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TAX

Personal Income Tax (PIT) PIT is levied on income obtained by individuals and its taxation will depend on the

individual s tax status. As a non-resident you will be liable to pay income tax on

Portuguese earnings including rental income and capital gains from disposing a

property located in Portugal. The relevant expenses (e.g. maintenance costs) are

deductible from the rental income. If you hold non-habitual resident status in Portugal,

only the employment income from high value-added activities in Portugal is subject

to a flat rate of 20%, while the normal PIT is applied to income that falls outside of the defined range but is derived in Portuguese territory. A separate introduction to the Non-Habitual Resident Tax Regime will be covered later in this guide.

Examples of the taxation on individuals with different statuses:

Tax on Rental Income The same tax rate is applied to rental income regardless of if the owner is a tax resident,

including NHR, or a non-resident in Portugal. The rental income is taxed at a flat rate of 28%.

Capital Gains Tax Different tax rates will be applied to the capital gains from the disposal of real estate in

Portugal depending on the status of the owner. If the seller is a non-resident, the profit from selling the property is taxed at a flat rate of 28%. If the seller is a tax resident, including NHR, only 50% of the capital gains obtained on real estate will be taxed. The

further 50% of the income is included in the annual income which will be taxed at a

progressive rate ranging from 14.5% to 48% (see table to right).

Taxable person Taxation

Residents Liable to PIT on worldwide income

(Portugal and abroad)

Non-Habitual Residents

Liable to PIT on the net employment and

self-employment and self-employment income from

"high value-added activities" at a flat rate of 20%. Foreign-source income may be exempt, under

certain conditions

Non-Residents Liable to PIT only on the Portuguese source of income

ARRANGE MORTGAGE FINANCE

You are advised to contact a qualified mortgage advisor, who will be able to recommend suitable lenders and the most competitive products to apply for, based on

your personal situation, budget and investment strategy. Once you have chosen your

preferred lender, the broker will provide the necessary application forms of the chosen

lender, as well as a list of the required documents before beginning the process of

submitting a full mortgage application. The documents they require include but are not

limited to the following:

Copy of ID

Proof of residential address

Copy of Portuguese tax number (the buyer needs to register at the Tax Office after signing the promissory contract)

Proof of current income (bank statements for the last 3 consecutive months)

Proof of deposits and existing liabilities

Property details for example the size, location and completion date

Credit report

Upon receipt of the full application, the lender will review the application and instruct

a surveyor to ensure that the property is suitable for lending security and to determine

the value of the property. As soon as the valuation figure is confirmed the mortgage is formally approved and an official Mortgage Offer letter from the lender will be issued. This confirms the lender s agreed terms and rates and stipulates any conditions in the Mortgage Offer. It outlines the mortgage terms, the maximum loan available and the

interest rate, and any variations thereof.

2 Euribor rates can be accessed on the following link: http://www. ibor-rates.eu/

TAX

Value added tax (VAT) Although the transfer of property and shares in Portugal is usually exempt from VAT

(IVA), a rate of 23% will be charged on other real estate related services, such as legal

fees, valuation fees, etc.

Beginning End Rate

0 7,091 14.5%

7,091 20,261 28.5%

20,261 40,522 37%

40,522 80,640 45%

80,640 - 48%

Rates: