If you plan to buy a property in Madeira, it's crucial to grasp the associated tax implications. One of the initial steps involves acquiring a Portuguese Fiscal Number, known as número de Contribuinte, necessary for any financial transactions in Portugal, especially property purchases. Additionally, familiarize yourself with the various taxes and fees linked to property acquisition in Madeira. Here are some key points to consider:
- **Fiscal Number**: Before finalizing a property purchase in Madeira, you must obtain a Portuguese Fiscal Number from the local tax office. Typically, your lawyer will assist in obtaining this number, usually incurring a small fee.
- **Real Estate Purchase Agreement**: After selecting a property that aligns with your lifestyle needs, your agent or broker will negotiate the terms and conditions of the purchase with the property owner or their representatives. Upon mutual agreement, an attorney will draft a formal agreement that both parties must sign. A minimum down payment of 10% is usually required upon signing this agreement.
- **Residency**: If you plan to reside in Madeira for more than 183 days in a year, you must apply for permanent residency. This status grants you similar rights to those of a Portuguese national.
PROPERTY INHERITANCE TAX
- Inheritances by a spouse, children, grandchildren, or parents are exempt from this tax.
- Inheritances passed on to others are subject to a 10% tax.
- Non-local residents may be subject to inheritance tax in their country of domicile or residence.
IMT PURCHASE TAX
- Buyers must pay this tax before the final deed.
- The tax-free limit for a permanent residence is 115,509€.
- Different rates apply for secondary residences, with land purchases incurring a 6.5% charge, regardless of the sale value.
STAMP DUTY
- A 0.8% fee on the sale price is paid before the final notarial deed.
REGISTRATION FEES
- A nominal tax is paid to the land registry for property registration and a notary fee for overseeing the final deed.
- If no mortgage is needed, the costs should not exceed 1000.00€.
However, securing financing from a local Portuguese bank will incur costs exceeding 1000.00€.
Capital Gains Tax
- This tax is due on the profit between the original purchase price and the selling price.
- Tax residents are taxed at regular rates on 50% of the capital gains.
- Reinvesting the proceeds within three years of selling a primary residence in Portugal, including Madeira or the EU, exempts individuals from capital gains tax.
- Non-tax residents are taxed on 28% of the capital gains.
- Keeping original documents and receipts for any property improvements is crucial to minimize capital gains tax.
Municipal Tax (IMI)
- IMI is an annual municipal charge for services like roads, schools, and local amenities.
- These values are periodically reviewed, with an average property tax rate of 0.307% for the 11 municipalities in Madeira and Porto Santo.
Portuguese Mortgages
- We collaborate with Portuguese banks offering financing solutions to non-residents on the island.
- Contact us before beginning your property search in Madeira, and we will connect you with financial experts to get pre-qualified.
- Being financially prepared before your search enhances your bargaining power.
Non-EU Citizens Opening a Bank Account in Madeira
Requirements include a valid passport, proof of address in the home country, tax identification, and employment proof.