Running costs

At signing of the final deed, everything to do with the upkeep of your property is put into your name: condominium fees, utilities, services, IMI, and AIMI where applicable. It is important to make sure these are all paid up to date by the previous owner before you buy.

IMI — the annual property tax

IMI is Portugal's equivalent of council tax, payable yearly in arrears. Rates vary from 0.3% to 0.8% according to property type, location and age. Rural properties are taxed at 0.8%; urban properties fall between 0.2% and 0.8%. Properties revalued since 2004 fall between 0.2% and 0.5%; those valued before 2004 between 0.4% and 0.8%. Each municipality sets its own rate.

Payment is split by property value: under €250,000, the full amount is due in April. Between €250,000 and €500,000, half in April and half in November. At €500,000 and above, in thirds across April, July and November.

Some exemptions exist. Urban properties used as a permanent home or rented out, with a tax registration value up to €125,000, held by individuals whose taxable income in the prior year was up to €153,300, are exempt from IMI for three years.

AIMI — the wealth tax

Introduced in 2017, AIMI affects those with a share in Portuguese property worth over €600,000. Regardless of residency status, rates are 0.4% for property held by companies, 0.7% for individuals, and 1% for those owning property valued over €1 million. A further rate of 1.5% applies above €2 million.

A €600,000 allowance applies per person. A couple jointly owning one home only attract AIMI above €1.2 million, and then only on the value above it. Someone owning three properties worth €500,000 each would be liable on €900,000. AIMI is assessed in June and paid in September.

AIMI excludes rustic land and properties registered as commercial, industrial or service-providing. Both IMI and AIMI are calculated on the Valor Patrimonial Tributário (VPT), which is usually lower than market value.

Condominium fees

If you buy within a private estate, resort or development, you own your home and a share of the common elements — foyers, hallways, lifts, gardens, roads, pools, tennis courts, gyms. Fees are calculated according to the size of your property, detailed in the deed, and billed monthly or twice yearly.

They cover road cleaning, green-zone and garden maintenance, building cleaning and decoration, reception, communal lighting, water supply for pools and gardens, and administration. Some include external painting of individual villas, refuse collection, meter reading, mail forwarding and security.

Rental tax

Individual ownership of Portuguese rental property is taxed at 28%. With planning and a fully compliant structure, effective assessment on short-term holiday rentals can be reduced significantly — in some cases to between 3.75% and 8.75%. If you use a rental management company, expect to pay around 30% of each booking depending on which services you take.

What it actually costs

Below are ballpark annual figures for a four-bedroom detached villa on its own private plot in three central Algarve locations. These are fixed costs only and are indicative rather than a quotation.