Property Taxes
Portugal Property Tax: Advice and Examples
Taxes on Property in Portugal: What You Need to Know
When buying, selling or renting property in Portugal, understanding the tax implications is essential. Below is a detailed breakdown of the key property taxes you'll encounter as a property owner in the Algarve — or anywhere in Portugal. Tax rules change regularly, so we always recommend working with a qualified Portuguese accountant or tax advisor for advice specific to your situation.
1. IMT — Property Transfer Tax
What is IMT? IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is a one-time property purchase tax paid by the buyer at the time of purchase. It is calculated on the higher of either the declared purchase price or the official taxable value (VPT) of the property.
IMT Rates for Primary Residences (2025 — Mainland Portugal)
| Property Value | IMT Rate |
|---|---|
| Up to €104,261 | 0% (exempt) |
| €104,261 – €142,618 | 2% |
| €142,618 – €194,458 | 5% |
| €194,458 – €324,058 | 7% |
| €324,058 – €648,022 | 8% |
| €648,022 – €1,128,287 | 6% (flat rate on full value) |
| Over €1,128,287 | 7.5% (flat rate on full value) |
Secondary Residences, Holiday Homes & Rental Properties: The initial exemption does not apply. A flat rate of 1% applies on the portion up to €101,917, with progressive rates thereafter, up to 8%. Properties above €1,128,287 are subject to a flat rate of 7.5%.
Land & Commercial Property: Urban land and commercial property attracts a flat rate of 6.5%. Agricultural/rural land is charged at 5%.
Example: For a primary residence purchased at €500,000, IMT falls in the €324,058 - €648,022 band and is calculated at 8% on the full purchase price, less a fixed deduction prescribed by law. The effective IMT cost would be approximately €25,000 - €28,000, depending on the applicable deduction factor. Always use a solicitor or accountant to calculate your exact liability before exchanging contracts.
Young Buyers (Under 35): Since August 2024, first-time buyers under 35 purchasing a primary residence benefit from full exemption from both IMT and Stamp Duty on properties up to €324,058, and a reduced rate of 8% (with a fixed deduction) on properties between €324,058 and €648,022.
IMT is paid before the final deed is signed at the notary. Your solicitor will typically handle this on your behalf.
2. Stamp Duty - Imposto de Selo
Stamp Duty (Imposto de Selo) is charged at a flat rate of 0.8% on the purchase price or VPT, whichever is the higher, and is paid alongside IMT at the time of purchase.
If you are taking out a mortgage, an additional Stamp Duty applies to the loan itself:
- 0.6% if the mortgage term exceeds five years
- 0.5% if the mortgage term is five years or less
Example: On a €500,000 purchase with a €300,000 mortgage (25-year term):
- Stamp Duty on purchase: €500,000 × 0.8% = €4,000
- Stamp Duty on mortgage: €300,000 × 0.6% = €1,800
3. IMI - Portugal's Annual Property Tax
What is IMI? IMI (Imposto Municipal sobre Imóveis) is Portugal's annual property tax, similar to council tax or property rates in other countries. It funds local infrastructure, public services and community development.
How IMI is Calculated
IMI is based on the Taxable Property Value (VPT), which is assigned by the local municipality (Câmara Municipal). This value is typically significantly lower than the market value, often three to four times less.
IMI Tax Rates (2025):
| Property Type | Rate |
|---|---|
| Urban properties | 0.3% – 0.45% (set annually by each municipality) |
| Rustic/rural land | 0.8% |
Example: For a property in Loulé with a taxable value of €200,000, at a rate of 0.3%, the annual IMI would be: €200,000 × 0.3% = €600 per year
IMI is typically paid in instalments between May and November depending on the amount due.
AIMI - Additional Property Wealth Tax
Owners of high-value Portuguese residential property are also subject to AIMI (Adicional ao IMI), an annual wealth surcharge applied to the combined VPT of all Portuguese residential properties owned.
AIMI Rates for Individuals (2025):
| Total VPT of Portuguese Residential Property | AIMI Rate |
|---|---|
| Up to €600,000 | 0% (no AIMI payable) |
| €600,000 – €1,000,000 | 0.7% on this portion |
| €1,000,000 – €2,000,000 | 1.0% on this portion |
| Over €2,000,000 | 1.5% on this portion |
Married couples or civil partners filing jointly benefit from a doubled allowance of €1,200,000. Companies are taxed at 0.4% (or 7.5% if the property is held through a jurisdiction classified as a tax haven by the Portuguese authorities).
Given that VPT values in the Algarve are often considerably below market value, many buyers will not be subject to AIMI, but this is worth confirming with your accountant, particularly if you own multiple properties in Portugal.
4. Rental Income Tax in Portugal
If you rent out your property, rental income is subject to Portuguese income tax under Category F.
For Non-Residents: Non-resident landlords are generally subject to a flat withholding rate on gross rental income. The applicable rate depends on the type and duration of the lease:
- 28% applies to commercial/non-residential leases and as the standard withholding rate
- 25% may apply to shorter-term residential leases
- 5% applies to long-term residential leases of 20 years or more
The rules around deductible expenses and the simplified regime have become more nuanced in recent years. We recommend taking specialist advice, particularly if you are letting through the short-term rental (Alojamento Local) model, where different rules apply.
For Tax Residents: Residents include rental income in their annual IRS return and are taxed at progressive rates (13.25% - 48%) after allowable expenses are deducted. The tax rate depends on total taxable income across all categories. A simplified regime may apply with automatic deductions, depending on your lease type.
Residents can choose between the standard accounting regime (deducting actual expenses) or the simplified regime. An accountant can advise which produces the better outcome for your situation.
IRS Income Tax Brackets for Residents (2025)
| Taxable Income (€) | Marginal Rate |
|---|---|
| Up to €7,703 | 13.25% |
| €7,703 – €11,623 | 18.00% |
| €11,623 – €16,472 | 23.00% |
| €16,472 – €21,321 | 26.00% |
| €21,321 – €27,146 | 32.75% |
| €27,146 – €39,791 | 37.00% |
| €39,791 – €51,997 | 43.50% |
| €51,997 – €81,199 | 45.00% |
| Over €81,199 | 48.00% |
An additional solidarity surcharge of 2.5% applies to taxable income between €80,000 and €250,000, and 5% on income above €250,000.
These are the 2025 tax year figures (income earned in 2025, declared in 2026). Brackets are adjusted annually, always verify current rates with your accountant or via the Portal das Finanças.
5. Capital Gains Tax (CGT) in Portugal
What is CGT? Capital Gains Tax (Mais-Valias) applies when selling a property at a profit. The rules changed significantly from 2023 onwards, including for non-residents.
For Both Residents and Non-Residents (from 2023 onwards)
Following changes brought in to align with EU law, both residents and non-residents are now taxed on the same basis on Portuguese property gains:
- Only 50% of the capital gain is subject to tax
- The taxable 50% is added to the owner's other income and taxed at the progressive IRS rates (13.25% to 48%), depending on total income
- This replaces the previous flat 28% rate that applied to non-residents on 100% of the gain - a significant improvement for most sellers
Deductible costs include:
- Renovation and improvement works (carried out within the past 12 years, with invoices)
- Original purchase costs - IMT, Stamp Duty, legal and notary fees
- Selling costs - estate agency commission, legal fees
Example:
- Property purchased for: €300,000
- Sold for: €450,000
- Capital gain: €150,000
- Taxable portion (50%): €75,000
- This €75,000 is added to other income and taxed at the applicable progressive IRS rate
The effective tax rate on the gain will vary depending on the seller's total income in that tax year. For many sellers, this new system results in a lower tax liability than the previous flat 28% rate on 100% of the gain, particularly at lower income levels.
Primary Residence Exemption
If you sell your main residence and reinvest the full net proceeds into another primary residence in Portugal, the EU or the EEA, you may be fully or partially exempt from CGT. The reinvestment window is:
- 36 months after the sale date, or
- 24 months before the sale date
This exemption applies to properties used as the seller's permanent habitual residence. Partial reinvestment may result in partial exemption. Specialist advice is strongly recommended if you are considering using this route.
Additional Exemption for Over-65s: Sellers aged 65 or over may also avoid CGT by reinvesting the proceeds from any property sale into a qualifying life insurance contract or pension fund within six months of the sale.
6. Fiscal Representation in Portugal
If you are a non-resident property owner, Portuguese law requires you to appoint a Fiscal Representative, a local tax agent or company responsible for managing your tax affairs and ensuring compliance with Portuguese tax regulations.
What a Fiscal Representative Does:
- Obtains your Portuguese Fiscal Number (NIF) - mandatory for buying property, opening a bank account, or applying for a mortgage
- Files property income tax returns on your behalf (rental income, capital gains)
- Pays your annual IMI (council tax)
- Registers your property with the local tax office
- Reviews the official VPT valuation used for tax calculations
Late or missed tax payments can result in significant fines, making fiscal representation an essential and cost-effective service for non-residents.
Typical cost: €200 - €350 per year per person, depending on the provider and complexity of your affairs.
7. A Note on NHR and the New IFICI Regime
Portugal's well-known Non-Habitual Resident (NHR) tax regime, which offered a 20% flat rate and foreign income exemptions for ten years, is closed to new applicants from 1 January 2024.
Existing NHR holders continue to benefit for the remainder of their ten-year period.
In its place, Portugal has introduced the IFICI (Incentivo Fiscal à Investigação Científica e Inovação), sometimes referred to as NHR 2.0. This provides a flat 20% rate on qualifying Portuguese-source income, but is limited to specific sectors, primarily scientific research, innovation, technology and high-value-added activities. It is not a general expat tax incentive in the way the original NHR was.
If you are considering relocating to Portugal and want to understand your options, we recommend consulting a qualified Portuguese tax advisor at an early stage.
Need Guidance on Buying or Selling Property in the Algarve?
At IRG Property, we guide buyers and sellers through the full process — from understanding your tax position before purchase to introducing you to trusted local solicitors, accountants and tax advisors. We don't just find you a property; we make sure you're properly supported every step of the way.
UK: 0800 015 9997 Portugal: +351 289 313 325 Email: info@irgproperty.com
