How you can purchase land in Portugal

If you are looking to purchase dome real estate abroad, you should give an eye to Portugal. Foreign nationals buying property in the country will qualify for a ‘golden visa’ to Portugal. A golden visa is effectively a legal residence permit in Portugal and the rest of the EU. What is more, after holding the visa for six years, you can qualify for full Portuguese citizenship.

A foreigner can buy land in Portugal

The Constitution of Portugal does not prohibit the purchase of real property in the country by foreign nationals and stateless persons. This concerns residential accommodations, commercial property and land lots too. Besides, the land can be purchased in the name of a natural person or in the name of a corporate entity.

Advantages of the Portuguese golden visa program

Portugal allows foreigners to buy land thus qualifying for a golden visa. The Portuguese golden visa program is highly popular with foreign investors as the choice of property to buy is wide indeed and the required investment amount starts at 280,000 euros, which is a comparatively small amount of money if you think of all the advantages that you will get when becoming a legal resident in Portugal. In addition to that, the applications for golden visas are processed within three months or a bit more so the waiting time is also quite acceptable, we believe. 

The main advantages of the Portuguese golden visa program include the following ones:

• No unrecoverable donations are required;
• There are no restriction on renting your Portuguese property to other people;
• You can sell your Portuguese property back after five years;
• You and the members of your family will have the right of abode in Portugal and you will be able to freely move across the Schengen zone.

There are plenty of attractive land lots in Portugal that you can purchase thus qualifying for a golden visa. In the middle of the continental part of the country, there are rocky hills where you can build your dream house. The northern territories are occupied by vineries and fruit and vegetable farms. Some foreign investors have already put money in Portuguese vineries. There are also hills in Portugal that are not so steep and they are covered by olive and fig plantations as well as some beautiful gardens. 

In addition to that, Madeira and the Azores are two territories in the Atlantic Ocean that belong to Portugal. The islands have their own microclimates and some attractive real property that you can buy. Land lots are also for sale both on Madeira and on the Azores and the opportunity to invest there is certainly worth considering. You will qualify for the Portuguese golden visa if you purchase land on the islands. 

Guidelines on purchasing land in Portugal if you are a non-EU citizen

When a foreign national is buying land in Portugal, he or she will have to go through pretty much the same procedures that a citizen of the country (or citizen of another EU country) has to go through. There are some specifics, however, that you should make a note of to ascertain that the process runs smoothly and quickly. InternationalWealth experts have looked into the issue of buying land in Portugal and here we would like to share our findings with the readers. Below please find a step-by-step guide on purchasing land in Portugal.

Step one: Acquire a tax number in Portugal

The first thing to do is to acquire a taxpayer’s identification number (Numero de Indentificacao Fiscal; NIF) in Portugal. You will not be able to purchase property in the country if you don’t have a NIF.  

When the conditions were normal, the foreign national in Portugal could pay a visit to the financial authorities of the country (a service center) and request to be registered as a taxpayer (that is, acquire a NIF). With the COVID-19 pandemic, however, it has become more complicated. You have to make an appointment in advance at the official website or use the assistance of a representative in Portugal who will have a NIF that will make him/ her authorized to request a NIF for a foreign national. 

Please bear in mind that you do not have to be a legal resident of Portugal to be able to apply for a NIF. Citizens of EU countries as well as EEA countries (EU countries plus Norway, Iceland, and Lichtenstein) do not have to apply for a NIF when purchasing land in Portugal. If you come from another country, though, you have to acquire a NIF before you can make a purchase deal so you will have to have a fiscal representative in Portugal. Your representative there can be a physical person or a legal entity. 

The NIF is required to pay the utility bills and perform other financial operations on the territory of Portugal. The tax number is also necessary for opening a bank account in the country.

Step two: Open a bank account in Portugal

You will have to have an account with a local bank to be able to purchase land in Portugal. The bank account will also help you solve other financial tasks in the country as you will have to cover the property maintenance costs and pay the taxes associated with property ownership, among other things. 

You can open a bank account in Portugal when you arrive there if you prepare all the required documents in advance. You are also welcome to apply for our professional assistance in choosing a foreign bank account. Please apply for a free consultation on the matter. If you look into the issue before going to Portugal, you stand a better chance to select the bank that will come up to your expectations. Preparing for setting up an account with a foreign bank is highly recommendable in any case.

Please mind that some Portuguese banks allow establishing accounts online. We will be happy to discuss the options with you if you apply for our assistance. 

It goes without saying that visiting Portugal before making the final decision to purchase land there would be a very good idea. When in the country, you will be able to file an application for a NIF, learn about the available land lots, set up a bank account, meet your real estate agent, and so on. In the present day, however, it can be rather problematic and this is the reason why you should explore the opportunities to perform some required actions remotely. We know exactly what actions involved in the process of purchasing land in Portugal do not require your personal presence in the country.

Documents required for opening a bank account in Portugal

Below please find the list of documents required for opening a bank account in Portugal. We have to warn you though that Portuguese bankers may request some additional information from non-EU citizens.

• Your passport (a copy);
• Confirmation of our residential address (such as a recent utility bill with your name and the property address on it);
• Your NIF (the NIF certificate);
• A bank statement from the bank that services you in your home country;
• A tax declaration.
• Documents showing how you make a living (a job contract or a company registration certificate, for example).

Step three: Find a representative in Portugal

Finding a representative in Portugal is almost necessary in the times when your freedom of movement is limited. InternationalWealth team will be happy to act as your representative in Portugal as we have direct contacts with law firms and real estate agencies in the country. We will provide full legal support to you in purchasing land in Portugal. 

How can a representative in Portugal be of assistance to you?

If you apply for our services, your representative in Portugal will be knowledgeable about all the legal aspects involved in purchasing land in Portugal and he/ she will know the local real estate market very well too. The representative is going to ascertain that the deal that you are going to enter is legal and that all the deeds of rights and other related documentation are in good order.

In addition to that, your representative in Portugal will naturally be fluent in Portuguese. If you do not speak the language, you will need help with translating the documents (they all have to be in Portuguese) and talking to the seller(s). We guarantee that your representative in Portugal will hold the required AMI license if you request our assistance in purchasing land in Portugal.   

Fourth step: Find a notary public

Notary services are required to legalize the transfer of property rights from one person or company to another person or company. The notary public will register the purchase deal and enter the new owner’s date into the Registry. He or she will also confirm that the seller is the full owner of the land lot that you are buying. 

We will also make sure that the Portuguese notary public whose services you would like to use has the necessary license and sufficient experience in providing services to foreigners buying land in Portugal

Step five: Ascertain that the seller is the rightful owner of the land in Portugal 

You have to have legal assistance when buying land in Portugal. Obviously, you do not want to fall prey to a fraudster selling land that does not actually belong to him/ her. In addition to that, you have to make sure that the property has not been pawned, that no unpaid taxes are due, and that there are no any other incumbencies. 

In Portugal, you buy all unpaid taxes, mortgages and other outstanding payments related to the property together with buying the property itself. That is why it is important to discuss the incumbencies with the seller beforehand. 

It would not be true if we said that you could buy only the property that is totally free of debts in Portugal, however. You can but in this case, you will have to negotiate a discount with the seller that would be equal to the outstanding debts related to the property. Otherwise, you can ask the seller to pay whatever he/ she owes before signing the purchase deal.

Land surveyor’s report for increased assuredness

Obtaining a land surveyor’s report is not necessary but it can lower possible risks associated with purchasing land in Portugal. The surveyor can measure the land lot and confirm that the real area coincides with the area indicated in the documents. The cost of the surveyor’s services will depend on the size and the price of the land lot but it is not going to be very high anyway.

Step six: Sign a provisional purchase agreement 

If you are happy with the plot of land in Portugal that you are offered, you can sign a provisional purchase agreement with the seller. When you do, the seller will take the property off the ‘for sale’ list. Normally, you will have to pay 10% (or more) of the cost of the land lot at this stage. 

The agreement will also have to contain the details of the steps that are pending. These details will be related to finalizing the deal. In particular, the date and method of the final payment have to be specified in the provisional purchase agreement. 

Step seven: Sign the final purchase agreement 

When you pay the full price of the land in Portugal that you are buying, you can make the final purchase agreement and take it to the notary public who will register the deal. After that, your representative in Portugal can pass the documents to the tax and registration authorities in the country. 

Step eight: pay the taxes associated with purchasing land in Portugal

Similarly to other countries, taxes are payable in Portugal when you buy real property there land included. Let us see what taxes you will have to pay when you buy land in Portugal. 

• Stamp duty

The stamp duty rate is 0.8% in Portugal for non-residents. Please bear in mind, however, that if you buy property under construction in the country, you will be subject to a 23% VAT instead of the state duty. 

• Property rights transfer tax (IMT)

This tax is 10% in Portugal for non-residents. It is payable at the moment when the final purchase agreement is signed. 

• Property tax (IMI)

The property tax starts at 0.3% and it can reach 0.45% for non-residents in Portugal. Please bear in mind that the tax can be as high as 0.8% in rural areas while in the well-developed urbanized area the rates are lower. 

• Rent tax

If you let your Portuguese property, including land, you will be subject to a 15% tax. The profit derived from letting the property on a lease is taxed, that is, the maintenance and other costs are deductible.

• Wealth tax (AIMI)

The tax was introduced in 2017. It is levied on the owners of property whose worth exceeds 600,000 euros. Corporate entities pay 0.4% of the total worth of the property and private owners pay 0.7%. If the worth of the property exceeds 1 million euros, the tax rate is 1%.

The wealth tax scale is as follows:

• 600,000 euros – no AIMI is payable.
• From 600,000 euros to 1,000,000 euros – 0.7% of the worth of property exceeding the lower threshold.
• Above 1,000,000 – 0.7% of the first 400,000 euros + 1% of the property worth exceeding 1 million euros.
• Capital gains tax

If you later resell the land in Portugal that you have purchased, and you sell it at a higher price than what you paid when buying it, you will be liable to a 25% tax on the capital that you will be gaining. This is a normal capital gains tax in Europe even though in such countries as Hong Kong and Singapore, for example, the tax rate is zero percent.

Besides, if you are reinvesting the capital gained into the Portuguese economy, only 50% of the capital gains will be subject to taxation. 

Acquire a legal residence permit when buying land in Portugal

You are not going to automatically qualify for a residence permit when you purchase land in Portugal. You have to apply for a golden visa (a legal residence permit) to the Portuguese immigration authorities. The minimum amount of investment required for qualifying for a golden visa is 500,000 euros in Portugal. However, if the land lot is located in an underdeveloped/ sparsely populated area, the required investment amount is 20% lower: only 400,000 euros.   

When considering purchasing property in Portugal and land in particular, you have to remember about the changes to the legislation that are going into force in 2022. In particular, real property located in the cities of Lisbon and Porto, in the region of Algarve, and some other places in Portugal will NOT qualify for the golden visa program beginning 2022. This means that you will not be eligible for a legal residence permit in Portugal if you buy property in these regions.

If you would like to play safe, you should give some serious consideration to the opportunity to buy land on the islands. Madeira and the Azores are considered remote districts of Portugal (which they are indeed) and the Government of the country treats these regions with especial love and care.