What’s your favourite childhood memory? Not paying bills!
Running costs for your Portugal property
At signing of the final deed everything to do with the upkeep of your property – all condominium fees if you’re buying in a complex or resort, utilities, services, the Imposto Municipal sobre Imóveis (IMI) and the Adicional Imposto Municipal Sobre Imóveis (AIMI – if applicable) – will be put into your name. It is important to ensure that these are all paid up to date by the previous owner before you buy.
You will, of course, have an ongoing obligation to keep up with all of these utility costs and other charges. Non-payment can have serious repercussions – for example your property can be confiscated and auctioned off if you fall too far behind on paying condominium charges. Some clients choose to have bills sent to their lawyers if they are not in Portugal on a permanent basis so as not to miss a deadline – speak to your lawyer in regards the best way to handle this if you plan to be in and out of the country.
There are fixed costs involved in the upkeep of your property – IMI (council tax), AIMI (wealth tax) condominium fees and property insurance and also variable fees such as electricity, water, gas, garden and pool maintenance.
If you choose to rent out your property there is also a yearly rental tax you must pay.
We go through all of these in more detail here so you have all the information you need in regards to your yearly spend.
Imposto Municipal Sobre Imóveis – IMI
As an owner of property in Portugal you will have to pay IMI – the Portuguese version of UK’s council tax. Payable yearly in arrears in one, two or three instalments depending on the value of your property. Rates vary from 0.3% to 0.8% according to property type, location and age.
Properties in rural areas are taxed at 0.8% whereas properties in more urban areas are taxed in between the ranges of 0.2% to 0.8%. Properties that have been re-valued since 2004 will fall between 0.2% and 0.5%, and properties valued before 2004 will be between 0.4% to 0.8%.
Some exemptions are available – urban properties which are to be used as a permanent home or to be rented out, with a tax registration value up to €125,000, held by individuals which obtained a taxable income in the year prior to the acquisition of up to €153,300, will be exempt from IMI for a period of three years.
IMI could be doubled on vacant properties and increased to 7.5% of the rateable value when the property is owned through a corporation domiciled in “black” listed jurisdictions (tax havens, eg: British Virgin Island, Isle of Man, Gibraltar).
Each individual area of Portugal has its own IMI rate which is decided by the municipal assembly for that area.
The person or corporation that owns the property on the last day of the respective tax year is liable to pay the IMI.
IMI is not paid monthly, but in instalments throughout the year. If you property is valued under €250,000, 100% of your IMI is payable in April. If your property is valued €250,000 – €500,000 then 50% is paid in April and 50% in November. For properties valued at €500,000 or over then payment is split into thirds payable in April, July and November.
Adicional Imposto Municipal Sobre Imóveis – AIMI
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.
We have put together the fees in the main central Algarve developments for you – prices are for guidance only.
Condominium fees – correct as of 2018
||Property type||Condominium fee||Infrastructure||Security|
|Dunas Douradas||1 bed apt||From €7,843||Included||Included|
|–||2 bed apt||From €9,706||Included||Included|
|–||3 bed apt||From €13,262||Included||Included|
|–||4 bed villa||From €24,203||Included||Included|
|Encosta do Lago||2 bed apt||From €3,375||From €601||Included|
|–||3 bed apt||From €4,463||From €793||Included|
|–||4 bed villa||From €2,138||From €985||Included|
|–||5 bed villa||From €2,673||From €1,177||Included|
|Lakeside Village||1 bed apt||From €1,064||From €409||€221|
|–||2 bed apt||From €2,128||From €601||€442|
|–||2 bed townhouse||From €1,728||From €601||€442|
|–||3 bed townhouse/villa||From €2,592||From €793||€663|
|–||4 bed townhouse/villa||From €3,456||From €985||€885|
|Martinhal||2 bed townhouse||From €4,738||Included||Included|
|–||2 bed townhouse||From €6,493||Included||Included|
|–||3 bed villa||From €9,475||Included||Included|
|–||4 bed villa||From €11,054||Included||Included|
|–||5 bed villa||From €14,038||Included||Included|
|Pinheiros Altos||2 bed apt||From €2,196||From €601||€923|
|–||3 bed townhouse||From €2,739||From €793||€1,384|
|–||3 bed semi detached with pool||From €3,343||From €793||€1,384|
|–||3 bed villa||From €9,713||From €793||€1,384|
|–||4 bed villa||From €10,293||From €985||€1,846|
|–||3 bed villa on private plot||N/A||From €793||€1,696|
|–||4 bed villa on private plot||N/A||From €985||€2,261|
|Quinta Verde||3 bed villa||From €3,750||From €1,947||Included|
|–||4 bed villa||From €5,000||From €2,595||Included|
|–||5 bed villa||From €6,250||From €3,244||Included|
|São Lourenço||Studio||From €2,264||From €361||€111|
|–||1 bed apt||From €3,018||From €409||€221|
|–||2 bed apt||From €6,036||From €601||€442|
|–||3 bed apt||From €9,054||From €793||€664|
|Vale dos Pinheiros||1 bed townhouse||From €3,500||From €409||€221|
|–||2 bed townhouse||From €4,200||From €601||€442|
|Victory Village||Studio||From €1,408||From €361||€111|
|–||1 bed apt||From €1,528||From €409||€221|
|–||2 bed apt||From €2,937||From €601||€442|
|–||3 bed apt||From €3,204||From €793||€664|
|–||3 bed townhouse||From €3,774||From €793||€664|
|–||4 bed townhouse||From €4,571||From €985||€885|
|Vilar do Golf||1 bed apt||From €2,790||From €409||€221|
|–||2 bed townhouse||From €5,129||From €601||€442|
|–||3 bed townhouse||From €6,200||From €793||€664|
|–||1 bed apt with pool/jacuzzi||From €1,489||From €396||Included|
|Vale do Lobo||2 bed apt with jacuzzi||From €2,131||From €698||Included|
|–||2 bed apt with pool||From €2,776||From €1,566||Included|
|–||3 bed villa||From €2,776||From €1,566||Included|
|–||4 bed villa||From €3,421||From €2,068||Included|
|–||5 bed villa||From €4,066||From €3,613||Included|
|–||6 bed villa||From €4,711||From €4,504||Included|
|–||7 bed villa||From €5,356||From €4,696||Included|
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
|Service||Quinta do Lago||Vale do Lobo||Vilamoura|
|Alarm monitoring & technical assistance||€560||€560||€200|
|Home & content insurance||€3,000||€1,750||€750|
|IMI & AIMI||€7,000||€3,000||€2,000|
|Security||€1,623||Included in resort membership||N/A|
|Swimming pool maintenance||€2,500||€2,500||€780|
|Water, sewage & refuse||€8,550||€4,380||€600|
|Total estimated annual costs||€49,133||€35,811||€13,595|