Salgueiro 18/01/2023 0 Comments

Fees and taxes when buying a house

Understanding the fees and taxes associated with buying a home is essential in order to consider all the costs involved in the process, both for the seller’s side and the buyer’s side.

Understanding the tax obligations related to the purchase of a property is important to avoid less than pleasant surprises in the deal.

Besides concluding a successful deal, it avoids contexts of tension between both parties. On the other hand, understanding all the previous information about these obligations also helps in the elaboration of a rigorous planning of all related costs.

In this regard, we present a set of information regarding the fees and taxes to be paid when selling a house.

Buying a Home: Fees and Taxes

When buying a house, besides the charges related to the mortgage, it is essential to understand that there are taxes that are mandatory to be paid to the State, such as

#1. Municipal Tax over the Onerous Transmissions of Real Estate (IMT)

This tax is reflected on the value stated in the contract or on the Patrimonial Taxable Value (VPT) of the property. In this sense, it is a considerable expense, even though it is paid all at once.

The IMT rate applied differs depending on the location and purpose of the property in question. In the case of an urban building intended solely for one’s own permanent residence, the current rates are as follows:
Up to €92,407: 0% rate, without parcel;
From 92,407 and 126,403 euros: rate of 2%, parcel of 1,848.14 euros;
From 126,403 to 172,348 euros: rate of 5%, installment of 5,640.23 euros;
From 172,348 to 287,213 euros: rate of 7%, amount of 9,087.19 euros;
From 287,212 to 574,323 euros: 8% rate, amount of 11,959.32 euros;
More than 574,323 euros: 6% (single rate), no installment.

It should be noted that the IMT tax must be paid before the official sale of the house, since at the time of the deed, the notary will require proof of payment of this tax.

In terms of exemption from this tax, you may not pay if the purpose of the property is for your own and permanent habitation and whose value of the PSV or purchase price is equal to or less than 92,407 euros, in mainland Portugal.

IMT Calculation
Considering the above mentioned values, and assuming that you are buying a property worth 200 thousand Euros, the IMT is calculated as follows:
On the 200 thousand euros of the price of the property, you will have to multiply this value by 7% and subtract the 9,087.19€ from it. In this case, the IMT will be 4.913€. That is: (200,000.00€ x 0.07) – 9,087.19€ = 4,912.81€.

#2. Stamp Tax (IS)

In addition to the IMT, it is necessary to pay Stamp Tax, whose rate is around 0.8% on the value established in the deed.

Thus, if the value of the house is, for example, 200 thousand euros, you will have to pay Stamp Tax of 1,600 euros.

#3. Municipal Property Tax (IMI)

Finally, IMI is a municipal tax paid annually by any property owner.

For the purposes of paying this tax, a property owner is considered to be the one who owns a property or land on December 31st of the year to which the tax relates, and the IMI to be paid each year always refers to the previous year.

In other words, in 2020 owners will pay the IMI for 2019.

In this sense, if you have acquired a property by December 31, even if only a few days before this date, you will be responsible for the IMI in the following year to be paid:
In a single installment, in May, if the value of the IMI is less than 100€;
In two installments, in May and November, if the value is between 101€ and 500€;
And in three instalments, in May, August and November, if the amount to be paid for IMI is over €500.

It should be noted that, since 2019, homeowners with IMI exceeding €100 have the possibility of paying the tax in full, in a single instalment.

The IMI is levied on the market value of urban and rural buildings located in Portuguese territory, thus constituting revenue for the municipalities where they are located.

Each municipality sets its own rates, although within a specific range – between 0.3% and 0.45%, in the case of urban buildings. In the case of rural buildings, the rate is 0.8%.

The IMI is calculated by multiplying the current IMI rate by the PSV (IMI = IMI rate x PSV).

To understand the rate in force in your municipality, simply access the Finance Portal and, in the section for “Citizens”, select Consult > Rates > Municipality Rates.

Taxas e impostos

Other costs to be borne by the buyer

The buyer is also responsible for the deed costs, which may differ depending on the type of notary (public or private) and the existence of bank financing.

On average, it costs between 400€ and 800€.

In addition, and if you want to guarantee that the seller will only sell the house to you, it is essential to request a provisional registration. If you are buying a house with bank financing, this is a document required by the banks. At the Land Registry Office, it can cost around 250€.

If you take out a mortgage, you will also have to take into account the bank commissions, stamp duty and mutual registration with mortgage (which will also be around 250€).

In addition to these expenses, there is also the cost of the mandatory multi-risk life insurance. The premium for this insurance is calculated on the basis of the capital insured and the age of the policyholders, and increases as the amount owed increases.

Source: CasaSapo