On 2 December, the Portuguese Government presented a draft bill proposing the standardisation of the IMT (Property Transfer Tax) rate at 7.5% for all real estate acquisitions carried out by non-resident individuals.
This proposal represents a substantial increase compared to the rates currently in force and may have a significant impact on foreign investors and purchasers of secondary residences in Portugal. As is common in tax reform initiatives, the draft bill provides for a number of relevant exceptions, which should be carefully considered when structuring a real estate acquisition.
Who is excluded from the 7.5% rate?
The proposed rate does not apply to:
- Individuals who, despite holding foreign nationality, remain in Portugal for more than 183 days (consecutive or non-consecutive) within any twelve-month period beginning or ending in the relevant tax year;
- Individuals carrying out public duties or official missions abroad on behalf of the Portuguese State;
- Situations falling under Article 16 of the Personal Income Tax Code (IRS Code), which sets out the criteria for Portuguese tax residency.
Key exceptions applicable to foreign purchasers
1. Acquisition followed by tax residency in Portugal
Where the purchaser becomes a Portuguese tax resident within two years of the acquisition, they may apply for a refund of the difference between the 7.5% rate and the IMT rate applicable to residents.
The refund is issued by the Portuguese Tax Authority upon submission of the relevant request, after tax residency has been formally recognised.
2. Lease of the acquired property
A second exception applies where the acquired property is placed on the rental market, provided that all of the following conditions are met:
- The lease must commence within six months of the acquisition date;
- The property must be leased for a total of 36 months (consecutive or non-consecutive) within the first five years of ownership;
- The monthly rent may not exceed €2,300.
If these requirements are satisfied, the purchaser may likewise request a refund of the IMT differential corresponding to the amount that would have been payable had the purchaser been tax resident in Portugal.
Legislative status and EU law considerations
The proposed measures remain at the draft legislative stage, and their entry into force is subject to Parliamentary approval and subsequent promulgation. It should also be noted that the proposal may raise material concerns under European Union law, particularly regarding potential discrimination and compatibility with the fundamental freedoms enshrined in the EU legal framework, which could give rise to litigation before European institutions.
Conclusion
Notwithstanding the anticipated tax changes, real estate investment in Portugal continues to represent a robust and attractive opportunity, particularly when supported by appropriate legal and tax planning.
It should also be noted that, under the current proposal, the IMT exemption applicable to properties acquired for resale remains fully in force, provided that the resale occurs within one year and all other statutory requirements are met.
At Almeida & Associados, we assist both domestic and international investors throughout all stages of the acquisition process, including legal and tax due diligence, contractual structuring, and compliance with obligations before the Portuguese Tax Authority.
For a preliminary assessment of your situation or further clarification on how this proposal may affect your investment, please do not hesitate to contact our office.
