Running Costs

Introduced in 2017, the Adicional Imposto Municipal Sobre Imóveis (AIMI) is seen as Portugal’s version of a wealth tax, affecting those with a share in Portuguese property worth
over €600,000.

Regardless of residency status, rates are 0.4% for properties held by companies, 0.7% for individuals and 1% for those owning property valued over €1 million.

A €600,000 allowance per person is deducted from the value of all Portuguese properties. If you and your partner jointly own one Portuguese home, the property will only attract AIMI if it is worth over €1.2 million, and then only on the value above this. Alternatively, someone owning three properties worth €500,000 would be liable for tax on €900,000 – the combined value minus the allowance. AIMI is assessed by the Tax Authorities in June of each year with the respective payment being made during the month of September.

There has been one change to this tax in 2019 in the form of an additional rate of 1.5% for properties valued in excess of €2 million.

AIMI does not apply to all types of property as the law excludes: rustic land (non-urban) properties and properties registered as commercial, industrial or service providing. Therefore, AIMI will apply to the remaining properties, which include apartments, villas and plots for construction, amongst others.

For both IMI and AIMI, the tax authorities calculate the property value using the Valor Patrimonial Tributário (VPT), bear in mind these values are usually lower than the actual market value.

With more and more tourists visiting Portugal – 10 million or so each year – it is worth considering renting out your property. Not only will this give you a way of reducing annual costs of owning a holiday home, but may even swell the coffers a little as well.

Currently there are nearly 42,000 rental licenses registered in the Portuguese Portal of Tourism and this number is growing every day.

If you decide that you would like to rent out your property, individual ownership of Portuguese rental real estate is taxed at 28%, but if you plan ahead and structure your real estate investment in order to be as tax efficient as possible and adopt a fully compliant strategy then you can dramatically reduce tax assessment on short-term holiday rentals and mitigate the tax you currently pay, to as little as 3.75% and 8.75%.

If you choose to rent your property out by using one of the myriad rental companies based in the Algarve then expect to pay around 30% of each booking to the rental company to cover their costs. Some companies will be cheaper than this, some more expensive, it all depends on which of their services you choose to use.

Properties in condominiums are those on a private estate, resort or development with communal areas and facilities. Owners here own their own homes, but also own a share of the common elements including foyers, hallways, passages, lifts, patios, gardens, roads, leisure and sports facilities – golf courses, swimming pools, tennis courts, gymnasiums, bars and restaurants.

Advantages of owning in a condominium include increased security – most have 24 hour security – a range of community sports and leisure facilities, community living, no garden, lawn or pool maintenance, fewer of the responsibilities of home ownership and ease of maintenance.

Owners must pay condominium fees for the upkeep of communal areas and services.

Charges are calculated according to the size of the property and are detailed in the property deed. Fees are billed monthly or bi-annually and will vary depending on the communal facilities provided.

Fees go towards road cleaning, green zone maintenance (including communal and possibly private gardens), cleaning, decoration and maintenance of buildings, reception, communal lighting in buildings and grounds, water supply (e.g. swimming pools, gardens) and administration fees.

Fees may also include the external painting of individual villas, rubbish collection, telephone message and mail forwarding services, reading utility meters and security services.

Although it is difficult to generalise – and the costs will be different in each case depending on a number of factors, we have put together some ‘ballpark figures’ to give you an idea how much things cost – in other words will the budget you have planned be enough?

We have chosen three areas in the Algarve as examples, condominium fees in Lisbon will be lower but utilities etc – generally – will be more expensive. The areas we have chosen are Quinta do Lago, Vale do Lobo and Vilamoura and we are basing the figures on a 4 bedroom, detached villa standing on its own private plot. These are all approximate, estimated figures but will give you an idea of the yearly costs of owning and living here. These are fixed costs only, based on information as of 2018.

Fixed annual property running costs – correct as of 2018