Buying Process

Buying Process

The process for buying a property in Portugal depends if it is to be bought in your own name or to be held by a company. But in either case the first step is to appoint a local Lawyer to deal with all the formalities and guide you through all the steps.

To purchase in your own name the normal procedure is as follows:

First the Lawyer should confirm that the property’s documentation is in order and prepare a Promissory Contract of Purchase and Sale.  The Promissory Contract of Purchase and Sale also agrees the Public Deed date.  On signature of the Promissory Contract of Purchase and Sale, a down payment is made to the promissory vendor. The down payment, usually 10% of the total purchase price, is part of the purchase price.  From that point on all parties are bound to the contract and cannot retract without suffering penalties as defined by Portuguese Law.

After the Public Deed is executed the property is legally yours, although you will need to register the change of ownership at the treasurer’s department and at the land registry office.

Normal penalties for the non-fulfilling party

If the promissory vendor withdraws from the sale the law normally requires him to repay twice the deposit.  Similarly, if the promissory purchaser fails to complete he forfeits the total of his deposit.

Taxes and other costs of purchase

• For rural and agricultural land “Transaction Tax” IMT is levied at a flat rate of 5%.
• For construction plots IMT is levied at a flat rate of 6,5%.
• For existing habitable property IMT is levied on a sliding scale of 6% or less (only properties above € 574.323,00 pay the maximum of 6%).

As well as the IMT, there are also the costs with the notary, registry and stamp duty that represent, altogether, approximately 1% of the purchase price.

If you want to set up a Company to buy a Property

If you decide to buy the property through a Company set up for the purpose, that Company will be responsible for same taxes that would apply if you were purchasing the property in your own name.  For further advice on Portuguese Company Law and taxation you should seek advice from your lawyer

If you want to buy a Property already held through a Company

If the property is already owned by a Company you will  be buying the Company and with it the property that it owns.  In this case the contract will be a Share Purchase Agreement and as well and checking the documents referring to the property your Lawyer will also need to complete due diligence on the Company.  IMT does not apply for the purchase of a Company but the tax treatment of a Company.

It is always important that you deal with certified parties. Always make sure that your agent is duly registered and that your lawyer is accredited at the Ordem dos Advogados(Lawyers Bar Association) .

This information was provided by Dr Vasco Ramires Fernandes, a Lawyer, with an office in Faro.  It is provided as a summary for general distribution to clients and the information contained herein should not be used to make decisions as up-to-date legal advice is vital for specific cases.