Useful Information about Portugal
Index to Useful Information about Portugal
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The following information is compiled to the best of our knowledge and in good faith. E&OE.
General
Portugal
Portugal is around the size of Scotland with twice the population and has tremendous variety both geographically and in its ways of life and traditions. Along the coast around Lisbon, and on the well-developed Algarve in the south, there are highly sophisticated resorts, while the vibrant capital Lisbon has enough going on to please most city devotees. But in its rural areas this is still a conspicuously underdeveloped country, and there are plenty of opportunities to experience smaller towns and countryside regions that have changed little in the past century.
Surrounded by the Atlantic Ocean to the east and south and bordering Spain to the north and the west, Portugal is perfectly situated for those who like rocky peninsula and rough sea. One of Europe's smallest countries, it has the diversity to match any of its bigger neighbours. Rivers and forests spread up the valleys between mountains and the dry winds blow on the rockier southern plains. It's an inexpensive and fascinating country with a long seafaring past, which is pushing forward to catch up with the rest of Europe after forty years of dictatorship.
Property purchasers and holidaymakers have been flocking to Portugal since the late 1960s and today Portuguese property still represents good value for money. While demand continues, Portugal remains a highly sought after location for new and resale properties, particularly in the popular resort areas of the Algarve.
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History
Portugal is one of the oldest nations in Europe having established its continental frontier as it is set today on 1297.
Portugal has been an independent kingdom since 1143.
1415 was the year that set the tone for centuries to come. under the guidance of Prince Henry "The Navigator", the Portuguese set sail on epic voyages that would make them the first to discover the ocean routes to India, Brazil, China and Japan, while at the same time founding settlements on both African coasts.
The history of Portugal is that of the rise of a nation to great world power, followed by a decline in fortune, then a resurgence. Following its heyday as a world power during the 15th and 16th centuries, Portugal lost much of its wealth and status with the destruction of Lisbon in a 1755 earthquake, occupation during the Napoleonic Wars, and the independence in 1822 of Brazil as a colony.
During 1910, there was a revolution and the monarchy were deposed and for most of the next six decades, repressive governments ran the country.
In 1974, a left-wing military coup installed broad democratic reforms. The following year, Portugal granted independence to all of its African colonies. Portugal is a founding member of NATO and entered the European Community (now the European Union) in 1986.
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Geography & Climate
The Portuguese coast is extensive, it has 943 km of coastline. The coast developed fine beaches, the Algarve beaches are world famous. The south down as far as the Algarve features mostly rolling plains with a climate somewhat warmer and drier than the cooler and rainier north.
Portugal is one of the warmest European countries. Mainland Portugal has average temperatures of 13ºC in the North and 18ºC in the South. Spring and Summer months are usually sunny and the temperatures are very high during July and August, sometimes between 30°C and 35°C, reaching sometimes highs of 45°C in the southern interior. During winter snow is common in the mountainous areas of the north. Although windy and rainy at times during winter, sunny days are not rare.
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Culture & People
Portugal is an ancient nation and for more than 1000 years it has maintained its specific culture through a self-governing venture while being influenced by the various civilizations that crossed the Mediterranean world. Thus, it has always absorbed habits and traditions from such early civilizations and from the regions that it discovered and conquered throughout the world during the Portuguese empire, establishing a specific legacy.
The Portuguese language became one of the most widely spoken in the world, and the Portuguese people were privileged for being exposed to so many different civilizations. The vast monumental, artistic and archaeological heritage witness not only the 850 years of history of encounters with distant cultures, but also the presence in the territory of more ancient peoples (Celts, Romans and Arabs).
The Romans were a major important influence on Portuguese culture, considering the Portuguese language itself derives from Latin.
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Tourism
Low cost airlines vie for services to Portugal's three international airports, bringing increased competition and lower fares each year. A sound EU standard transport infrastructure and a solid economic climate help to make Portugal a modern arena in which to invest in property today. With capital growth currently at around 10% per annum in hot-spot locations, shrewd investors are looking to Portugal to gain stable medium to long term returns on their investment, through capital appreciation as well as rental yields.
New emerging markets are now in their early stages, such as those along the Silver Coast just north of Lisbon and further north near Porto. Here prices can be as much as 30% lower than in more popular resorts further south, while potential for growth is rocketing due to improved infrastructures and a new trend amongst foreign property purchasers for rural locations away from the more traditional resorts. Meanwhile, golf resorts and related off-plan investments on the Algarve maintain their popularity amongst the golfing set looking to make the most of the warm climate and excellent facilities to be found in the region.
Away from the Algarve, the Silver Coast in central Portugal is becoming a new property hot-spot. Located between Lisbon and Porto and sometimes called the Lisbon Coast, it is less developed for tourists than the Algarve but offers fantastic beaches and unspoilt towns. Now that the A8 motorway links Porto with Lisbon, this region, with property that caters for all types of buyer, is set to open up.
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Property in Portugal
Buying a Property
According to the Portuguese Civil Code, the purchase and sale of any immovable property, urban or rural, must be consigned on a public notary deed. This does reduce risks when buying Portuguese property.
Having agreed to purchase a property, it is normal procedure in Portugal to lodge a 10% deposit with your lawyer. This is a sign of 'good faith', and the vendor should then withdraw the property from the market. A promissory contract is usually signed after searches by your lawyer, within one month of the deposit being made. This is a commitment to purchase/ sell the property, and there are usually penalties if either party breaks this contract.
Before signing the promissory contract, your lawyer will check the current ownership of the property & ensure it is free of charges & debts. The vendor must be up to date with the payment of all charges (such as mortgages) or debts (such as utility bills) & must sell the property with vacant possession.
If you require financing for your portuguese property, an extra clause can be added into the promissory contract stating that the contract is subject to mortgage approval.
Upon signature of the promissory contract your lawyer will release the 10% deposit to the purchaser or their lawyer. If the vendor fails to fulfill delivery of the property per the contract, you will be entitled to a refund of twice the amount of your deposit. If on the other hand you as the buyer are unable to fulfill the contract, the vendor is entitled to keep the deposit amount without any refund to you being necessary.
A date is then set forth for the signing of the 'escritura' or final deed. This is usually 3 - 4 weeks after signing the promissory contract. Once done, and the property has been registered with the land registry, it is legally yours.
In order to buy a Portuguese property, you will need an NIF number (Fiscal Number) so that the Portuguese Tax Authorities can identify you. With your fiscal number you can open a bank account, buy property & pay tax.
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Detailed Legal Procedures
To help understand the procedures and legal acts that are involved in acquiring a property in Portugal. It is always recommended that qualified advice be sought in any purchase.
It is important to insure that any plans in the Town Hall referring specifically to the property do physically agree with the existing construction. A property for living purposes must have the following documentation:
- A Habitation License for property constructed after 1951
- A Certified insertion in the records of the Land Conservatory
- A detailed “Caderneta Urbana” from the Tax Office Commercial and Industrial properties require both Points b. and c.
In the case of a rural property the following extra document is necessary which is a detailed and an up-to-date description of the property as is named “Caderneta Rústica”. The local Tax Office issues this document.
It is quite normal for both Parties to initially enter into a Promissory Contract detailing the conditions of Sale – “Contrato de Promessa de Compra e Venda”. This Contract is then legalized by registering it in the Notary Office. This Contract is legally binding on both sides and the law requires the seller to repay twice the deposit should he withdraw from the sale. Likewise, it the buyer fails to complete he forfeits the total of his deposit. There are specific laws relating to this act that a Lawyer will be able to explain.
It is often found practical for the buyer to appoint a third party such as their lawyer to act for them legally in the matter. A document named “Procuração Pública” is prepared with the necessary details and then in the Notary Office this document is signed and registered by the Notary. This official document can also be created in the Portuguese language outside Portugal in a Portuguese Consul in a foreign country, or in a Notary in the language of the country concerned. In the case of the latter the document must have the Seal of the Notary and an Apostil attached. An official translation into the Portuguese language will later be necessary.
You are required to obtain a Fiscal Number from the local Tax Office (Finanças).
Prior to act of purchase, the purchase will usually be subject to a State payment called “CEMI” which is carried out in the local Tax Office nearest to the property. The amount charged is dependent upon the nature of the purchase and does vary. In certain cases the buyer may be exempt from paying this Tax.
When all the above requirements have been completed the act of sale can proceed in any Notary Office. This act is known as the “Escritura de Compra e Venda” which takes place in front of the selected Notary and is recorded in his official books. The Notary will check prior to the act of sale that all the necessary documents are correct to ensure that the sale can proceed according to the facts provided. It is at this moment that payment is normally completed to the seller. After the act is recorded the Notary Office will issue a photocopy of the entry, which is the proof to the buyer that the act has officially taken place. The photocopy will carry the seal of the Notary but as further official copies can be requested at any time this document should not be mistaken for a “Title Deed” – as known in the UK.
On completion of the above act the property in question has then to be registered in the new owners name in the Land Registry (Conservatória do Registo Predial). This next registration is not obligatory until the owner wishes to sell the property. However, it is strongly recommend that the previous owner make this registration immediately after the Notary act as a preventative measure against a possible financial abuse.
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Taxes & Other Purchase Costs
Other costs related to your Portuguese property purchase must also be taken into consideration:
1) Property Transfer Tax (know as SISA) imposed by the government. This tax can vary widely and is unavoidable except where a property is already owned via an offshore company.
Examples are as follows:
- Property of value less than €80,000 - 0%
- Urban Property for residence with purchase price over € 80.000,00 - 2%-6%
- Acquisition of rural property - 5%
- Acquisition of other urban properties and other acquisitions - 6.5%
A municipal tax is levied by reference to the ratable value, from 1%. For offshore companies the rate is now 2%. From 1st January 2004 this will rise to 5%. Buying a property using real estate holding companies is a popular tax efficient method of investing in a second home. It can allow buyers to minimise property transfer taxes and avoid capital gains on sale and inheritance tax in the event of death.
2) Notarial and Registration fees, are also unavoidable and amount to approx. 2,5% of the declared purchase price.
3) Lawyers and legal fees, vary from 1,5% to 2%. A major benefit is that power of attorney can be given to a lawyer, saving you time and travel costs to sign documents personally.
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Non Resident Mortgages
Up to 80% loan to value.
Interest only facility for up to 10 years based on 30 year total term.
Capital and repayments mortgages available Interest rates from 0.25% above Euribor.
Fixed rate mortgages for up to 5 years.
Refinance / Equity release of up to 75% loan to value on existing property (including interest only facility) for the purpose of property reform, purchase of a new property or debt consolidation.
Equity release on up to 40% loan to value to release cash from the property.
All products are available subject to status.
Many of these products are not available direct from the banks in Portugal and will be subject to the lenders criteria and your status. Rates and costs available in writing on request for all Portuguese mortgages.
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Buying a New Property
If you are purchasing a new property in Portugal, you should be provided with a copy of the certificate of completion of works and also the licence of first occupation.
If you are buying an off-plan property in Portugal, the vendor is obliged to make certain information available to you. This includes copies of the relevant maps & architecture plans, registration details, building license and a completion date along with the consequences of non-compliance with the terms of the Promissory Contract. You should also receive a copy of the bank guarantees to cover funds paid over to the vendor by the purchaser prior to completion should there be any problems with the development.
If buying off-plan, once the work is complete and the money and or mortgage is in place, you will be able to sign the Title Deed (Escritura Pública de Compra e Venda) at a Portuguese Private or Public Notary. This transfers ownership of the property to you. If your lawyer has power of attorney, he can sign this on your behalf. The Title Deed must then be entered into the Portuguese Official Registry records so that your ownership is fully protected against third parties. The change of owners must then also be passed on to the Portuguese Tax Authorities
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Frequently Asked Questions
Here are some frequently asked questions. Our answers are offered in good faith but they are for guidance only and we cannot accept responsibility for any mistakes or misinformation in the following:
Q1: Can I make an offer?
Unlike the UK, reduced offers are rarely accepted in Portugal, negotiation is not generally the norm. If you wish to put forward an offer, we will be happy to advise you.
Q2: Should I have the property surveyed?
We strongly recommend that you have the property surveyed before entering into any contract.
Q3: How do I transfer money to pay for a Portuguese property in Euros?
Often until you come to buy a property overseas you are not really aware of the effect of currency fluctuations may have on large sums of money. Exchange rates are changing all the time. The fluctuations in the exchange rate between the Pound and the Euro can seem small but they make a significant difference when large amounts are concerned. There are simple ways to fix the exchange rate for your property so that you know exactly what it will cost you and have that peace of mind. You can do this by buying the currency in a lump sum (a spot contract) or simply fixing the rate you will get for a future date and paying part up front and the rest when you want to send the money over to Portugal (forward contracts). As well as these you can often find currency specialists who can get you much better prices than your banks will offer. If you would like to discuss currency matters further, please contact us and we will advise you.
Q4: Will I have to be in attendance to complete the transaction in Portugal?
No. You can give your lawyer “Power of Attorney” to sign all necessary documents on your behalf. This is normal practice although you are entitled to be there.
Q5: Will the property I buy be Freehold?
Yes – Leasehold does not exist in Portuguese Property Law.
Q6: Can I get a Portuguese mortgage?
Yes. The terms and requirements are much the same as in UK and you must be able to show you can make the repayments. You can normally borrow up to 75% of valuation and interest rates are generally lower than here in the UK.
Q7: Should I make a will covering my property in Portugal?
Yes. If you are a British National, in the event of your death the terms of your British Will will apply to any property that you own in Portugal - this rule applies even if you permanently reside in Portugal. If you were to die without a Will it is likely that British Inheritance Laws would be applied to any Portuguese assets in the estate. However you should be aware that Portuguese Inheritance Law divides all assets of an estate equally between a surviving spouse and any surviving children of either spouse. This arrangement may not suit your particular circumstances, therefore we strongly recommend that you ensure that you have a British Will which covers your Portuguese property.
Q8: Does Portugal have Inheritance Tax?
Not in respect of Portuguese properties where the appropriate documentation has been submitted to the tax authority.
Q9: Should I use a Portuguese solicitor?
We strongly recommend that you use a Portuguese lawyer - not only are they generally less expensive than their British counterparts, but they have a thorough understanding of the Portuguese conveyancing system and any local variations which may impact on your proposed purchase.
Q10: What are the requirements if I want to live in Portugal permanently?
For accurate information for your particular circumstances, you should check with the Portuguese Consulate in the country where you are currently living. As a general guide, because Portugal if part of the Euro-zone, if you are a British citizen you have the right to reside in Portugal and share the same rights as a Portuguese citizen. As a permanent resident you will need to have a Residence Card and this can be obtained by providing the authorities with:
- proof of a valid passport
- insurance policies
- evidence of income that is sufficient to support yourself (and your family if applicable)
- 2 passport photographs
If you intend to work in Portugal, you do not need a work permit but you will have to supply a copy of an employment contract.
If you have a pension, or any other source of income, then you will need to provide a copy of a few bank statements showing evidence of your income.
To obtain a Residence Card you will need to apply at the Delegation of the Foreigner and Borders Service (Serviço de Estrangeiros e Fronteiras - SEF) office nearest to where you are going to live in Portugal.
If you are a non-EU citizen, you must apply for a Residence Visa/Permit in person at the Portuguese Consulate in the country where you are currently living. They will advise you of the documents you need to provide to support you application.
Q11: Do I need to have a Fiscal Representative?
Under Portuguese law, all non-Portuguese non-residents who own a property in Portugal must appoint a fiscal representative. A fiscal representative must be resident in Portugal but can be any nationality.
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Expedia Property is also active in the Portuguese Property market through relationships with private sellers and property developers. We have a good selection of Portugal property for sale, particularly on the Silver Coast, the Costa Lisboa, the Algarve and even the Island of Madeira. Our portfolio of Portuguese property for sale is growing all the time. |
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