Tax Benefits of Buying Real Estate in Portugal

Purchasing a property in Portugal not only brings advantages related to quality of life and safe investment, but it can also offer attractive tax benefits. The Portuguese government has implemented several tax measures that can reduce the charges related to the purchase of properties, attracting both residents and foreign investors. In this article, we explore the main tax benefits that can be taken advantage of when purchasing a property in Portugal.

1. Tax Regime for Non-Habitual Residents (NHR)

The Non-Habitual Resident Regime (NHR) is one of the most popular initiatives to attract foreigners to Portugal. This regime offers tax exemptions for a period of 10 years on income obtained abroad and a flat rate of 20% on income from work in Portugal.

Those who qualify for this scheme may benefit from:

• Tax exemption on passive income (such as dividends, interest, or rents) earned abroad.
• Reduced IRS rate (20%) for income from high value-added activities.

This regime is especially attractive for retirees or qualified professionals from other areas, who can enjoy a very favorable tax regime while acquiring property in Portugal.

2. Exemption or Reduction of IMT in Certain Cases

The Municipal Tax on Onerous Transfers of Real Estate (IMT) is paid at the time of purchase of a property and varies according to the value of the property. However, there are cases in which it is possible to obtain an exemption or a significant reduction from this tax:

• Exemption for properties with a value of less than 97,064 euros (in 2024) when intended for permanent housing.
• Reduced IMT in urban rehabilitation areas or for properties acquired for rehabilitation and long-term rental purposes.

Investing in real estate in urban rehabilitation zones, for example, not only offers tax benefits but also contributes to the revitalization of historic areas and sustainable urban development.

3. Stamp Duty

Stamp Duty is a tax paid at the time of purchase of a property and corresponds to 0.8% of the value of the transaction. Although it is a cost that must be considered, there are situations where this tax can be deductible or reduced, especially in purchases made for business purposes or within special regimes, such as urban rehabilitation.

4. Tax Benefits in Local Lodging (AL)

For those who want to invest in real estate for tourism and short-term rental, the Local Lodging (AL) regime can bring tax advantages. Income obtained through AL is taxed within the scope of "economic activities", which means that it can benefit from a simplified taxation regime, where only a part of the income is considered for tax purposes.

This simplified regime can result in a lower effective IRS rate, making investing in tourism real estate an attractive option.

5. IRS Tax Deductions

For residents in Portugal, it is possible to deduct from the IRS part of the charges related to real estate, such as mortgage interest, especially in contracts entered into before 2011. In addition, there are deductions for rehabilitation works of properties located in classified urban areas or in buildings that are more than 30 years old.

These deductions can be significant, reducing the annual financial impact of those who invest in properties, especially for their own home.

Conclusion

Portugal offers a set of very advantageous tax benefits for those who want to acquire real estate, whether for own housing, investment or tourism. With special regimes such as the NHR and the Golden Visa, as well as deductions and exemptions from taxes such as IMT and Stamp Duty, the country becomes an attractive destination for both nationals and foreigners.

Before investing, it is essential to consult with a tax expert to ensure that you take full advantage of the advantages available, according to the type of property and the purpose for which it is intended.