Following a verbal agreement, the purchaser’s lawyer ensures that the title deeds and other documents, including the caderneta urbana, which defines the property’s size, boundaries and rateable value, and the habitation licence, which demonstrates its compliance with building regulations, are in order.
The local tax office then issues a Fiscal Number, and buyer and seller agree a provisional contract, which details the terms of the sale.A deposit (usually 10 per cent of the purchase price) is paid.
Once the provisional contract’s conditions are fulfilled, both parties sign the final contract in the presence of a Notary Public and the balance of the purchase price is paid. The notary records the transaction with the Land Registry and files the caderneta urbana with the tax office.
Property Fees and Taxes
Several fees and taxes are payable when buying property in Portugal. The most significant of these are the agent’s fee (typically 3-5 per cent) and a transfer tax on a sliding scale up to a maximum of six per cent. You also need to take into account legal fees for your independent solicitor, mortgage fees (if applicable) and surveyors fees if you have one carried out (highly recommended on resale properties).
Typically, buying costs amount to between four and ten per cent of the purchase price of the property.
Most fees are based on the declared, or fiscal, value of the property, which was traditionally much lower than the actual price paid, to minimise tax. However, the fiscal value of most properties has been recalculated in recent years and there are harsh penalties for buyers who declare a price considerably below actual market value.
In the past there has been a culture of under-declaring the value of resale property, in order to cut down on the capital gains tax for the vendor and other fees due on property sale. Please be aware of the possibility that some private vendors will insist on doing this to cut their liability, and in many cases it is a deal-breaking point. No matter what the vendor says, this is illegal and as the authorities take more of an interest in property transactions there are stiff penalties for those who are caught. Even if you were to get away with under-declaration on buying the property, the strong likelihood is that you will be stung for the difference in capital gains when you come to sell.