Portuguese Vs. Spanish Real Estate Property,
Property and income tax comparisons between Portugal Vs. Spain
lower down page but, just to mention, if this quinta / villa property
were just a few meters north (across the river / border in Spain),
it would cost you up to 43,750 Euros a year in wealth (assets) tax
alone; here in Portugal there is no wealth tax. Which is perfect
for anyone that loves Spain but not Spanish wealth / worldwide income
On the subject of taxes, if you qualify as a Non-Habitual
Resident in Portugal you will pay only 20% on earning derived
from within Portugal and nothing on income derived outside Portugal
providing the income is taxable in the other country where you earn
it (even if they do not actually tax you on it).
Many people find the Spanish tax man / system very, if not too
intrusive / grabbing regarding worldwide earnings. Spain has quite
low thresholds for what is taxable outside Spain if you are resident
there. If you are affluent or wealthy, you probably will not find
the Spanish tax regime attractive. Living on the border just inside
Portugal however, gives you the best of both worlds.
Living on the border, you can literally enjoy the best of both
countries. For example, the healthcare, fish, restaurant food, clothes
shopping, recreational facilities, cured ham and dairy products
are far better in Spain. Chicken, fresh vegetables, bottled water,
beef, fruit, video games (because the Portuguese versions also have
English, the Spanish versions do not) preschools and soft drinks
are much better in Portugal. The present owners sometimes buy wine
in Portugal, sometimes Spain, depending on what offers there are.
Many people here in Portugal buy petrol / diesel for their cars
in Spain where it is cheaper.
If you operate a business across the river in Spain (it does not
have to be a very big business, it could simply be an extension
of your hobby, perhaps operated from a low cost virtual office),
you would be able to buy a Spanish registered car in the businesses
name and drive it legally for personal use in Portugal; a BMW 320D
touring (estate / station wagon) costs €14,000 more in Portugal
than it does in Spain (Spanish and Portuguese road taxes and insurance
are comparable); see our Business
There have been some horror stories broadcast on British TV about
foreign ownership problems, mostly in Spain. The reason is that
many Spanish building permits had been corruptly issued for "rustic"
category land, which they should not have been; you need "Urbano"
land title for development / building. In Portugal such things are
tightly regulated and no-one can get a building permit for rustic
land; they have to change the land type (if it is possible) first.
In Spain it is buyer beware; be sure your land title is "Urbano".
In Portugal you can get a building permit for agricultural title
land (the plot on which you build though has first to be upgraded
to "Urbano") if you own over 5000 sqm of agricultural
land or your land is in a designated development zone; again, in
Portugal, your land title for the building itself must be Urbano.
On the other side of the coin and river when Spain does zone an
area for development they often have little regard at city hall
for what is adjacent to where you can build. Here in Portugal land
and developments / buildings are carefully regulated for a number
of reasons including environmental and communal. For example, the
present owners have some land available to legally build a house
but it has been made clear to them that the maximum number of storeys
is two (including the roof section which can contain accommodation)
and that any house must be a good distance from their nearest neighbour’s
property so as not to steal light from their windows. Compare this
with Salvaterra just across the border in Spain where 6 plus storey
apartment blocks have appeared from nowhere and where little old
ladies in their little old houses now have huge concrete blocks
next to them; you do not see that the Portuguese side of the border.
Above, Spanish planning at its worse in Salvaterra, just across
the river from the villa. Great, lots of new shops and restaurants
for you to go to. Not so good for this houseowner who has 5 or even
6 storey apartment blocks now on every side. As recently as 2004
this road was all old single storey houses, now....... Which only
goes to show you can not rely on the views from your house and grounds
unless you own the land next door or it is protected by preservation
orders and zone restrictions!
On the taxation side, Portugal is far more attractive than Spain.
Especially if you want to take early retirement and raise a family
off your savings; the fact Portugal does not tax wealth (assets
in Portugal) is a major benefit. If the villa was in Spain, a buyer
would have to pay up to 43,750 Euros a year wealth tax on the property
alone! Capital gains on property and inheritance tax in Portugal
are also much better (lower or non-existent) than Spain. In fact,
the only tax to grumble about in Portugal is the (hidden) vehicle
licensing fee (tax) which makes cars 30% more expensive then in
Spain, but the EU has already mandated Portugal must drop this back
door tax within the next few years. Will this simply get added to
the tax burden elsewhere? Apparently not as Portugal is fast catching
up on its income tax, municipal property tax (rates) and VAT cheats,
so they are getting more tax revenues this way. Of course if you
buy a villa in Portugal that is on the border with Spain, if you
also register in Spain, you can of course buy yours cars over the
border! As long as you are not Portuguese and as long as you have
a Spanish ID card, the Portuguese tax police can do nothing unless
they can prove the Spanish registered vehicle spends more than the
6 months allowed in Portugal.
||0.2 % - 2.5% pa
||7.65% - 34%
||Nil (immediate family)
|Non-Resident Property Tax
||3% pa of property value
|Property Transfer Tax
||6% to 7% “ITP” if property is not new (including
stamp duty), 8% (VAT and stamp duty) if new. Land only is 17%.
||6% “IMT” + 0.8% Stamp Duty for luxury properties,
6.5% IMT + 0.8% Stamp Duty for land only.
|Property Capital Gains Tax
Residents: 6% to 21% (less all legal fees and costs paid)*
|Income Tax (Residents)
||15% - 45%
||12% - 42%
|Income Tax (Non-Residents)
||25% / 15% on rental income
|Municipal Property Tax (Rates)
||0.4% to 1.1%
||0.4% and 0.8%
Capital Gains Tax (Individuals)
Capital gains tax on property sales in Portugal for residents are
treated as income and taxed accordingly. Tax breaks exist for Portuguese
residents but not for non-residents that make it very sensible to
be classified as "resident" when you sell any property!
Home owners that have their principle residence outside Portugal
pay a flat rate of 25% of their capital gains on any property sale
in Portugal. Residents receive a 50% exemption before the gain is
calculated along with any other taxable income. However,
if your Portuguese property is your main / registered residence
and you sell it, you can invest your sale proceeds including profit
into a new principle address property without paying tax on the
capital gains made on the old property (must be done within 2 to
3 years). If you reinvest less than the full sale amount of the
former property, the taxable amount is pro-rated. In addition, you
are able to offset your selling and buying costs (legal and moving
fees), which brings down the maximum tax rate of 20% (50% of 42%)
All immediate family members (spouse, children, grandchildren, parents
and grandparents) are exempt from tax on transfers by way of gift
or inheritance; anyone else is assessed tax at a flat rate of 10%.
Note: We have done our very best to accurately reflect the true
tax systems of Spain and Portugal above, but we are not taxation
experts nor financial advisors and you should ascertain the facts
from a qualified source such as the local tax offices. This information
was compiled from a number of other (credible) web sources in March