Property transfer tax (IMT), stamp duty (IS) and capital gains (IRS)
The taxes charged on transfers of property for consideration are property transfer tax (Imposto Municipal sobre as Transmissões Onerosas de Imóveis, IMT) and stamp duty (Imposto do Selo, IS).
The tax charged on transfers of property by way of gift is stamp duty (IS).
Capital gains arise only on transfers of property for consideration and fall under income tax, whether personal or corporate as the case may be. They are gains which, not being business, professional, investment or rental income, arise from the disposal for consideration of rights in rem over immovable property.
Rateable value (VPT)
The rateable value of urban property for IMT purposes is the value shown on the property tax record.
The rateable value of rural property for IMT purposes is not shown on the property tax record. It is obtained by multiplying the initial rateable value, which does appear on the record, by the factor applicable to the year of entry in the register.
Transfers for consideration
IMT and stamp duty
Scope and taxpayer
As regards property, IMT and stamp duty are charged on transfers for consideration of the right of ownership, and on the transfer or creation for consideration of lesser rights derived from it (usufruct, right of habitation, surface rights, easements and so on), over immovable property situated in Portugal — through sales, exchanges (on the difference in value, where the values attributed exceed the rateable values), and divisions and distributions of assets (on the excess acquired), other than a distribution on divorce, which is not subject to IMT — without prejudice to the other charging provisions in article 2 of the IMT Code. These taxes are borne by the acquirer or buyer.
Value on which IMT and stamp duty are charged
These taxes are charged on the greater of two figures, the price or the rateable value of the property, without prejudice to the special rules in article 12(4) of the IMT Code.
IMT and stamp duty rates
Where property is acquired as a main or second home, the rates are graduated (average and marginal) and banded according to the value of the transaction, the rates being lower in the first case. They also differ according to whether the property is on the mainland or in Madeira and the Azores. The value of the bands is updated annually. On the acquisition of rural property the rate is 5%, and on the acquisition of urban property for non-residential purposes the rate is 6.5%.
Stamp duty has a single rate of 8 per thousand on the greater of the two figures, rateable or declared, though it may be lower in the case of IMT Jovem.
Non-residents
For non-residents the rate is always 7.5% on the acquisition of urban property, or of an autonomous unit of urban property, used exclusively as a dwelling, whether a main or second home. No exemption or reduction applies wherever the acquirer is a non-resident, unless they were treated as resident or become resident for tax purposes in Portugal within two years of the acquisition; or unless the property is let for residential purposes at a moderate monthly rent (not exceeding the limits referred to in article 2(2) and (3) of Decree-Law no. 97/2026 of 20 May) within six months of the acquisition, and is let for at least 36 months, whether consecutive or not, during the first five years after the acquisition — in which case the difference is cancelled and refunded to the taxpayer.
Exemptions
There are numerous exemptions, the most important being:
Exemption for acquisition exclusively as a main and permanent home
The first acquisition of urban property, or of an autonomous unit of urban property, used exclusively as the resident taxpayer's main and permanent home is exempt from IMT where the value on which the tax would be assessed does not exceed the top of the first band.
The IMT Jovem exemption
The first acquisition of urban property, or of an autonomous unit of urban property, used exclusively as the resident taxpayer's main and permanent home is exempt from IMT where the value on which the tax would be assessed does not exceed the top of the first band (a much higher threshold than the band referred to above for a main or second home), for taxpayers aged 35 or under at the date of transfer who are not treated as dependants in the year of transfer. Excluded from the exemption are taxpayers who hold the right of ownership, or a lesser right derived from it, over residential urban property at the date of transfer or at any point in the previous three years. Where the property becomes jointly owned by a married couple, the conditions and the IMT calculation are assessed separately for each spouse.
The refurbishment exemption
Acquisitions of property intended for refurbishment works are exempt from IMT, provided the acquirer begins the works within three years of the acquisition and meets the other requirements of the Tax Benefits Statute. Also exempt from IMT are transfers for consideration on the first transfer following refurbishment works, where the property is to be let as a permanent home or, if located in an urban regeneration area, also used as a main and permanent home.
Exemption for acquisitions of property for resale
The exemption on buying property for resale applies to those who carry on that activity as a regular business.
A person is treated as regularly carrying on the business of buying property for resale where, before the acquisition, they:
- Have filed the declaration provided for in article 112 of the Personal Income Tax Code or in article 109(1)(a) of the Corporate Income Tax Code, as the case may be, relating to carrying on the business of buying property for resale;
- Normally and regularly carry on the business of buying property for resale (evidenced for the previous two years by a certificate obtained from the tax portal, where that certificate shows that in each of the two previous years property previously acquired for that purpose was resold); and
- Have it recorded in the deed that the property is acquired for resale.
Where the property has been resold within one year other than again for resale, and tax has been paid, the tax is cancelled by the head of the tax office on the application of the interested party, accompanied by a document evidencing the transaction.
When IMT and stamp duty are assessed and paid
IMT and stamp duty are as a general rule assessed before the act or event transferring the assets, even where the transfer is subject to a condition precedent, where title is retained, and in the case of a contract for a person to be named.
In the case of a promissory contract, an assignment of contractual position, a power of attorney or a delegation subject to IMT, the tax is likewise assessed before they are signed, with no reduction or exemption, and no stamp duty is payable. If the person who paid the tax goes on to acquire the property, an additional assessment only arises where the value attributable to the final transfer exceeds the value on which the earlier assessment was based; the tax is cancelled in whole or in part if the acquirer benefits from a reduced rate or an exemption.
If the act or event for which IMT was paid does not take place within two years, the assessment ceases to have effect.
On transfers by division, distribution of assets, auction, judicial or administrative sale, allocation, settlement or conciliation, the corresponding legal instruments form the basis of the assessment, which is therefore made after the act.
IMT must be paid on the day of assessment or within the following 30 days, failing which the assessment ceases to have effect.
If the transfer takes place by an act or contract signed abroad, the tax must be paid during the following month.
Which tax office is responsible
Any interested party may file the declaration for the assessment of IMT and stamp duty, and may do so at any tax office.
Where the assessment is made on the basis of the taxpayer's (the acquirer's) declaration, the responsible office is the one where that declaration is filed.
Where the assessment is made electronically, the office responsible for assessing IMT is the one for the taxpayer's address or registered office.
On the disposal of an estate or of a share in an estate, and on transfers by distribution of assets, the assessment of IMT is always handled by the tax office responsible for assessing stamp duty. Where no stamp duty assessment arises, IMT is assessed by the tax office for the area in which the assets are located and, if they lie in the areas of more than one office, by the one covering the assets of greatest rateable value.
Stamp duty
Stamp duty is likewise charged on the greater of two figures, the price or the rateable value of the property, at a rate of 8 per thousand, and is borne by the acquirer (item 1.1 of the General Stamp Duty Table).
Stamp duty is assessed and paid together with IMT.
Transactions subject to value added tax (VAT) and not exempt from it are not subject to this tax.
Transfers for consideration of an industrial, commercial or agricultural business, where VAT is not due on those contracts, are subject to stamp duty under item 27 at a rate of 5%, where there is a lease.
Capital gains
Capital gains are taxed under personal or corporate income tax and are charged on the profit made on the disposal of the property for consideration; the tax is borne by the transferor or seller.
The charge arises, under personal or corporate income tax, in the year of the disposal. If the disposal results from a regular activity, the profit made is aggregated with the rest of the year's income and taxed as a whole. If, however, it is an unexpected or fortuitous increase in wealth, and so falls outside any commercial or professional activity, it is taxed under category G (capital gains).
Calculation
Capital gains are calculated as the positive difference between:
- The value of the right at the time of acquisition — that is, the purchase price — adjusted by coefficients fixed annually by order, plus expenses such as the deed, registrations, taxes paid on the acquisition, commission paid to an estate agent, compensation necessarily paid to tenants, and improvements made to the property in the previous 12 years; and
- The value of the right at the time of disposal — that is, the sale price.
Category G capital gains are assessed on 50% of the profit, which is aggregated with the year's income.
Exemptions
Reinvestment in a main and permanent home
Gains on the transfer of property used exclusively as the taxpayer's or their household's main and permanent home are excluded from tax where, cumulatively:
- The property transferred was used as the taxpayer's or their household's main and permanent home, evidenced by their registered tax address, in the 12 months before the transfer, or, where the reinvestment precedes the transfer, in the 12 months before the reinvestment — unless the failure to meet that period was due to exceptional circumstances (in particular a change in the household through marriage or civil partnership, the ending of a marriage or civil partnership, or an increase in the number of dependants);
- The sale proceeds, less the repayment of any loan taken out to buy the property, are reinvested in acquiring ownership of another property, of land on which to build a property and/or the building itself, or in extending or improving another property used exclusively for the same purpose, located in Portugal or in another EU or EEA State — provided, in the latter case, that there is an exchange of information on tax matters;
- The reinvestment takes place between 24 months before and 36 months after the date of the sale. Where the reinvestment of the proceeds in a main and permanent home does not go ahead for a supervening reason not attributable to the taxpayer, that period is suspended provided that, cumulatively, the taxpayer entered into, within the legal reinvestment period, a contract of sale or a promissory contract of sale for a property, or a building contract for a property to be used as a main and permanent home; the breach of that contract is the subject of court proceedings; and the taxpayer notifies the tax authority of the supervening event in the income tax return for the year in which the 36-month period after the sale ends — in which case the reinvestment period is suspended from the moment proceedings are brought until they end. If the court decides in their favour, the reinvestment must be completed by the end of the 12 months following the judgment becoming final;
- The taxpayer states their intention to reinvest, even in part, giving the amount in the income tax return for the year of the sale;
- The taxpayer uses the property acquired as their own or their household's home within 12 months of the reinvestment, or applies to enter the property or the alterations in the register (where the reinvestment is in land on which to build, or in the building, extension or improvement itself) within 48 months of the sale, using the property as their own or their household's home by the end of the fifth year following the sale and, in both cases, registering their tax address there.
Reinvestment in financial products by taxpayers who are retired or aged 65 or over
Gains on the transfer of property used exclusively as the taxpayer's or their household's main and permanent home are excluded from tax where, cumulatively:
- The taxpayer, their spouse or civil partner is demonstrably retired at the date of the transfer, or is at least 65 years old;
- The sale proceeds, less the repayment of any loan taken out to buy the property, are used within six months of the sale to acquire one or more of the following: a life assurance contract, or individual membership of an open pension fund, intended solely to provide the acquirer or their spouse or civil partner with a regular periodic payment for at least 10 years, of a maximum annual amount equal to 7.5% of the sum invested; a contribution to the public capitalisation scheme; or a pan-European personal pension product;
- The taxpayer states their intention to reinvest, even in part, giving the amount in the income tax return for the year of the sale.
Reinvestment in property let for residential purposes at a moderate monthly rent
Gains on the transfer of residential property are excluded from tax where, cumulatively:
- The sale proceeds, less the repayment of any loan taken out to buy the property, are reinvested in acquiring ownership of other property in Portugal, to be let for residential purposes at a moderate monthly rent (not exceeding the limits referred to in article 2(2) and (3) of Decree-Law no. 97/2026 of 20 May);
- The reinvestment takes place between 24 months before and 36 months after the date of the sale;
- The taxpayer states their intention to reinvest, even in part, giving the amount in the income tax return for the year of the sale;
- A residential tenancy agreement is entered into within six months of the reinvestment, or of the date the gain arose if later, save where prevented for good reason, in particular the need for urgent works, and only for as long as strictly necessary;
- The property in which the reinvestment is made is the subject of one or more residential tenancy agreements at a moderate rent for at least 36 months, whether consecutive or not, and is not sold within the first five years from the reinvestment or from the date the gain arose, if later.
For a fuller treatment, see our article Mais Valias Imobiliárias — “O IRS e a insustentável leveza do IRC”, in Ordenamento do Território, Urbanismo e Cidades. Que Rumo?, Almedina, 2017.
Transfers by way of gift
Transfers of property by way of gift, such as gifts, are subject to stamp duty:
- At a rate of 8 per thousand, under item 1.1 of the General Stamp Duty Table; and
- At a rate of 10%, under item 1.2 of the General Stamp Duty Table, unless the gift is between spouses or civil partners, descendants or ascendants, in which case the transaction is exempt from that item.
The stamp duty is borne by the acquirer or donee.
Item 1.2 does not apply to transfers by way of gift in favour of corporate taxpayers, even where exempt from corporation tax, and item 1.1 is paid before the contract is signed.
Establishing title by adverse possession
Establishing title by adverse possession is treated as a transfer by way of gift. It is subject to stamp duty under item 1.2 of the Table at a rate of 10%, borne by the acquirer or the person establishing title, from which spouses and civil partners, descendants and ascendants are exempt, among others.
Movable property
Transfers of movable property by way of gift (for example, gifts of movables subject to registration or licensing, shareholdings, securities and associated debt rights, government bonds and certificates, sums of money, crypto-assets, commercial, industrial or agricultural businesses, industrial property rights, copyright and related rights, among others) are subject to stamp duty under item 1.2 of the Table at a rate of 10%, borne by the acquirer, from which spouses and civil partners, descendants and ascendants are exempt, among others, up to €5,000.
When stamp duty is assessed and paid
Assessing the tax is the responsibility of the central services of the tax administration.
Where the transferor or the person acquiring by adverse possession lives in Portugal, the assessment is handled by the tax office for their place of residence.
Where there are several donors, all or some of them living in Portugal, the assessment is handled by the tax office for the place where the resident donor who disposed of the assets of greatest value lives and, if the assets are of equal value, by the tax office for any of the places where the oldest donor lives.
Where the transferor or the person acquiring by adverse possession lives outside Portugal, the assessment is handled by the tax office for the place of residence of the estate administrator or of the beneficiary, as the case may be. Where there are several beneficiaries of the same transfer, the assessment is handled by the tax office for the place where the oldest beneficiary lives or, where assets situated in Portugal are transferred, where the assets of greatest value are located.
Where there are several donors, all living outside Portugal, the assessment is handled by the tax office for the place of residence of the estate administrator or of the beneficiary, as the case may be. Where there are several beneficiaries of the same transfer, the assessment is handled by the tax office for the place where the oldest beneficiary lives or, where assets situated in Portugal are transferred, where the assets of greatest value are located.
The estate administrator and the beneficiary of any transfer by way of gift subject to stamp duty must report the gift, the death of the deceased, or the establishing of title to the responsible tax office, on an official form identifying the deceased or the donor, the relevant dates and places, and the successors, donees, persons acquiring by adverse possession or beneficiaries, together with the family relationships and evidence of them. Where relevant, the form must list the assets transferred and give the values the person filing it is required to declare.
The report must be filed by the end of the third month following the month in which the tax obligation arose, at any tax office.
IMT
IMT, which replaced the former municipal transfer tax (sisa), is borne by the acquirer and is charged on, among other things:
- The transfer for consideration of the right of ownership over property (including exchanges, acquisition on a division or distribution of assets as regards the excess acquired, acquisition at the end of a finance lease at the residual value under the contract, acquisition by the tenant or on the exercise of a pre-emption right) and of lesser rights derived from it, these rights being transferable in various ways or arising on the creation or ending of various kinds of contract, together with item 1.1 of the General Stamp Duty Table at a rate of 8 per thousand;
- The disposal of an estate or of a share in an estate that includes immovable property, together with item 1.1 of the Table at 8 per thousand;
- A promise to acquire and dispose accompanied by delivery of possession — IMT only;
- A promissory contract in which it is agreed that the prospective buyer may assign their contractual position to a third party, and the assignment itself. In that case tax is charged only on the part of the price paid under each contract, applying the rate corresponding to the total price agreed; and whenever the prospective buyer or assignee goes on to sign the final contract, the tax they have already paid is credited against the final assessment. IMT only;
- A promise to exchange — IMT only;
- A so-called “irrevocable” power of attorney in which the principal renounces the right to revoke it. The attorney and any substitute are taxed at 5% or 6.5% respectively, according to whether the power of attorney gives authority to dispose of rural or urban property. No exemption or reduction of rates applies, without prejudice to their applying if the final contract of sale is signed with the attorney or the substitute. IMT only;
- A lease with a clause transferring ownership, and a long-term lease or sublease — IMT only;
- The transfer of improvements — IMT only;
- The acquisition of immovable property by accession, together with item 1.1 of the Table at 8 per thousand;
- The disposal of water rights, together with item 1.1 of the Table at 8 per thousand;
- The acquisition of shares or holdings in general partnerships, limited partnerships or private limited companies, where those companies own immovable property and where, as a result of the acquisition, of a redemption or of any other event, one of the shareholders comes to hold at least 75% of the share capital, or the number of shareholders is reduced to two who are married or civil partners — IMT only, but only where, cumulatively, more than 50% of the company's assets consist, directly or indirectly, of immovable property situated in Portugal, by reference to balance sheet value or, if higher, rateable value, and that property is not directly used in an agricultural, industrial or commercial activity, excluding the buying and selling of property. In every case, any shares or holdings held by the company itself are attributed proportionately to the shareholders according to their stake in the share capital;
- The acquisition of units in closed-end property investment funds offered privately, regardless of where the management company is based, together with redemptions, increases or reductions of capital or other transactions resulting in one holder, or two holders who are married or civil partners, coming to hold at least 75% of the units representing the fund's assets;
- Contributions of immovable property by shareholders towards share capital and towards ancillary contributions to the obligation to contribute capital in commercial companies or civil companies in commercial form, or in civil companies with legal personality, and contributions of immovable property by participants on subscribing for units in closed-end property investment funds offered privately, together with item 1.1 of the Table at 8 per thousand;
- The allocation of property to shareholders on the winding-up of commercial companies, together with item 1.1 of the Table at 8 per thousand;
- The transfer of immovable property on a merger or demerger of companies;
- Compensation for the compulsory purchase of property in the public interest.
Stamp duty
Stamp duty is the oldest tax in the Portuguese system. It is borne by the acquirer and is charged on a wide range of transactions, including:
- The transfer for consideration of the right of ownership, or of lesser rights derived from it, over immovable property, and the rescission, invalidity or ending by mutual agreement of those contracts, provided they are not subject to VAT (to avoid double taxation), at a rate of 8 per thousand (item 1.1 of the Table), together with IMT;
- The transfer of a commercial, industrial or agricultural business, and subconcessions and transfers of concessions, at a rate of 5% (item 27), where VAT is not due on those contracts;
- The transfer by way of gift or inheritance of the right of ownership, or of lesser rights derived from it, over immovable property, and the rescission, invalidity or ending by mutual agreement of those contracts, provided the beneficiary is not a corporate taxpayer, even if exempt, at a rate of 8 per thousand (item 1.1 of the Table), plus 10% (item 1.2 of the Table) — this last item replaced the former inheritance and gift tax. Spouses and civil partners, descendants and ascendants are exempt from item 1.2, among others;
- The transfer by way of gift or inheritance of movable property subject to registration or licensing, shareholdings, securities and associated debt rights, government bonds and certificates, sums of money, crypto-assets, commercial, industrial or agricultural businesses, industrial property rights, copyright and related rights, among others, provided the beneficiary is not a corporate taxpayer, even if exempt, at a rate of 10% (item 1.2 of the Table). Spouses and civil partners, descendants and ascendants are exempt from item 1.2, among others;
- Acquisition by adverse possession, provided the beneficiary is not a corporate taxpayer, even if exempt, at a rate of 10% (item 1.2 of the Table). Spouses and civil partners, descendants and ascendants are exempt from item 1.2, among others (as, for example, where acquisition by adverse possession follows an oral gift from parents to children).
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