⚠️ Are You Aware of the Common Pitfalls When Purchasing Property in Portugal?

Happy Sunday, friends! 😊

It’s a surprisingly wet morning here on the Silver Coast and a welcome refresher for the garden, at least. Despite this drizzle, I have to say this has been one of the most pleasant summers we’ve enjoyed since moving to Portugal… and I’ve got the tan to prove it!

Last week, I promised to deliver an article on how to get a prescription through the national healthcare line. Unfortunately, today’s newsletter was already setting off all the word-count warning bells, so I’m taking a literal rain check and bringing you the full scoop next week. You’ll just have to come back again then... 😉

Here’s what we’re diving into today:

🤺 Some more epic medieval festivals you won’t want to miss

🏡 The second article in our Buying Smart in Portugal property series

🙊 A language video with local beach slang to help you blend in (especially if you haven’t worked on your tan yet)

Ready? Let’s dive in, shall we?

Óbidos Castle, a striking fortress perched above whitewashed houses and cobblestone streets, was once a royal wedding gift. In the 13th century, King Dinis gifted the town (and its castle) to Queen Isabel, marking the beginning of a tradition in which Óbidos belonged to Portugal’s queens for centuries. Its stone battlements now encircle one of the best-preserved medieval towns in Portugal, offering panoramic views to visitors brave enough to walk the 1.5 km walls.

Every July, Óbidos comes alive with its enchanting Medieval Festival. For about two weeks, the castle’s terrace and the old town transform, filling with costumed knights, fortune tellers, theatrical performances, and the aroma of roast meats and mead. The entire town becomes a stage for jousting tournaments, music, and historical reenactments, making it feel like you’ve stepped straight into a page of history.

Óbidos Medieval Fair (17-27 July, Óbidos): The charming walled town of Óbidos is once again stepping back in time, transforming into a lively medieval village filled with costumed performers, roaming musicians, thrilling jousts, and bustling stalls serving up traditional food and artisan crafts. This year’s spotlight falls on the timeless love story of Pedro and Inês, brought to life through captivating reenactments and storytelling. With medieval banquets, live shows, wooden tankards, and straw-lined streets, it’s a fully immersive experience that’s both magical and perfect for families, like walking straight into a page of history.

Viagem Medieval (30 July-10 August, Santa Maria de Feira, Aveiro District): Step into a living fairytale at Viagem Medieval, Europe’s largest medieval festival! The streets and castle of Santa Maria da Feira will transform into a bustling 15th-century village. Experience thrilling jousts, dramatic historical reenactments, lively parades, and feasts fit for royalty—all surrounded by hundreds of costumed performers and authentic medieval markets. It’s an unforgettable journey back in time, bursting with spectacle, flavour, and adventure for all ages!

Sines Tasquinhas Food Festival (11 July-2 August, Sines): a lively summer event held along Avenida Vasco da Gama in Sines, offering scenic views of the bay and fishing port. Around 20 food tents, managed mostly by local communities, serve traditional and regional dishes, each required to highlight at least two specialities from Sines, creating a true celebration of local gastronomy. Visitors can also enjoy a daily programme of live music and entertainment spanning multiple genres, with concerts typically starting at 10 pm, making the festival a distinctive blend of culture, food, and community spirit in a festive seaside setting.

Ria Formosa Festival (31 July-10 August, Faro): one of the Algarve’s most celebrated summer gastronomic events, taking place in Largo de São Francisco, Faro. This open-air festival is renowned for its focus on the seafood and traditions of the Ria Formosa lagoon, offering visitors the true flavors of the region. The festival is an unmissable summer event for anyone keen to sample southern Portugal’s best seafood, discover authentic regional flavors, and enjoy festive Algarve nights with music and community spirit.

Lionel Richie – Say Hello To The Hits Tour (July 29, MEO Arena, Lisbon): The legendary musician brings his tour to Lisbon, promising an evening filled with timeless hits like 'Hello' and 'All Night Long'.

Ageas CoolJazz 2025 (4-31 July, Cascais): A renowned summer music festival taking place in Cascais, Portugal. Celebrating its 21st edition, the festival transforms the picturesque green spaces of Hipódromo Manuel Possolo, Parque Marechal Carmona, and the newly added Jardim da Parada into vibrant concert venues. While its core is jazz and soul, the program is broad and eclectic, featuring pop, world music, indie, R&B, and fusion genres.

A big hug to those of you who’ve already supported this newsletter, you ROCK! 🎊 If you’ve been enjoying the newsletter and want to show a little love, here’s how:

A few weeks ago, we kicked off a new property buying series with the expert input of FRESH Portugal, starting with the essentials of buying in Portugal. Today, we’re back with Article 2, where we break down the true costs, taxes, and common pitfalls expats should know before signing on the dotted line.

If you find this as insightful as I did, be sure to share it with a friend, and keep an eye out for the next instalment in a few weeks, where we’ll dive into the legal landmines to avoid when buying property in Portugal.

Without further ado, here’s today’s article from the brilliant team at FRESH Portugal.

Editor’s note: Minor edits have been made for clarity, formatting, and flow.

🏡

Purchasing a home in Portugal involves several mandatory costs beyond the agreed price of the property.

The most significant is the IMT (“Imposto Municipal sobre Transmissões Onerosas de Imóveis”) or property transfer tax. The property tax is always charged on the higher amount between the declared purchase price and the taxable value (“VPT”) and depends on the type of property.

For example, for urban residential properties, IMT ranges from 1% to 7.5%. Some properties may benefit from exemptions or reduced rates if they fall below certain thresholds or are intended as a primary residence.

In addition to IMT, you’ll pay stamp duty (“Imposto do Selo”), which is fixed at 0.8% of the declared purchase price or taxable value of the property. Legal and administrative costs also add up. And while hiring a lawyer is not compulsory, it is highly recommended, particularly for foreign buyers unfamiliar with the Portuguese legal system. Legal fees are typically around 1% to 2% of the property’s value, depending on the complexity of the transaction.

You will also need to budget for notary and land registry fees, which usually range between €1,000 and €1,500. These cover the cost of officially registering the property in your name and validating the sale. While the seller typically covers the real estate agent’s commission, it’s essential to confirm the arrangement in advance. Agents typically charge around 5% to 6% of the sale price, plus VAT.

Altogether, you should expect to pay an additional 7% to 10% of the purchase price to cover all transaction-related costs. It’s wise to include this in your initial budget to avoid unpleasant surprises down the road.

Yes. Once you become a property owner in Portugal, you will be subject to an annual property tax known as IMI (“Imposto Municipal sobre Imóveis”). The IMI is computed not on the market price of the property but on its taxable patrimonial value, which is often significantly lower than the market value.

The IMI rate varies depending on the location of the property and whether it is classified as urban or rural. For urban properties, it typically ranges from 0.3% to 0.45%, though in some municipalities it can go up to 0.5%. For rural properties, the rate is fixed at 0.8%.

IMI is charged annually and can be paid in one, two, or three instalments, depending on the total amount due. Owners receive notification by post or through the Portuguese Tax Authorities Portal. In certain cases, such as for low-income families or new primary residences, there may be temporary exemptions from IMI, lasting up to three years.

It’s also important to note that high-value properties (with a VPT over €600,000 for individuals or €1.2 million for couples) may be subject to an additional tax known as AIMI (“Adicional ao IMI”), which is also assessed annually.

Yes, non-residents and foreign residents in Portugal are generally able to obtain mortgages in Portugal, although the conditions differ from those offered to Portuguese residents. Most Portuguese banks will lend to foreign buyers.

Typically, foreign buyers are offered a Loan-to-Value (LTV) ratio of around 60% to 70%, meaning you’ll need to provide a deposit of at least 30% to 40% of the property’s sale value. Interest rates can be either fixed or variable and tend to be competitive compared to other European countries, but terms depend on your age, income, and credit profile.

To apply for a mortgage, you’ll need to provide a variety of documents, including proof of income (e.g., annual salary slips or previous tax returns), bank statements, a credit report from your home country, and your passport or EU identification card. The property itself will also be assessed by the bank.

Many of the Portuguese banking institutions have dedicated English-speaking branches or staff trained to assist foreign clients through the mortgage process.

This is an important strategic decision, and the best choice will depend on your individual financial goals, tax situation, and family circumstances. Purchasing property in your personal name is usually the simplest route and works well for most residential buyers. However, it’s important to consider potential inheritance implications, particularly for non-Portuguese buyers who intend to leave the property to heirs living outside of Portugal.

Buying property jointly with a spouse or partner is also common, especially when both parties contribute financially. In this case, both names must be included on the deed. However, it’s important to understand which property regime applies—such as separation of assets or community property—under both Portuguese law and your home country’s legal system. This becomes especially relevant in the event of divorce or death.

Purchasing property through a company can offer certain tax advantages, especially for high-value properties or real estate intended for rental income. In some cases, non-residents incorporate Portuguese limited liability companies (“Lda”) for this purpose. This route is more complex and involves additional corporate and tax reporting requirements in Portugal, and may be subject to corporate tax and VAT. However, it can provide flexibility in estate planning and may reduce inheritance tax exposure.

In all cases, it is essential to consult a lawyer or tax advisor familiar with both Portuguese and international law before deciding how to structure ownership.

Portugal operates under forced heirship rules, which means certain family members, such as spouses, children, and sometimes parents, are entitled to a mandatory share of a deceased person’s estate. This applies regardless of what is written in a will. Unless the deceased has taken legal steps to apply the inheritance laws of their country of nationality (if they are from another EU state).

Under EU Regulation 650/2012, foreign nationals living in Portugal can opt to apply the succession laws of their country of nationality rather than those of Portugal, provided they clearly state this in a Portuguese will. This is particularly useful for expats who wish to distribute their estate differently from Portuguese norms.

Importantly, Portugal does not have a traditional inheritance tax. Instead, there is a 10% stamp duty levied on inheritances or gifts, but this does not apply to spouses, children, or parents. Other beneficiaries, however, will be subject to this 10% tax.

To avoid legal complications and to protect your heirs, it is strongly advised to draft a Portuguese will that reflects your wishes and complies with both local and international law.

Yes, while Portugal is generally a safe place to buy property, there are several risks that buyers should be aware of. One of the most common issues involves hidden debts attached to the property, such as unpaid utility bills or condominium fees. These debts can sometimes transfer to the new owner, so it’s crucial that your real estate lawyer verifies the absence of liabilities before you sign any deed.

Another frequent pitfall is the existence of illegal constructions or unlicensed extensions on properties. In rural areas or older properties, it’s not uncommon for annexes, swimming pools, or extra floors to have been built without municipal approval. These additions could result in fines or even demolition orders imposed by the Portuguese state. Always cross-check the property’s current status with the records at the local municipality.

Inflated listing prices, especially in high-demand areas such as Lisbon, the Algarve, or coastal tourist towns. Some sellers (or agents) intentionally list properties above market value, assuming foreign buyers are unaware of typical prices. Comparing multiple listings, obtaining an independent valuation or working with a buyer’s agent can help you make a fair offer.

Lastly, ensure you work only with licensed real estate agents. This guarantees that they are certified and regulated. Unlicensed intermediaries, though often charming, may lack legal responsibility and leave you vulnerable to fraud or misinformation.

With thanks to our collaborators, the Real Estate Team at FRESH Portugal, for their valuable insights and contributions to this article.

_{The tax team at Fresh Portugal is a highly skilled and experienced group, with deep expertise in both domestic and international tax law. Specializing in tax consulting, litigation, and planning, the team focuses on areas such as digital nomad taxation, crypto, and expat tax services. Additionally, the team has a strong background in private client services, tax compliance, delivering comprehensive and innovative solutions.}

Email: [email protected]

Portuguese with Leo has the language lessons you’ve been looking for. He uses real, everyday Portuguese, spoken slowly and clearly, making it easy for even total beginners to get familiar with the sounds and rhythm of the language. In this video, he breaks down common expressions in a fun and engaging way. I highly recommend checking out his channel if you want to level up your Portuguese quickly and naturally.

Thanks for reading! 💌

Hustle on!

Angelique🧞‍♀️

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