles or problems that cause you to lose time and money, during and after the closing of the deal, the best solution is to be well informed.
In this article, prepared for idealista/news by Belzuz Abogados*, we present the main steps that should be followed in a standard process of buying and selling a property by a private individual in Portugal. This article is aimed at anyone interested in acquiring a property in Portugal, whether it is for rental, investment (long term rental, local accommodation), holiday or residential use, amongst others.
Non-resident entities in Portugal - obtaining the identification number
One of the first steps in the process of buying and selling a property in Portugal, for entities that do not have fiscal residence in Portugal, is to obtain the Fiscal Identification Number ("NIF") from the Portuguese Tax and Customs Authority. The NIF is the administrative number that identifies each individual in Portugal before the Tributary and Customs Authority, and is necessary for all contracts entered into when purchasing property in Portugal.
In the case of natural persons, if the buyer is married it will be necessary to request the NIF of both spouses even if the property is only acquired by one of them.
Legal and technical auditing of the property
Due to the large investment that the purchase of a property implies, it is recommended to perform a legal and technical audit of the property - a survey and analysis of all information and data relating to the property - before entering into and signing any agreement, so that the buyer can properly evaluate the property they intend to acquire and reduce as much as possible the risks involved in the process.
This will be the phase in which the buyer will be able to confirm, for example, what encumbrances and charges are levied on the property, if the use of the garage space is exclusive to the owner of the flat, if it is included when the property is transferred, among others.
Promissory contract of purchase and sale
Before signing the public deed of purchase and sale, and with the purpose of binding the parties to the future business, entering into an agreement called promissory contract of purchase and sale is highly recommended. Through this agreement each one of the parties will establish the terms and conditions for the purchase and sale, committing itself, in the terms of the same, to the completion of the future business, in which the property will be transferred to the buyer.
In a promissory contract of purchase and sale the business conditions should be established. These conditions include:
- Identification of the seller and buyer
- Identification of the property
- Price of the purchase and sale
- Description of the terms and conditions of payment
- Deadline for the completion of the public deed
This type of agreement is not mandatory; however, this is a common procedure when the buyer needs to resort to bank credit or, for any other reason, the definitive contract cannot be immediately signed.
The promissory contract of purchase and sale should always be carefully reviewed by a qualified professional since in our professional practice we sometimes find situations where the inappropriate wording of this type of contract resulted in the loss of the value of the deposit given by the buyer, which in some cases can reach 30% of the total value of the property.
Provisional registration of the promissory contract of purchase and sale
When a promissory contract of purchase and sale is signed, its registration can be requested at the Conservatory for Real Estate Registry (Conservatória do Registo Predial in Portuguese) in order to safeguard the promissory buyer's position as the future owner of the property in relation to third parties.
Therefore if the vendor intends to sell the property to an entity other than the promissory buyer, the latter may enforce their right and through recourse to the courts, force the buyer to comply with the agreement assumed at the outset and transfer ownership of the property to the promissory buyer.
Public deed of sale and purchase / purchase contract
The final contract of sale and purchase is prepared and signed by the parties before a notary, lawyer or solicitor, who, depending on the case, will be the entity that will certify that the purchase and sale occurs in the agreed terms, verifying the payment of the price, certifying the identity of the parties, the documents relating to ownership and the payment of tax obligations. This person is also responsible for the registration of the acquisition in the name of the new owner at the Land Registry.
Definitive registration of the acquisition
Once the public deed or definitive contract is signed, the registration of the acquisition must be presented at the Land Registry Office.
Taxes on the property
The main taxes due for the acquisition and ownership of a property are
- Municipal Tax on Onerous Transmissions of Real Estate ("IMT") - This tax is only due once, at the time of acquisition of the property. The IMT rate varies between 0% to 8%, according to the acquisition value or patrimonial tributary value, the rate to apply (from 1 to 8%), its location and its purpose.
- Stamp Duty ("IS") - This tax is assessed at the time of acquisition of the property. The rate is 0.8%, regardless of the value of the acquisition.
- Municipal Property Tax ("IMI") - This tax is due every year by the taxpayer who owns the building on 31 December of the year to which the tax relates, and has a rate between 0.3% to 0.45% of the taxable patrimonial value of the property.
In order to observe all the specificities of the different stages of the purchase and sale process - preparation of the public deed of purchase and sale, payment of taxes, registration at the Conservatory for Real Estate Registry, etc. - it is recommended that the parties, both buyer and seller, are duly advised by an independent professional with expertise in real estate law.
*Ricardo Pires Jordão, Real Estate Department of Belzuz Abogados S.L.P. - Portuguese Branch
**This article is provided for general information purposes only and is not intended to be, nor should it be construed as, legal or professional advice of any kind.
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