One of the main considerations in any investment in real estate abroad is taxation. Portugal, despite its many advantages as an investment destination, requires in-depth familiarity with the local tax structure – to avoid surprises and maximize profits.
Inheritance tax (IMT)
In Portugal, there is a graduated acquisition tax called IMT – Imposto Municipal sobre Transmissões. The amount of the tax depends on the value of the property, its purpose (residential or commercial), and whether it is the buyer’s first or second home:
- For a first residential home – tax brackets between 1% and 6%.
- For investment – this is usually a tax of 6.5%.
- For commercial properties – the tax can reach 7.5%.
In addition to IMT, there is also a stamp duty of 0.8% of the transaction cost.
Tax on rental
Property owners who rent out their apartments in Portugal are required to pay a tax on Rental income:
- The standard tax is 28% of net profits (income less recognized expenses).
- In certain cases, reliefs or deductions can be requested, mainly for maintenance expenses, management, mortgage interest, etc.
Capital Gains Tax
When selling a property, capital gains tax must be paid:
- A tax of 28% on the net profit.
- There are reliefs if the income from the sale of the apartment is used to purchase another apartment for permanent residence.
Municipal taxes and ongoing maintenance
Property owners pay an annual property tax (IMI) to the local municipality:
- Ranging from 0.3% to 0.8% of the property value according to the state assessment (and not necessarily according to the purchase price).
- A temporary exemption for 3 years is possible in certain cases of purchasing a new property or deep renovation.
Double taxation – Portugal and Israel
There is a tax treaty between Portugal and Israel to prevent double taxation. This means that you will not pay Twice on the same income – but you will have to report to the tax authorities in Israel, and in some cases make up the difference if the tax rate in Israel is higher.
How does I-Portugal help?
We are not accountants – but we work with the best local professionals. Each of our investors receives full support in the process of opening a tax file, understanding the reporting requirements and dealing with the authorities. The goal: that taxation does not become an obstacle – but rather part of your financial planning.
In conclusion
Taxation in Portugal requires attention – but it is predictable, clear and manageable. With the right support and precise planning, it is possible to maintain high profitability even after tax, and enjoy all the benefits of investing in one of the developing countries in Europe.