Portugal :7.5% Property Tax for Foreign Buyers « Euro Weekly News

Foreign buyers looking to snap up property in Portugal are facing an unexpected shock as the government pushes forward with a new tax rule that could significantly raise the cost of purchasing a home.

Under proposals presented to Parliament December 2, anyone classed as a non-resident buyer will be charged a flat 7.5 per cent Property Transfer Tax (IMT) on residential purchases – regardless of whether they are buying a small apartment or a multi-million-euro villa. Until now, residents have benefited from a sliding scale, starting at 2 per cent on lower-priced homes and rising to 7.5 per cent only on luxury purchases above €1.1 million.

The new plan means foreign buyers would no longer qualify for that gradual rate system. Instead, 7.5 per cent would apply across the board, making Portugal – for many international buyers – a noticeably more expensive place to buy property overnight.

The measure forms part of the Government’s wider housing strategy aimed at calming the overheated market and improving access for local residents. But among expats and overseas investors, reaction has been swift, with many questioning whether the move risks putting off long-term residents as well as speculative buyers.

Who won’t have to pay the higher rate

Not everyone will be hit by the rule – and this is where the detail becomes crucial.

Foreign citizens who spend more than 183 days in the country within a year will not be treated as non-residents for tax purposes. In practice, that means anyone who meets the usual residency threshold can still benefit from the standard progressive IMT rates, rather than paying the flat 7.5 per cent.

There is also an exemption for those working in an official capacity for the state – such as diplomatic or public service roles – covered under existing tax provisions.

Another potential lifeline exists for buyers who initially arrive as non-residents but later decide to stay. If someone becomes a tax resident within two years of buying their property, they may apply for a refund on the excess tax paid.

Support for the rental market has also been written into the proposal. Buyers who list their property within six months of purchase for long-term renting – with monthly rent capped at the moderate rent limit of €2,300 – can avoid the higher tax as long as the home remains rented for at least 36 months within the first five years.

Refunds and what happens next

In cases where a buyer qualifies for an exemption after completing the purchase, the Tax and Customs Authority would refund the difference between the tax paid and what would have applied under the resident rate bands. However, refunds must be requested formally and supported with paperwork to prove eligibility.

For now, the change is not yet law. The proposal has been submitted through legislative authorisation and still requires parliamentary approval before taking effect.

The higher tax for non-resident buyers was first flagged back in September within the Government’s housing initiative known as “Construir Portugal – Leasing and Simplification” – a package aimed at boosting rental supply and easing pressure on house prices.

Whether the measure will achieve that goal remains open to debate. What is certain is that for many would-be buyers from abroad, the cost of entering the market could soon be thousands of euros higher. For anyone planning to purchase in the near future, understanding residency rules – and acting quickly – now matters more than ever.

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