Real Estate Investment

The easiest and less expensive investment activity to obtain the residence permit is a real estate investment for a minimum of € 500.000.
The applicant must prove ownership of the property (even as a joint owner as long as each of the joint owners invests at least € 500.000) or has a promissory purchase contract for the property (as long as the deposit paid by the applicant is at least of € 500.000).

In order to prove compliance with the legal requirements the applicant must, upon presenting the application, present the following documents:

• Prove of the purchase or the promissory agreement to purchase the real estate;
• Declaration from a bank operating in Portugal confirming the transfer of the capital for thepurchase or payment of the deposit;
• An updated certificate of ownership including registration of the purchase and, if possible, ofthe promissory sale and purchase agreement in favour of the applicant.

Whenever the promissory sale and purchase agreement serves as prove for granting the residence permit, the respective final deed of sale and purchase must be presented prior to the application for renewal.
The properties acquired for this purpose may only be mortgaged or charged for an amount over the required minimum of € 500.000.
Properties may also be rented out and exploited for commercial, agricultural or tourism purposes.

Taxation on Real Estate Investments

There are three charges associated with the acquisition of a property in Portugal.

a) IMT – is a Sale and Purchase Tax on property, to be paid by the purchaser at a rate up to 6,5% of the purchase price or of the official valuation for tax purposes, whichever greater. For a residential property valued € 500.000, the tax will be approximately 6% and for commercial property 6.5%. If the buyer has his tax residence in certain countries with a more preferable taxation regime this may give rise to the application of a higher rate;

b) IMI – is the annual property tax to be paid by the owner as of 31st December of each year. The rate goes from 0,3% to 0,5%, depending on location for urban properties and is 0.8% for rural properties, and are charged based on the official value for taxation purposes.

c) IS – is the Stamp Duty (0,8%) charged once with IMT on the value that serves as the calculation basis for the IMT. Urban properties with an official value for taxation purposes over € 1.000.000 will pay Stamp Duty at a rate of 1%.

d) TAX OVER RENTAL INCOME – is the tax (28%) to be paid by the property owner for the total amount of rents received.

Condominium Costs

Depending on the property purchased it may involve an annual Condominium Cost which is charged to all owners of units of such property to cover fixed maintenance and other costs associated with the property (e.g. elevators maintenance, common area electricity, security, etc.)

Individual Tax Regime

The applicants or holders of a residence permit who do not reside in Portugal for a period longer than 183 days per year, will NOT become Portuguese tax payers and can remain as tax payers of their original permanent place of residence. As a non-tax resident in Portugal, the residence permit holder will only be taxed in Portugal for any eventual income RECEIVED IN PORTUGAL at a rate of 25%. Taxes on property always apply as mentioned.

Residence in Portugal for tax purposes may be required anytime, among other reasons, when someone remains in the country for more than 183 days per year, whether consecutive or not, or when someone remains for a shorter period but, on the 31 December of that year, have a residence in Portugal in a way that allows to presume that he will maintain and occupy it. It is assumed that this choice is only exercised when the Portuguese tax regime is more beneficial than the one of the country of origin.

Portugal has signed a number of double taxation agreements the provisions of which should be taken into consideration in the taxation or income earned from operations between entities resident in the country and other states.