Advice on purchasing and selling property in the Algarve

First of all you need to certify that all the documents related to the property are in order.

The documents of your future property are the following:

a) Certificate of Land registry. Describes the property and its a full prove of the ownership. It also shows all the charges and encumbrances that are attached the property.

b) Certificate of the treasure department - this document describes the property in accordance with the one above. Besides it also shows the ownership and exhibit the rateable value of your property.

c) Habitation License - License conferred by the Town Hall confirming that the construction, if any, is licensed.

d) Ficha Tecnica de Habitacao - it works as an identification of the structure of the building and it is only required if the habitation License was requested after the 30th of March 2004.

e) Plans of the Property - as per approval of the project of construction by the Town Hall.

After confirming that the documentation is in order is time to prepare the Promissory Contract of Purchase and Sale. The purchasers Lawyer usually prepares the Promissory Contract. At the moment of the signature of the Promissory Contract of Purchase and Sale the promissory purchaser delivers to the Promissory Vendor a part of the purchase price, usually 10% of the total purchase price. This corresponds to the deposit. The law requires the Promissory Seller to repay twice the deposit should he withdraw from the sale. Likewise, if the Promissory Purchaser fails to complete he forfeits the total of his deposit.

The Purchase and Sale will only be complete after the competent public deed done at a notary that will confirm that all the documentation is in order and that the purchase price was already paid in full.

After the Public Deed is done the property is legally yours although you need to register the change of ownership at the treasure department and at the Land Registry.

Individual

Costs of the Purchase (besides the purchase price):

1 - Prior to the deed you shall pay the Transmission Tax IMT This tax is as below:

a) Purchase Price: up to 85.500euros ; Tax: 1% ; Amount to Deduct: 0 euros.

b) Purchase Price: from 85.500 up to 117.200 euros ; Tax: 2% ; Amount t Deduct: 855 euros.

c)Purchase Price: from 117.200 up to 159.800 euros ; Tax: 5% ; Amount to Deduct: 4.371 euros.

d) Purchase Price: from 159.800 up to 266.400 euros ; Tax: 7% ; Amount to Deduct: 7.567 euros.

e) Purchase Price: from 266.400 up to 511.000 euros ; Tax: 8% ; Amount to Deduct: 10.231 euros.

f) Purchase Price: superior to 511.000 euros ; Tax: 6% ; Amount to Deduct: 0 euros.

Example: Purchase by 500.000,00 Euros = 500.000,00 X 8% = 40.000,00 - 10.231,00 = 29.769,00 Euros.

" IMT is levied at a flat rate of 5% for rural and agricultural land

" IMT is levied at a flat rate of 6,5% for plots for construction

" IMT is levied at 8% whenever the purchase is made by an offshore (companies domiciled in the Portuguese black listed jurisdictions).

2 -.Besides the Transmission Tax, there are also the costs with the notary, registry and stamp duty that represent all together approximately 1% of the purchase price.

Sale taxes:

This part is exclusively applicable to non residents for fiscal purposes.

When you come to sell it the taxation (non-residents) will be of 25% over the gain. The gain represents the difference between the purchase price (multiplied by inflation factors) and the sale price :

Gain = sale price  [(purchase price X inflation factor) + suitable invoices for the last five years + deductible expenses in acquisition + deductible expenses on the sale]

Companies

Attention the regime explained below is not applicable to the Portuguese black listed jurisdictions (although the taxation over this black listed companies has decreased with the Portuguese Annual Budget for 2007 it is still not compensating) and its only applicable to non residents for fiscal purposes:

Besides the documents referent to the property you shall also proceed with a due diligence to the company. The documentation might vary from jurisdiction to jurisdiction but there is always the:

a) Share Certificate

b) Declaration of Trust

c) Memorandum and Articles of Association

Taxation of the company:

Purchase:

a) If you decide to buy the property through a company that still doesn't own the property you shall support the same taxes as if you were purchasing the property in your own name (Please see above the table for Transmission Tax).

b) If the company is already the owner of the Property then you avoid the Transmission Tax.

Sale:

a) If you sell the companies shares (or interest) to a third party you wont be liable for any Capital Gains Tax in Portugal.

b) If the company sells the property then it will incur in the same gains as an individual, this is, the company will be taxed in 25% over the gain. The Problem with this companies is that some times those companies purchased the property many years ago and have changed hands for several times. Therefore if the company decides to sell the Property (and of course that decision is taken by the shareholder/beneficial owner) the capital gain that the company will incur will not be just your gain but the added gain of all the owners of the company.

Fiscal card

As a future owner of a Portuguese property you will need to have Portuguese Fiscal Number. That will have to be obtained by someone who is a Portuguese resident for fiscal purposes. The person that obtains you the card will be your fiscal representative, which means that will mediate your relation with the Portuguese Treasury (This usually involves a fee that might vary from 150,00 Euros plus VAT to 350,00 Euros).

Real Estate

Always choose a Real Estate dully Licensed. ROSARIO BUSCH - SOC. MEDIACAO IMOBILIARIA, UNIP., LDA has the License number 3824 - AMI

Lawyer/Solicitor

Choose a Lawyer that is legally inscribed at the Lawyers Bar Association or a Solicitor that is inscribed at the Solicitors Chamber