Portugal property taxes explained for first-time buyers

Authored by the expert who managed and guided the team behind the Portugal Property Pack

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A team specialized in real estate investing in European countries

We are a team of financial experts, legal professionals, developers, and local real estate specialists dedicated to helping people like you avoid mistakes when investing in real estate in a foreign place, particularly in Portugal. If you'd like to learn more about us, you can check our presentation page.

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João Morais 🇵🇹

Founder | Real Estate Advisor, at Wilderness Investments

João Morais is an expert in the Portuguese real estate market. With a network of trusted connections and years of experience, João ensures a seamless experience, guiding clients through every step of the buying process, from property search to contract negotiations. After speaking with him, we reviewed the blog post, made some changes, and included his experience to make it richer.

How much is the property transfer tax (IMT) for a first-time buyer in Portugal, and what percentage do I actually pay depending on the purchase price?

IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) in Portugal follows a progressive tax structure that can save first-time buyers thousands of euros.

As of September 2025, first-time buyers under 35 purchasing their permanent residence receive full IMT exemption on properties up to €316,772. For properties between €316,772 and €633,453, you only pay IMT on the amount exceeding €316,772 at an 8% rate.

Standard buyers without exemptions pay progressive rates starting at 2% for properties above €101,917, increasing to 5% for properties between €139,412 and €203,168, then 7% between €203,168 and €282,110, and finally 8% between €282,110 and €633,453. Properties above €633,453 are taxed at a flat 7.5% rate.

For example, if you're 28 years old buying your first home for €400,000, you would pay IMT only on €83,228 (€400,000 - €316,772) at 8%, resulting in €6,658 in IMT instead of the €24,800 a standard buyer would pay.

It's something we develop in our Portugal property pack.

What is the annual property tax (IMI) in Portugal, and how is it calculated based on the property's location and value?

IMI (Imposto Municipal sobre Imóveis) is Portugal's annual property tax calculated using a simple formula: VPT (tax value) multiplied by the municipality rate.

Municipality rates for urban properties range from 0.3% to 0.45%, while rural properties are taxed at 0.8%. The VPT (Valor Patrimonial Tributário) is determined by tax authorities based on the property's location, size, construction quality, and market factors, typically ranging from 60% to 90% of market value.

Lisbon typically applies a 0.3% rate, while Porto often uses 0.45%. For a €300,000 apartment in Lisbon with a VPT of €250,000, your annual IMI would be €750. The same property in Porto might cost €1,125 annually due to the higher municipal rate.

IMI payments can be made annually in one payment or split into up to three installments depending on the amount owed, with the first installment due in April.

Do first-time buyers in Portugal get any exemptions or reductions on IMT or IMI, and how do I apply for them?

First-time buyers in Portugal qualify for substantial exemptions on both IMT and IMI under specific conditions.

For IMT exemption, you must be under 35 years old and purchasing your first permanent residence. The exemption covers the full IMT amount for properties up to €316,772, with partial exemption for properties up to €633,453. Additionally, you receive stamp duty exemption on the same price thresholds.

IMI exemption applies if your property's tax value is under €125,000, your annual household income is below €153,300, and you're buying your first permanent residence. This exemption lasts for three years and can result in savings of €375 to €562 annually.

To apply, complete the IMT declaration through Portugal's official Finance Portal (Portal das Finanças) online or submit a paper form at local tax offices. You'll need to provide proof of age, income statements, and confirmation that this is your first property purchase. The application must be submitted within 30 days of the property deed signing.

It's something we develop in our Portugal property pack.

How much is stamp duty when buying a property in Portugal, and is it a fixed percentage of the purchase price?

Stamp duty (Imposto do Selo) in Portugal is a fixed 0.8% of the higher value between the purchase price and the property's official tax value (VPT).

First-time buyers under 35 purchasing their permanent residence receive full stamp duty exemption on properties up to €316,772, mirroring the IMT exemption structure. For properties above this threshold, stamp duty applies only to the amount exceeding €316,772.

For a €250,000 property purchase, a qualifying first-time buyer pays zero stamp duty, while a standard buyer pays €2,000. On a €500,000 property, the first-time buyer pays stamp duty only on €183,228 (€500,000 - €316,772), totaling €1,466 instead of €4,000.

Stamp duty is collected during the property registration process and must be paid before the deed can be finalized.

What notary and registration fees should I expect to pay in addition to the main property taxes?

Notary and registration fees in Portugal typically range from 1% to 2% of the purchase price, plus fixed administrative charges.

If I buy a property to live in, how are my taxes different compared to buying a holiday home or rental property?

Purchasing a permanent residence in Portugal offers significantly better tax treatment compared to holiday homes or rental properties.

Permanent residence buyers benefit from IMT and stamp duty exemptions (if under 35), potential three-year IMI exemption, and access to favorable mortgage terms. Holiday homes and rental properties receive no IMT exemptions, meaning you pay the full progressive rates starting from the first euro above €101,917.

Rental properties generate taxable income subject to Portuguese personal income tax rates up to 48%, though you can deduct mortgage interest, maintenance costs, and depreciation. Holiday homes incur the same purchase taxes as rentals but generate no offsetting income, making them purely a cost center from a tax perspective.

Some municipalities also impose additional surcharges on non-resident property owners or properties classified as holiday rentals, potentially adding 0.1% to 0.3% annually to your IMI bill.

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What are the tax implications if I take out a mortgage to buy my first property in Portugal?

Taking out a mortgage for your first property in Portugal involves additional stamp duty but offers potential tax deductions on your ongoing payments.

You'll pay 0.6% stamp duty on the mortgage loan amount for loans with terms of five years or longer. For a €200,000 mortgage, this adds €1,200 to your initial costs. Shorter-term loans under five years are subject to higher stamp duty rates.

Mortgage interest payments on your permanent residence may be partially deductible from your annual income tax, though specific rules and limits apply based on your income level and the loan terms. Property-related expenses like maintenance and insurance may also qualify for limited deductions.

The mortgage itself doesn't affect your IMT or annual IMI calculations, as these taxes are based on the property value rather than your financing method.

How much income tax will I pay on rental income if I decide to rent out the property later?

Rental income in Portugal is subject to personal income tax at progressive rates that can reach up to 48% depending on your total taxable income.

Net rental income (after allowable deductions) is added to your other income and taxed according to Portugal's progressive income tax brackets. You can deduct mortgage interest, property management fees, maintenance costs, insurance, IMI payments, and depreciation from your gross rental income.

For example, if you earn €15,000 annually in gross rental income and have €5,000 in deductible expenses, your taxable rental income is €10,000. This amount is added to your other income and taxed at your marginal rate, which could range from 14.5% to 48%.

Non-resident landlords face a flat 28% tax rate on net rental income, with limited deduction opportunities compared to Portuguese tax residents.

If I sell the property in the future, how is capital gains tax calculated in Portugal, and are there exemptions for reinvestment?

Capital gains tax in Portugal is calculated on the difference between your sale price and adjusted acquisition cost, with different rates for residents and non-residents.

Portuguese tax residents pay capital gains tax on 50% of the gain at their marginal income tax rate, while non-residents pay tax on 100% of the gain at a flat 28% rate. The acquisition cost can be adjusted for inflation and includes purchase price, IMT, stamp duty, notary fees, and improvement costs.

A significant exemption exists for reinvestment: if you sell your permanent residence and reinvest the entire proceeds into another permanent residence in Portugal within 24 months, you can defer or eliminate the capital gains tax entirely. This exemption applies once every five years.

For a €100,000 capital gain, a Portuguese resident would pay tax on €50,000 at their marginal rate (potentially €6,000-€24,000), while a non-resident pays €28,000. With the reinvestment exemption, both could pay zero.

We did some research and made this infographic to help you quickly compare rental yields of the major cities in Portugal versus those in neighboring countries. It provides a clear view of how this country positions itself as a real estate investment destination, which might interest you if you're planning to invest there.

What extra taxes or costs apply if I buy a new-build property versus a resale home?

New-build properties in Portugal generally don't incur VAT for residential purchases but may involve additional connection and licensing fees.

New constructions require utility connections (electricity, water, gas, internet) that can cost €1,000 to €3,000 depending on the property location and infrastructure availability. Building licenses and completion certificates add another €500 to €1,500 to your costs.

Resale properties typically have all utilities connected and required certificates in place, but may require immediate renovation or repair work that new builds don't need. Energy efficiency upgrades might be necessary for older properties to meet current standards.

Both property types face the same IMT, stamp duty, and IMI rates, though new builds might have higher VPT values initially due to modern construction standards and energy efficiency ratings.

How does being a foreign buyer affect my tax obligations in Portugal, and do double taxation treaties make a difference?

Foreign buyers in Portugal face the same IMT, stamp duty, and IMI rates as Portuguese citizens for their primary residence purchase.

However, non-resident foreign buyers pay higher taxes on rental income (28% flat rate versus progressive rates for residents) and capital gains (100% of gain taxed versus 50% for residents). EU citizens have the same purchase rights as Portuguese nationals, while non-EU citizens face no significant restrictions but may encounter additional due diligence requirements.

Double taxation treaties between Portugal and your home country can prevent you from paying taxes twice on the same income. For example, if you're a US citizen earning rental income from Portuguese property, you typically pay tax in Portugal first, then claim a foreign tax credit in the US to avoid double taxation.

Establishing Portuguese tax residency (spending 183+ days annually in Portugal) can significantly reduce your tax burden on property-related income through access to resident tax rates and deductions.

It's something we develop in our Portugal property pack.

What are the ongoing yearly costs besides IMI that I need to budget for, like community fees or waste collection taxes?

Beyond IMI, Portuguese property owners face several recurring annual costs that can significantly impact your budget.

Community fees for apartment buildings typically range from €50 to €150 monthly, depending on the building's amenities, age, and location. Luxury developments with pools, gyms, or concierge services can charge €200+ monthly, while basic buildings might only charge €30-€50.

Municipal service charges include waste collection (€15-€30 monthly), water supply maintenance fees, and street lighting contributions. These charges vary by municipality but generally total €200-€400 annually for most properties.

Property insurance is mandatory if you have a mortgage and advisable regardless, costing €200-€600 annually depending on coverage and property value. Maintenance reserves for major repairs, elevator servicing, and building upkeep should account for another €300-€800 annually.

Conclusion

This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.

Sources

1. European Parliament - Portuguese Tax System Analysis
2. Portuguese Government - IMT and Stamp Duty Exemptions
3. Idealista - Property Buying Costs Guide 2025
4. MCS Tax Advisors - Annual Property Tax Guide
5. Pearls of Portugal - IMI Tax Information
6. Sovereign Group - Local Property Tax Guide
7. Portugal Buyers Agent - Property Tax Overview
8. Tytle - Property Tax Guide 2025
9. ImIn Portugal - Property Tax Blog
10. Portugal Property - Tax News 2025