Investing in Portugal

Investment

We support foreign investors in obtaining Portuguese nationality, non-habitual resident status (RNH), D2, D7 and Golden Visa.

Portugal offers very favorable tax and legal conditions for immigration and foreign investment, in particular due to Portuguese incentive programs - such as the non-habitual resident status (NHR), the D2 visa, D7 visa or the Golden Visa.

CNT specializes in several areas, including real estate law, commercial law and taxation, and its main objective is to help its clients in all expatriation procedures. Our law firm collaborates with a group of professionals (economists, lawyers, architects, engineers, managers) with extensive experience in this field. Our main objective is to inform you of some important points related to real estate investment and non-habitual resident status, in order to minimize risks with real estate transactions and expatriation.

Dr. Cátia Neves Tavares, a lawyer with more than ten years of experience, is on the French Embassy's list of renowned French-speaking lawyers in Portugal, having also gone through an expatriation almost twenty years ago, aware of the risks and concerns of her clients, together with its team, ensures the protection of its clients' interests in any type of investment, both in terms of consultancy and in all administrative procedures. Present in the north, center and south of the country, the CNT office advises you throughout the process of acquiring / leasing real estate or other investments in Portugal.

We briefly present the main issues related to the existing tax burden on income, whether you are a resident or not, which building or apartment is rented under a rental contract (furnished or not) or what you need to rent furnished accommodation to tourists ( short-term occupation). This information does not replace the case-by-case analysis of each transaction to properly determine the tax consequences arising from this type of transaction.

(a) Taxation of income from property owned by a non-resident individual

Property rented under a rental contract (provided or not).

Tax rate: 25%
Tax base: rents collected, minus property tax and documented maintenance costs (non-deductible interest and repayments).
Formality: income declaration Mod. 3 – annex F, in May of the following year.

(b) Taxation on the activity of renting furnished accommodation to former tourists by a non-resident individual:

Activity subject to VAT (6%) if turnover exceeds €10,000.00. Possibility of adopting a simplified income tax calculation scheme, for a turnover of up to €200,000.00/year.

Tax base: 15% of turnover
Tax rate for a non-resident: 25% (so 25% x 15%: effective rate of 3.75% of turnover).
Formalities: tax declaration of the beginning of the economic activity of operating the furnished accommodation for tourists (before starting the activity), Mod. declaration 3 – annex B, in May of the following year.

Note: it is up to the operator to declare their income in their country of residence, if applicable, if the tax paid in Portugal can be considered for deduction.
(c) Taxation of income from a property owned by a resident

Property rented under a rental contract (provided or not).

Tax rate: 28% (proportional rate, does not vary according to the global income of the tax household)
Tax base: rents collected, net of property taxes and documented maintenance costs (non-deductible interest and depreciation).
Formalities: income declaration Mod. 3 – annex F, in May of the following year

d) Taxation of the activity of renting furnished accommodation for tourists previously managed by a resident individual:

Activity subject to VAT (6%) if the turnover exceeds €10,000.00. Possibility of adopting a simplified income tax calculation scheme, for a turnover of up to €200,000.00 / year.

Tax base: 15% of turnover
Tax rate for a resident: from 14.5% to 48%, to which returns can be added.

Note: the taxpayer always has the option of being taxed on the actual result, an option that he or she can choose at the beginning of the year.

Formalities: tax declaration of the beginning of the economic activity of operating the furnished accommodation for tourists (before starting the activity), Mod. declaration 3 – annex B, in May of the following year.

e) Taxation of income from a property belonging to a non-resident legal person (company) without permanent establishment in Portugal:

Property rented under a rental contract (provided or not).

Tax rate: 35%
Taxable base: income collected, net of property taxes and documented co-ownership fees (non-deductible interest and depreciation).
Formalities: income declaration Mod. 22, in May of the following year.

(f) Taxation of the business of operating a furnished tourist accommodation by a non-resident legal entity (company) with a permanent establishment in Portugal:

For the exercise of this activity by a non-resident company, the creation of a permanent establishment or branch is mandatory. Activity subject to VAT, rate 6%.

Tax rate: 21%
Taxable base: net accounting result (deductible interest and depreciation).
Formalities: tax declaration of the beginning of the economic activity of the operational accommodation for tourists (before starting the activity), declaration Mod. 22, in May of the following year.

  • (g) Taxation of income from a property owned by a resident company

Property rented under a rental contract (provided or not).

Tax rate: 21% (plus possible municipal tax of 1.5% maximum)
Taxable base: net accounting result (financial participation and deductible depreciation).
Formalities: tax declaration of the beginning of the building's operating activity (before the start of the activity), declaration Mod. 22, in May of the following year

(h) Taxation of accommodation(s) rented to tourists by a resident company

Activity subject to VAT, rate 6%. Possibility of adopting a simplified income tax calculation scheme, with a turnover of up to €200,000.00/year and a maximum total asset of €500,000.00.

Simplified regime tax base: 4% of turnover, for hotel activity
Tax rate: 21% (plus possible city tax of 1.5%)

Grades:

The taxpayer can choose to be taxed on the real result, an option to be made at the beginning of the year;
An approved accountant (TOC) must be appointed in the case of a shareholding by a company incorporated under Portuguese law or a permanent establishment of a non-resident company.
Formalities: tax declaration of the beginning of the economic activity of the operational accommodation for tourists (before starting the activity), declaration Mod. 22, in May of the following year.

There is a tax treaty between France and Portugal regarding income tax. This Convention allows obtaining the Non-Habitual Resident Status (the famous NHR Statute)

Main benefits of choosing Portugal as your non-habitual residence.
I – WHAT ARE THE COMPETITIVE BENEFITS?

Tax for a period of 10 years at a fixed rate of personal income tax (IRS taxes – on income) of 20% on the profit of a proactivity seen in Portugal. The absence of double taxation in the case of pensions and income from employment or self-reported abroad.
II – HOW TO OBTAIN NON-HABITUAL RESIDENT STATUS?

Not reside in Portugal in the last five years;
Register as a tax resident in Portugal, with the local tax service office (for this, you must have been in Portugal for more than 183 consecutive days, or, if you have not resided all these days, on December 31 of the same year in a box whose condition suggests you intend to keep and take home as usual);
Request the granting of non-habitual resident status, when you are registered as a tax resident in Portugal or before March 31st of the year following the year in which you became a resident in Portugal.

If you are an employed or self-employed person, the tax rate is 20% of income received in the national territory (plus, in 2014, the excess tax of 3.5%). Taxation applies to income from activities with high added value of a scientific, artistic or technical nature. For more information about these areas or others, do not hesitate to contact us.

Environment

Mediterranean climate and its exceptional brightness (300 days of sunshine per year)
Always close to the ocean.
Biological and ecological diversity (surprisingly varied landscapes, proportional to the country's surface).
Important historical heritage. Thirteen sites on the UNESCO World Heritage list are in Portugal. Lisbon was considered the second best European destination in 2015.

Real Estate in Portugal

A property equivalent to a property located in the south of France, but at the price of Portugal. Luxury real estate programs at very competitive prices
A property equivalent to a house in Spain, but in addition to the quality of the landscapes and the Portuguese coast, its real estate density is dominated by the State (which prevented uncontrolled construction and preserved the quality of the environment around the properties).
Recognized construction quality.
Excellent opportunities to take advantage of due to the lack of market liquidity Low risk of asset devaluation in the medium and long term, because Portugal did not suffer a financial bubble.
Legislation that protects buyers and frames the market
Portugal is not just a country to invest in, but also to live in
If the investment is to buy a property, the acquisition of real estate in Portugal can seem very simple, because it is a procedure that can be completed in a short time.
Very different from the procedure in France, for example. That's why we advise our clients to be well informed, because otherwise their projects could be headed for financial disasters.

Security

A stable country with one of the lowest crime levels in Europe Welcomes people who speak English and French fluently
Stable political system in the short, medium and long term.
One of the European Union countries with the lowest cost of living, guaranteeing a comfortable standard of living.
Health system and European currency.
No significant financial risk (exchange rate, inflation, interest rates controlled by the European Central Bank)
Facilitated procedures and total transparency in purchasing procedures for foreign buyers
Advantageous tax system: no tax on inheritance and donations for residents in Portugal, special exemption or reduced rate of income tax for non-habitual residents.
An investment, still considered today, leading and safe by many French and British residents.
Interesting real estate opportunities to take advantage of
Holiday destination with a strong tourist attraction and, consequently, an active second home rental and sale market
Excellent tourist investment, potential seafront and capital. All these assets contribute to a very pleasant quality of life in the context of choosing Portugal as a place of permanent residence or vacation

Accessibility

Good accessibility to European Union countries (daily flights from the main airports, at competitive prices)
State-of-the-art infrastructure (very good road connections)

The purchase of a house is subject to the payment of taxes, the acquisition of property in Portugal involves registering it with the tax authorities, to obtain a tax identification number (TIN). In other words, residents abroad, as well as those who, although domiciled in Portuguese territory, are absent for a period of more than six months, must, for all tax purposes, appoint a representative domiciled in Portuguese territory. If you are a resident of or are moving to a Member State of the European Union or the European Economic Area, the appointment of this representative is only optional. Tax domicile is the place of habitual residence or, in the case of foreigners, the tax domicile corresponds to that of their tax representative. To purchase your property, you must present documents that identify the property and confirm the legitimacy of the owner and buyer, namely:


I. EXTRACT FROM THE LAND REGISTRATION (OR SUMMARY OF TITLES)

Information contained in the land registry that indicates the composition of a given building, the legitimacy of the person who wants to sell it and the type of expenses incurred (mortgages, seizures, etc.)


II. BOOKLET

This document can be requested from any finance service, where you can find out about the tax situation of the building and check who is responsible for fulfilling the tax obligations that concern it.


III. USE LICENSE

The purpose of the use license is to certify the use for which the property is intended and to validate that the property can be used for the intended purposes. This authorization must be requested at the parish council where the building is located.


IV. TECHNICAL DATA SHEET

The housing data sheet is a document that describes the main technical and functional characteristics of the building. It must be requested directly from the parish council where the building is located.


V. ENERGY CERTIFICATE

It must be presented by the owner during the deed of the property, at the time of sale.


SAW. RECEIPT OF PREPAYMENT OF MUNICIPAL TAX ON FINANCIAL TRANSACTIONS RELATING TO REAL PROPERTY
SAW. PHOTOCOPY OF IDENTITY CARDS (OR EQUIVALENT) AND TAX CARDS OF THE CONTRACTING PARTIES
VIII. PRESENTATION OF PROXY, IN CASE OF REPRESENTATION BY A REPRESENTATIVE

The acquisition of a property is concluded with the execution of the deed and with the Registration of Ownership of the property. After this registration, proof of ownership of the property is issued.

Above all, it should be noted that in Portugal, the concept of property encompasses “total ownership”, which is based on the total and exclusive right to use, enjoyment and disposition of the property. This right gives a significant competitive advantage to the Portuguese real estate market. The acquisition of real estate is subject to municipal tax on financial transactions involving real estate and stamp duty. It is the person purchasing the property who must pay these taxes, before signing the property's sale deed, from a Tax Service office.
I. IMT – Municipal Tax on Real Estate Transfers

It is a tax that refers to the transfer, for consideration of the ownership right over properties or parts thereof (use and habitation, surface rights, usufruct, among others). This tax refers to the value of the sales contract or the property tax value of the properties, whichever is greater. This tax results from the application of variable rates which, in the case of buildings intended exclusively for housing, can vary between 0% and 6%.
II. Stamp tax

It is a tax that applies to all actions, contracts, documents, titles and other legal facts or processes, including free transfers of real estate. In the case of real estate acquisitions, it relates to the value of the sales contract or the property value of the buildings, based on the highest value resulting from the application of the rate of 0.8%.
III. IMI – Municipal Property Tax

Value entered in the cadastral matrix on the settlement date. This matrix mentions the description of the building, its location, the value of the tax assets and the identity of the owners. The matrices are updated every year on December 31st. After purchasing a property, if you don't live there all year round, you can make a profit on your real estate investment by taking out seasonal rentals, for example.

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