The Different Taxes Related to Second Homes in Portugal
1. Municipal Property Tax (IMI)
IMI is an annual tax paid by property owners in Portugal, calculated based on the property’s fiscal value. The IMI rate varies by municipality and typically ranges from 0.3% to 0.45% for urban properties. For rural properties, the rate is fixed at 0.8%. In 2024, IMI rates may increase for properties subject to a triennial update of the fiscal value.
2. Stamp Duty (Imposto do Selo)
When acquiring a second home, a stamp duty of 0.8% of the property’s purchase value is due. Additionally, an annual stamp duty of 1% applies to luxury properties valued at more than one million euros.
3. Capital Gains Tax
If you decide to sell your second home in Portugal, you will need to pay capital gains tax. For Non-Habitual Residents (NHR), only 50% of the gains are taxable at a rate of 28% for individuals. Permanent residents may benefit from additional exemptions if they reinvest in another property in Portugal.
4. Income Tax (IRS)
Income generated from renting out the second home is subject to IRS. The tax rate is 28% for non-residents, while residents are taxed on a graduated scale of 14.5% to 48%. Homeowners can deduct certain expenses related to renting, such as maintenance costs and mortgage interest.
Non-Habitual Resident (NHR)
In 2024, the Non-Habitual Resident (NHR) status in Portugal was officially abolished for new residents, marking the end of an era that lasted for 14 years. This advantageous tax regime, which offered reduced tax rates and tax exemptions on foreign income for ten years, is no longer available for new applications as of January 1, 2024. The status still exists for people who already benefit from it.
Ownership and Inheritance Tax
Inheritance tax in Portugal does not apply to spouses, children, parents and grandparents, who are exempt from the 10% stamp duty on inheritances. Foreign residents can make a will stating that the inheritance law of their home country applies, which can provide more flexibility in the distribution of their assets.
For more information on inheritance tax on real estate in Portugal for foreigners, check out our article here!
Conclusion
Despite recent tax changes, Portugal remains a preferred destination for foreigners wishing to acquire a second home. Its exceptional quality of life, affordable living costs and diversified real estate offer continue to seduce. In 2024, although Non-Habitual Resident (NHR) status is no longer available to newcomers, many tax benefits remain, making buying property in Portugal still attractive. Whether you plan to spend your holidays there, generate interesting rental income or prepare for a sunny retirement, investing in a second home in Portugal remains an attractive and wise option. For a thorough understanding of the tax implications, it is recommended that you consult with local experts in order to optimize your investment.
