Property taxes may not be the most interesting topic, but we've written a page about them anyway!

When it comes to tax, the Portuguese like most systems consist of both state and local taxes. These are generally calculated based on your income, expenditure, and property ownership. On this page, we will focus on those taxes associated with property because, well, we are estate agents and that is what we do!

IMI - Imposto Municipal sobre Imóveis

Once you have bought a property and paid all the associated buying costs, the most significant tax you will have to pay each year regarding your property is IMI - Imposto Municipal sobre Imóveis. This is Portugal’s equivalent of council tax and it pays for the ongoing upkeep and maintenance of the local area, including services such as bin collection and recycling. IMI is only applicable to the owners of the property, tenants are exempt.

IMI rates are set each year by the individual municipalities (council.) IMI varies from 0.3% to 0.45% of the value of the property for urban buildings, rustic buildings have a set rate of 0.8%. Homeowners in urban areas with properties worth less than €125,000 can benefit from a three-year exemption on IMI, as long as they live in the property themselves.

You can get a further deduction of around €20 for each dependant, and exemptions also exist for people with low incomes or those with energy-efficient homes.

AIMI - Adicional Imposto Municipal Sobre Imóveis

First introduced back in 2017, AIMI - Adicional Imposto Municipal Sobre Imóveis - regarded by many people as Portugal’s equivalent of a wealth tax, affects owners with a share in Portuguese property worth over €600,000. If you and your partner jointly own the property, you only pay AIMI if the value is over €1.2 million.

Regardless of residency status, AIMI rates applied are 0.4% on the total amount for properties held by companies, 0.7% for individuals, and 1% for those owning property valued over €1 million. 

CGT - Capital Gains Tax 

In a nutshell, capital gains is the tax you will pay on the profit from the sale of your property or investment. The taxable part is the amount of profit made, so in other words the difference in price between the amount that you bought the property for and the price that you then sell it for. It is calculated and adjusted by a number of things - the accountable inflation index, the property purchase tax (IMT) that you paid when you bought the property, registration fees, notary fees, agent commission fees and any documentation relating to improvements made to the property over the past 12 years.

As a non-resident in Portugal, individuals will pay a flat rate of 28% CGT when they sell their property, non-residential companies pay 25%. For residents, only half the gain is taxed, and this is done in relation to your income tax level if the property is your primary residence.

Residents also benefit from a three-year rollover period for CGT exemption. As long as the property is your primary residence and you intend to reinvest all, or part, of your taxable profit into a new primary residence within the EU you can apply for this exemption. Exemptions also apply for those selling a property purchased before 1989.

If the registered public deed price of the property is lower than the rateable value, the CGT will be calculated on the higher value.

TAX ON RENTAL INCOME 

If you decide after you have purchased your property that you want to rent it out, then you will be taxed on any profits you make from rental income. Net rental income is taxed at a flat rate of 15%.