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Buying Property in Portugal as a Foreigner

As in many countries the world over, the first step in the real estate purchase process is the execution of a preliminary contract for sale. In Portugal, this initial contract is called the contrato de promessa de compra e venda. This particular agreement is a legally binding contract that sets forth the conditions of the sale.

The contrato de promessa de compra e venda is drawn up by a notary. At the time that this contract is executed and signed, the purchaser of the real estate is called upon to place a deposit for the real property that is subject to the transaction. In Portugal, the deposit that normally is paid by a buyer of real estate is between ten and twelve percent. If a seller elects not to follow through with the sale, he or she will forfeit the deposit that has been paid. Of course, there are instances when a buyer is justified in not closing on a contract for the sale of real estate. For example, if a seller cannot provide to the buyer a title free and clear, the buyer then does have the right to walk away from the contract and will not forfeit his or her deposit.

An interesting feature of the preliminary contract in Portugal is the fact that if the buyer walks away they will simply loose the deposit. If the “contracto de compra e venda” (CPCV) has already been signed, the buyer will loose the value they have paid (usually 10 – 15%).

If the SELLER walks away before the “CPCV” they will need to pay twice the deposit. If the “CPCV” has already been signed then the SELLER is obliged to pay twice the amount paid in the CPCV.
Thus, in Portugal, the buyer of real estate is provided with a level of protection that is found in very few other countries around the world. Indeed, this level of protection really is almost unheard of anywhere else in the world.

Another requirement that is unique to Portugal when it comes to the purchase of real estate is one in which the buyer of real estate is obliged to obtain a “Fiscal Number” from the local Tax Office. This requirement applies to foreign nationals who are interested in buying real estate in Portugal as well as to citizens of that country. The process of applying for and obtaining a Fiscal Number is very simple and does not require a great deal of time. Indeed, the process really involves completing what is in reality a very simple form and submitting it to the local Tax Office where it can be processed in no time whatsoever.

The real estate sales process in Portugal moves at a pretty fast clip. Generally speaking, the signing of the final contract and deed — which is known as the escitura de compra e venda — will occur within three to four weeks of the execution of the initial contract for sale. Once this agreement and related documentation is executed, the ownership of the real estate will transfer by operation of the law from the seller to the buyer. Although the buyer will become the legal owner of the real estate at that juncture, there still is a bit more work to do to completely conclude the real estate purchase process.

The final step that a person needs to take when purchasing real estate in Portugal is the payment of the Imposto Municipal Sobre, a tax imposed on real estate transactions in that country. In addition, the buyer will be obliged to register — either personally or through a lawyer — the deed with the Land Registry Office.

Overall, there are no added obligations on a foreign national who purchases real estate in Portugal. The rules, regulations and legal schemes that apply to citizens of Portugal apply similarly to foreign nationals who are interested in buying real estate in that country.