Purchasing Practice in Portugal

It used to be common practice in Portugal for part of the purchase price to be paid in cash. In some cases, sellers will still try this route. However, the purchaser should be aware that besides being illegal, the base price for the capital gains in a possible future sale, will be the amount documented and taxed. Further, should the purchase price be lower than the official tax valuation, the tax authorities may still demand stamp duty (transfer duty) on the official tax valuation. Similarly the determination of the capital gains will be determined based on the tax valuation if higher.

Common Pitfalls when Purchasing Property

Acquiring property in Portugal may provide many hurdles not normally encountered by new residents in their home country. For example, many of the properties listed for sale may have multiple owners due to unsettled inheritances, and some of these are likely to be abroad, with the result that a property transaction may be delayed until all the paperwork is gathered.

The purchaser may only become aware of this when proceeding with the final steps in acquiring the property when confronted with notice from the agents that the sale has been delayed because the sellers are awaiting another document. It is advisable to enquire from the agent at an early stage whether the seller has full title or the necessary powers of attorney to proceed with the sale.

Illegal Additions to Property

It is also common for properties to have unlegalised additions to the property and not reporting or obtaining the necessary local municipal authority licences to avoid costs and additional property rates. Therefore a purchaser should also enquire from the estate agent whether the property for sale is legal. There are often cases where owners have had to knock down unauthorised additions.