Let's Explore the Main Costs People Encounter When Selling Property in Portugal!
In recent years, the number of non-residents living in Portugal has doubled from around 480,000 in 2018 to 1.4 million in 2023.
This is largely because the country's infamous coastline, rich history and favourable climate, combined with its relatively affordable real estate market, has seen an increase in non-residents looking to buy and sell property in Portugal.
If you're a non-resident looking to sell property in Portugal, it's crucial to understand the various costs involved in the process. In this blog, we will go through the costs you may encounter in each stage of the process, so you can navigate through it a little easier!
Table of Contents:
- The Most Significant Cost: Capital Gains Tax
- Real Estate Agent Commissions When Selling a Property in Portugal
- Legal Fees When Selling a Property in Portugal
- Fiscal Representation: A Mandatory Requirement for Non-Residents
- Property Valuation and Survey Costs
- Mortgage Cancellation Fees
- Currency Exchange Costs for Non-Euro Property Sellers
- Other Costs to Consider When Selling Property in Portugal
- The Costs of Selling Property in Portugal: A Summary
The Most Significant Cost: Capital Gains Tax
Let's start things off with taking a look at the most significant and asked about cost during the process of selling a property in Portugal.
As a non-resident, when selling a property in Portugal, the most considerable cost is often the Capital Gains Tax (CGT).
Capital Gains Tax is levied on the profit made from the sale of the property.
Non-residents are taxed at a flat rate of 28% on this gain, while corporations are taxed at 25%. Non-residents can deduct certain expenses to reduce their tax liability.
These include costs associated with property improvements, as long as you can provide valid invoices, the cost of buying and selling the property and real estate agent commissions.
Double Taxation Agreements (DTA)
Portugal has Double Taxation Agreements with many countries. The agreement prevents the same income from being taxed twice. For example, if you're a tax resident in the UK and sell property in Portugal, you may be able to offset Portuguese Capital Gains Tax against any UK tax liability.
Real Estate Agent Commissions When Selling a Property in Portugal
You should expect real estate agent commissions, in Portugal, to range anywhere from 3% to 6% of the final sale price, plus VAT at 23%. This cost will vary depending on the region and the specific services provided by the agent.
We suggest you negotiate the commission rate upfront and ensure you clarify which services are included e.g. marketing, property viewings, and negotiations with potential buyers.
Exclusive vs. Non-Exclusive Agreements
Exclusive Agreement
If you sign an exclusive contract with an agent, the commission might be lower, but you are obligated to sell through that agent.
Non-Exclusive Agreement
A non-exclusive agreement allows you to list with multiple agents but may lead to higher commission fees.
Legal Fees When Selling a Property in Portugal
Hiring a qualified lawyer is essential when selling property in Portugal, especially if you're a non-resident and unfamiliar with local laws and procedures. Legal fees typically range from 1% to 2% of the sale price, depending on the complexity of the transaction and the lawyer's expertise.
What Will Your Lawyer Help With?
A lawyer will handle various aspects of the sale, including verifying property documentation, checking for any outstanding debts or encumbrances, preparing the sale and purchase agreement, which is locally known as the Contrato de Promessa de Compra e Venda, and ensuring that the transaction complies with Portuguese law.
Are There Any Additional Legal Fees?
Aside from the standard legal fees, you will also need to pay notary and registration fees. The notary will oversee the signing of the final deed, known locally as the 'Escritura', and officially register the new owner. These fees usually range from €500 to €1,000 (£422 - £844), depending on the notary and the value of your Portuguese property.
Fiscal Representation: A Mandatory Requirement for Non-Residents
Non-residents selling property in Portugal are required to appoint a fiscal representative, who is responsible for ensuring tax compliance with the Portuguese authorities.
This representative can be an accountant, lawyer, or tax advisor. Fees for fiscal representation can range from €500 to €1,500 (£422 - £1,265) per year, depending on the complexity of your tax situation and the services provided.
Property Valuation and Survey Costs
Before listing your property for sale in Portugal, we advise you to have a professional valuation or survey conducted to determine the market value of the property.
Although this step isn't mandatory, it will provide you with an accurate assessment and help you set a realistic selling price. Valuation costs typically range from €300 to €800 (£253 - £675), depending on the property's size and location in Portugal.
Mortgage Cancellation Fees
If there is an outstanding mortgage on the property, you may need to pay a mortgage cancellation fee to the bank. This fee varies depending on the terms of your mortgage agreement but can range from 0.5% to 2% of the remaining loan amount. It is crucial to check with your lender to understand the specific costs involved.
Currency Exchange Costs for Non-Euro Property Sellers
As a non-resident, your primary currency may not be the Euro.
Currency exchange costs can significantly impact the net proceeds from your property sale in Portugal.
If you're transferring funds from Portugal to another country, you might incur currency conversion fees and fluctuations in exchange rates, that can impact the final costs.
We would advise you to use a foreign exchange specialist to manage these risks and secure a favourable rate.
At EasyFX, we have helped customers buy and sell property abroad for over 20 years and our dedicated team of expert brokers is always available to support, making foreign exchange, Easy, for everyone.
The cost of transferring your sale proceeds back home can vary, Banks will usually charge the most on the exchange rate, around 2-4% of the transferred amount and place high fees that can vary from £5-£25 per transfer.
Independent money transfer services will be a cheaper alternative, some, like ourselves, don't add on any transfer fees for international transactions and apply lower charges on the exchange rate.
Other Costs to Consider When Selling Property in Portugal
Inheritance and Gift Taxes
If you are selling a property as part of an inheritance, of gifted to another party, additional taxes and fees may apply.
While Portugal does not impose inheritance tax on direct descendants, there may be stamp duty and other administrative costs to consider. It's crucial to consult with a lawyer or tax advisor to understand the implications fully.
Maintenance and Utility Bills
The final costs you will need to consider are miscellaneous costs such as utility bills, condominium fees - if applicable - and property maintenance costs until the property is sold.
These ongoing expenses can add up, especially if the property remains on the market for an extended time.
The Costs of Selling Property in Portugal: A Summary
Selling property in Portugal as a non-resident comes with a variety of costs that can greatly affect your net profit.
From Capital Gains Tax and real estate agent commissions to legal fees and currency exchange rates, understanding these expenses is key to smart financial planning and making the most out of your property sale.
To handle the complexities of the Portuguese property market, it's wise to work with experienced local professionals, that our team, here at EasyFX can put you in touch with to get your property sale process started and make it seamless throughout.
By carefully preparing and budgeting for all potential costs, you can maximise your returns and ensure a smooth and successful property sale in Portugal.
Make Your Portuguese Property Sale, Easy, with EasyFX
As experts in foreign exchange, our goal at EasyFX is to make your international property sale and money transfer, Easy and affordable.
We work to get you a favourable exchange rate, at the right time, for your Portuguese property sale. Your proceeds no longer have to go into a bank's pockets, and instead, stay with you.
As an FCA, FINTRAC, and FSMA-regulated institution, you can trust us with your money, which is always kept in safeguarded client accounts.
If you'd like to know more about how we can support and help with your property sale in Portugal then please get a free transfer quote today, or sign up in less than 15 minutes and one of our dedicated brokers will be in touch to discuss your requirements.
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