Table=
of
Contents............................=
...........................................................................=
............ 1
Intro=
duction..........................................=
...........................................................................=
........... 7
Sex
Money=
..........................................=
...........................................................................=
...........................................................................=
........ 7
Price=
s..........................................=
...........................................................................=
...........................................................................=
.......... 7
Law
Reali=
ty Check..........................................=
...........................................................................=
...................................................................... 8
Trans=
lations..........................................=
...........................................................................=
........................................................................ 8
The E=
uropean
Union (EU)..........................=
...........................................................................=
............................................................... 8
The E=
uropean
Economic Area (EEA).................=
...........................................................................=
................................................... PAGE=
REF
_Toc43089842 \h <=
/span>8
Eurol=
and..........................................=
...........................................................................=
...........................................................................=
... 8
Schen=
gan
Countries...........................=
...........................................................................=
.......................................................................... =
9
Discl=
aimer..........................................=
...........................................................................=
...........................................................................=
. 9
Useful
Addresses & Telephone Numbers...=
...........................................................................=
............................................................ =
9
Findi=
ng a
Property in Portugal................=
.................................................................... 10
The N=
eed for
Preparation.........................=
...........................................................................=
.............................................................. 10
Why?<=
span
style=3D'mso-tab-count:1 dotted'>..........................................=
...........................................................................=
...........................................................................=
... 10
What
preparation should you make?........=
...........................................................................=
........................................................ 10
Which=
Area
and Type of Property is Right for You? PAGE=
REF
_Toc43089851 \h <=
/span>13
Perso=
nal
preference..........................=
...........................................................................=
..................................................................... 13
Getti=
ng to
know the areas......................=
...........................................................................=
............................................................... 13
Do yo=
u want
to let the property?................=
...........................................................................=
........................................................ 14
Clima=
te..........................................=
...........................................................................=
.......................................................................... =
14
Acces=
s..........................................=
...........................................................................=
...........................................................................=
. 16
Facil=
ities..........................................=
...........................................................................=
......................................................................... <=
/span>18
Terra=
in..........................................=
...........................................................................=
...........................................................................=
. 18
Price=
Guide..........................................=
...........................................................................=
.................................................................... 18
Space=
..........................................=
...........................................................................=
...........................................................................=
... 19
Heati=
ng..........................................=
...........................................................................=
.......................................................................... =
19
Air
conditioning........................=
...........................................................................=
...........................................................................=
... 19
Parki=
ng..........................................=
...........................................................................=
...........................................................................=
19
New o=
r old?..........................................=
...........................................................................=
................................................................... =
19
Rental
Potential...........................=
...........................................................................=
...........................................................................=
21
Capit=
al
Growth..............................=
...........................................................................=
......................................................................... <=
/span>21
Estat=
e Agents..........................................=
...........................................................................=
..................................................................... 22
Portu=
guese
based agents........................=
...........................................................................=
............................................................... 22
UK ba=
sed
estate agents.......................=
...........................................................................=
.................................................................. <=
/span>23
DIY s=
ales..........................................=
...........................................................................=
....................................................................... 24
Aucti=
ons..........................................=
...........................................................................=
......................................................................... <=
/span>25
Renti=
ng
instead of Buying...................=
...........................................................................=
.................................................................... 26
Inspe=
cting
Property............................=
...........................................................................=
....................................................................... 27
Do it
yourself............................=
...........................................................................=
...........................................................................=
... 28
Estate
Agent's Valuation & "Survey".....................................................................=
....................................................................... 31
Mortg=
age
Lenders Survey......................=
...........................................................................=
.............................................................. 31
Portu=
guese
Builder.............................=
...........................................................................=
.................................................................... 31
Portu=
guese
Surveyor............................=
...........................................................................=
.................................................................. <=
/span>32
UK Qu=
alified
Surveyor based in Portugal..........=
...........................................................................=
................................................ 32
UK ba=
sed
Surveyor............................=
...........................................................................=
.................................................................... 32
Times=
cale..........................................=
...........................................................................=
...................................................................... 32
Contr=
acts
"subject to survey".......=
...........................................................................=
....................................................................... 32
Gener=
al..........................................=
...........................................................................=
...........................................................................=
33
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 33
Raisi=
ng
Finance to Buy a Property in Portugal................................................. PAGE=
REF
_Toc43089885 \h <=
/span>34
UK Mo=
rtgages..........................................=
...........................................................................=
.................................................................. <=
/span>34
Portu=
guese
Mortgages...........................=
...........................................................................=
................................................................... =
35
Gener=
al
concept.............................=
...........................................................................=
........................................................................ 35
The m=
ain
differences between an English and a Portuguese mortgage.................................................................=
................. 35
How M=
uch Can
I Borrow?...........................=
...........................................................................=
........................................................ 36
Appli=
cations
for a Portuguese Mortgage...........=
...........................................................................=
................................................ 37
The M=
ortgage
Offer...............................=
...........................................................................=
................................................................ 37
Payme=
nts for
New Property........................=
...........................................................................=
......................................................... 37
Prope=
rty
needing Restoration.................=
...........................................................................=
............................................................. 37
The C=
ost of
Taking out a Mortgage...............=
...........................................................................=
.................................................... <=
!--[if supportFields]> PAGE=
REF
_Toc43089895 \h <=
/span>37
Hidde=
n Costs..........................................=
...........................................................................=
................................................................ 38
Early
Redemption Penalties................=
...........................................................................=
................................................................. 38
The E=
xchange
Rate Risk...........................=
...........................................................................=
........................................................... <=
/span>38
Forei=
gn
Currency Mortgages..................=
...........................................................................=
.............................................................. 38
Savin=
g Money
on your Euro Repayments.............=
...........................................................................=
........................................... 38
Summa=
ry..........................................=
...........................................................................=
....................................................................... 39
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 40
Who s=
hould
own the property?...................=
................................................................ 41
The o=
ptions..........................................=
...........................................................................=
........................................................................ 41
Sole
ownership...........................=
...........................................................................=
...........................................................................=
.. 41
Joint
Ownership...........................=
...........................................................................=
...........................................................................=
41
Addin=
g your
children to the title...............=
...........................................................................=
........................................................... <=
/span>41
Putti=
ng the
property in the name of your children only..........................................=
................................................................... =
41
Limit=
ed
company.............................=
...........................................................................=
..................................................................... 42
The u=
se of
trusts..............................=
...........................................................................=
...........................................................................=
42
Which=
is
right for you?......................=
...........................................................................=
...................................................................... 43
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 43
Buyin=
g a
Property in Portugal................=
..................................................................... 44
The L=
aw..........................................=
...........................................................................=
...........................................................................=
.. 44
Gener=
al
Procedure...........................=
...........................................................................=
......................................................................... <=
/span>45
Choos=
ing a
lawyer..............................=
...........................................................................=
....................................................................... 45
The N=
otary
Public ("Notario")
Portu=
guese
lawyers (advogados)..........................................=
...........................................................................=
............................... 46
Engli=
sh
lawyers (solicitors)................=
...........................................................................=
.................................................................... 46
The p=
rice..........................................=
...........................................................................=
...........................................................................=
. 46
How m=
uch
should be declared in the deed of sale?........................................................................=
........................................... 46
Where=
must
the money be paid?..................=
...........................................................................=
...................................................... 47
Gener=
al
Enquiries and Special Enquiries.....=
...........................................................................=
...................................................... 47
Your =
Civil
State (estado civil) and other
personal details....................=
...........................................................................=
........... 48
Tax
Idenification Number (NIE)..........................................=
...........................................................................=
................................. 48
The c=
ommunity
of owners (comunidad de propietario=
s)..........................................=
................................................................... =
48
Initi=
al
contracts...........................=
...........................................................................=
...........................................................................=
.... 49
Who p=
repares
them?...............................=
...........................................................................=
.............................................................. 49
If yo=
u are
buying a Finished Property..........=
...........................................................................=
...................................................... 50
You a=
re
buying an Unfinished Property.......=
...........................................................................=
..................................................... =
51
Key p=
oints
– a checklist.................=
...........................................................................=
....................................................................... 52
Steps=
between
signing the contract and signing the escritura
de compraventa..................=
.................................................... <=
!--[if supportFields]> PAGE=
REF
_Toc43089932 \h <=
/span>53
Power=
s of
Attorney (poderes)..........................................=
...........................................................................=
.................................... 53
Getti=
ng the
money to Portugal...................=
...........................................................................=
.......................................................... 54
Excha=
nge
control and other restrictions on moving money.................................................................=
.................................... 55
Final=
checks
about the property..................=
...........................................................................=
........................................................ 55
Fixin=
g the
completion date.....................=
...........................................................................=
.............................................................. 56
Check=
list
– Steps before completion.....=
...........................................................................=
............................................................. 56
The d=
eed of
sale (escritura)..........................................=
...........................................................................=
............................................ 56
Forma=
lities..........................................=
...........................................................................=
..................................................................... 56
Trans=
lations..........................................=
...........................................................................=
.................................................................. <=
/span>57
Steps=
taken
after the escritura has been si=
gned..........................................=
...........................................................................=
..... 57
The c=
ost of
buying a home in Portugal...........=
...........................................................................=
..................................................... =
57
Key p=
oints
– property under construction.=
...........................................................................=
.......................................................... 58
Key p=
oints
– resale properties...........=
...........................................................................=
..................................................................... 58
Speci=
al
points – old properties.......=
...........................................................................=
........................................................................ 59
Speci=
al
points – rural properties.....=
...........................................................................=
...................................................................... 59
Speci=
al
points – city properties......=
...........................................................................=
........................................................................ 59
Speci=
al
points – apartments and houses sharing facilities.................................................................=
........................................ 60
Other=
things
to do when you buy a property.......=
...........................................................................=
................................................ 60
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 60
Ownin=
g a
Property in Portugal................=
.................................................................... 61
Bank =
accounts..........................................=
...........................................................................=
................................................................... =
61
Who c=
an open
a bank account?.....................=
...........................................................................=
.................................................... <=
!--[if supportFields]> PAGE=
REF
_Toc43089954 \h <=
/span>61
Which=
bank
should you use?.....................=
...........................................................................=
.......................................................... 61
Which type of account?..........................................=
...........................................................................=
............................................. 61
"=
;Bad"
Cheques.............................=
...........................................................................=
.......................................................................... =
62
Your =
existing
UK account..........................=
...........................................................................=
.......................................................... 62
"=
;Offshore"
Accounts............................=
...........................................................................=
................................................................. 62
Key Points..........................................=
...........................................................................=
..................................................................... 62
Taxes=
..........................................=
...........................................................................=
...........................................................................=
........ 62
Elect=
ricity,
gas, water & telephone bills....=
...........................................................................=
.......................................................... 62
Elect=
ricity..........................................=
...........................................................................=
....................................................................... 62
Gas
Telep=
hone..........................................=
...........................................................................=
...................................................................... 64
Water=
..........................................=
...........................................................................=
...........................................................................=
... 64
Cable=
/Satellite
TV..................................=
...........................................................................=
................................................................ 66
The Comunidad bill.................................................................=
...........................................................................=
.................................. 66
Prope=
rty
insurance...........................=
...........................................................................=
......................................................................... <=
/span>66
Other
expenses............................=
...........................................................................=
...........................................................................=
..... 67
Takin=
g your
car.................................=
...........................................................................=
........................................................................ 67
Buying a Portuguese car..........................................=
...........................................................................=
................................................ 68
Driving Licence
Takin=
g your
furniture...........................=
...........................................................................=
................................................................... =
69
Takin=
g your
pet.................................=
...........................................................................=
......................................................................... <=
/span>69
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 70
Renti=
ng out
your Property in Portugal...........=
..................................................... =
71
The r=
ight
area................................=
...........................................................................=
...........................................................................=
.. 71
Letting Agencies?=
..........................................=
...........................................................................=
......................................................... 71
Climate..........................................=
...........................................................................=
.......................................................................... =
72
Access..........................................=
...........................................................................=
...........................................................................=
. 72
Tourist attractions..........................................=
...........................................................................=
........................................................ 72
Other facilities<=
span
style=3D'mso-tab-count:1 dotted'>..........................................=
...........................................................................=
............................................................... 73
The r=
ight
property............................=
...........................................................................=
......................................................................... <=
/span>73
Can you let the property?...............................=
...........................................................................=
...................................................... 73
Pick =
a pretty
home................................=
...........................................................................=
................................................................. 73
Makin=
g it
attractive..........................=
...........................................................................=
..................................................................... 73
Equip=
ping the
property............................=
...........................................................................=
............................................................. 74
The r=
ight
price...............................=
...........................................................................=
...........................................................................=
.. 75
Marke=
ting..........................................=
...........................................................................=
.......................................................................... =
76
UK ma=
rket..........................................=
...........................................................................=
..................................................................... 76
Portu=
guese
market..............................=
...........................................................................=
................................................................... =
77
Other=
markets..........................................=
...........................................................................=
............................................................... 77
Inter=
net..........................................=
...........................................................................=
.......................................................................... =
77
Doing=
deals..........................................=
...........................................................................=
.................................................................... 78
Manag=
ement..........................................=
...........................................................................=
..................................................................... 78
Furni=
shed or
Unfurnished?........................=
...........................................................................=
............................................................. 79
The L=
etting
Agreement...........................=
...........................................................................=
................................................................. 80
Taxat=
ion of
Rental Income.......................=
...........................................................................=
.............................................................. 80
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 80
Taxes – REVISE IN LIGHT OF NEW SISA RULES.........=
....................................................... 81
Introduction..........................................=
...........................................................................=
...................................................................... 81
Are you resident or non-resident for tax purposes?=
.........=
...........................................................................=
................................ 81
The Rules that determine Residence.........=
...........................................................................=
......................................................... 82
Tax Residence in more than one country.........=
...........................................................................=
................................................ 83
Decisions you must make.........=
...........................................................................=
...........................................................................=
83
Taxes payable in the UK.........=
...........................................................................=
...........................................................................=
...... 84
Should you pay tax in Portug=
al?.........=
...........................................................................=
.................................................................. <=
/span>85
Local taxe=
s..........=
...........................................................................=
...........................................................................=
............................. 85
IBI (impuesto sobre bienes immeubles)..........=
...........................................................................=
................................................... PAGEREF _Toc43090010 \h 85
Basura..........................................=
...........................................................................=
...........................................................................=
. 85
Other local taxes...............................=
...........................................................................=
..................................................................... 85
Payment of local property taxes.........=
...........................................................................=
................................................................ 86
Other taxes payable in Portugal - Non-residents.........=
...........................................................................=
...................................... 86
Taxes on income..........................................=
...........................................................................=
.......................................................... 86
Taxes on wealth – patrimonio..........................................=
...........................................................................=
.................................. 87
Tax on Real Estate owned by "foreign"
companies in Portugal..........................................=
.................................................... <=
!--[if supportFields]> PAGE=
REF
_Toc43090017 \h <=
/span>87
Taxes on capital gains...............................=
...........................................................................=
........................................................... <=
/span>87
Taxes on death..........................................=
...........................................................................=
............................................................. 89
Taxes paya=
ble
in Portugal - Residents..........................................=
...........................................................................=
....................... 90
Tax on inc=
ome
- Impuesto sobre la renta de las pe=
rsonas
fisicas (IRPF)=
..........................................=
.................................... 90
Notional income tax...............................=
...........................................................................=
............................................................... 92
Corporation tax..........................................=
...........................................................................=
............................................................ =
92
Taxes on wealth – patrimonio..........................................=
...........................................................................=
.................................. 92
Taxes on capital gains...............................=
...........................................................................=
........................................................... <=
/span>93
Taxes on death..........................................=
...........................................................................=
............................................................. 93
VAT..........................................=
...........................................................................=
...........................................................................=
.......... 94
Other Taxes..........................................=
...........................................................................=
....................................................................... 94
New Residents..........................................=
...........................................................................=
................................................................... =
94
Double Taxation Treaty...............................=
...........................................................................=
........................................................... <=
/span>94
Tax planning generally...............................=
...........................................................................=
............................................................. 94
Useful Names & Addresses.........=
...........................................................................=
...........................................................................=
.. 95
Resid=
ence
Permits.............................=
...........................................................................=
.......... 96
EU ci=
tizens..........................................=
...........................................................................=
......................................................................... <=
/span>96
Non EU
citizens............................=
...........................................................................=
...........................................................................=
... 96
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 96
Healt=
h Care..........................................=
...........................................................................=
........... 97
Touri=
sts
& Temporary Visitors............=
...........................................................................=
................................................................. 97
EU/EEA
Visitors up to 90 days..............=
...........................................................................=
............................................................. 97
EU/EEA
citizens visiting for over 90 days at a time...................................................................=
................................................ 97
Non EU/EEA Visitors..........................................................................=
...........................................................................=
.................. 98=
Residents.........=
...........................................................................=
...........................................................................=
.................................. 98
People
entitled to State medical assistance=
...........................................................................=
....................................................... 98
Peopl=
e not
entitled to State health care.......=
...........................................................................=
...................................................... 98
Who d=
o you
contact to receive medical care?....=
...........................................................................=
............................................. 98
What =
do you
have to pay?........................=
...........................................................................=
.......................................................... 99
Usefu=
l Names
& Addresses.....................=
...........................................................................=
................................................................. 99
Welfa=
re
Benefits............................=
...........................................................................=
.......... 100
Gener=
al..........................................=
...........................................................................=
...........................................................................=
. 100
The G=
eneral
EU Rules............................=
...........................................................................=
................................................................ 100
How d=
o you
decide which rules apply to you?....=
...........................................................................=
............................................. 100
Which=
country
insures you?........................=
...........................................................................=
...................................................... 101
In wh=
ich
country do you live?................=
...........................................................................=
........................................................... <=
/span>101
Livin=
g in
Portugal - What Portuguese benefits can you claim?.................................................................=
............................ 101
What =
UK
benefits can you claim?.............=
...........................................................................=
.......................................................... 102
Usefu=
l Names
& Addresses.....................=
...........................................................................=
............................................................... 105
Inves=
tments..........................................=
...........................................................................=
........ 106
The n=
eed to
do something........................=
...........................................................................=
.............................................................. 106
What =
are you
worth?..............................=
...........................................................................=
................................................................ 106
Who s=
hould
look after your investments?........=
...........................................................................=
................................................ 107
Where=
should
you invest?.........................=
...........................................................................=
............................................................ =
107
Trust=
s..........................................=
...........................................................................=
...........................................................................=
..... 108
Keepi=
ng track
of your investments.................=
...........................................................................=
.................................................... <=
!--[if supportFields]> PAGE=
REF
_Toc43090063 \h <=
/span>108
Usefu=
l Names
& Addresses.....................=
...........................................................................=
............................................................... 109
Retir=
ement to
Portugal............................=
..................................................................... 110
Pensi=
ons..........................................=
...........................................................................=
...........................................................................=
110
Healt=
h care..........................................=
...........................................................................=
...................................................................... 110
Cost =
of
Living..............................=
...........................................................................=
...........................................................................=
.. 110
Comin=
g back
to England..........................=
...........................................................................=
............................................................. 110
Buria=
l &
Cremation...........................=
...........................................................................=
.................................................................... 110
Usefu=
l Names
& Addresses.....................=
...........................................................................=
............................................................... 111
Inher=
itance
in Portugal.........................=
......................................................................... <=
/span>112
The
Portuguese inheritance rules........=
...........................................................................=
................................................................ 112
Who d=
o the
rules apply to?.....................=
...........................................................................=
.............................................................. 112
Makin=
g a Will..........................................=
...........................................................................=
................................................................ 112
What =
if I
don't make a Will of any kind?......=
...........................................................................=
................................................... PAGE=
REF
_Toc43090076 \h <=
/span>112
Usefu=
l Names
& Addresses.....................=
...........................................................................=
............................................................... 112
Concl=
usion..........................................=
...........................................................................=
........... 113
Buying a property in
There are a= few preliminary points to deal with to save time later.
I am told this is always a good way to start a book or= , in this case, a section of a book. I am, of course, talking about nothing more vulgar than the unfortun= ate lack, in the English language, of a simple but neutral way of describing a person. The generic "he" can cause offence. &nb= sp; "S/he" seems contrived and, in any case, the method cannot= be extended to the "his/hers" choice. The use of "they" = for the singular is confusing. And in a world where printing costs and the writer's fees are determ= ined by the thousand words, repeatedly saying "he, she or they" or "his, her or their" is expensive as well as tedious for the reader. So I will gener= ally use "he" or "him".&nbs= p; Sorry!
The Portuguese Escudo has been consigned to the dustbi= n of history and we have embarked on the glorious new world of Euros. The British – for whom= this book is mainly intended – seem to have difficulty in understanding fu= nny foreign money, so I will generally give prices in Euros with an approximate conversion into £ Sterling. &nb= sp; Exchange rates, of course, vary wildly over time and in a few years = the figures given will probably be treated with either nostalgia or amusement.<= span style=3D'mso-spacerun:yes'>
At the time of writing (March 2003) €1 =3D &poun= d;0.70 approximately.
€1 has for several years been fixed at 200.482 E= scudos. Simple really!
Some of the tax rate tables and fees previously charge= d in Portuguese Escudos will undoubtedly be "Eurofied" over the next few years to= get rid of the silly numbers produced by the simple conversions carried out when the Euro took over from the Escudo. &= nbsp; Where the new rates have not been published I have simply converted = all of the old Escudos figures at the official rate. At least, I have if my calcu= lator, finger and brain have each been up to the task!
Prices quoted are usually only rough estimates.
This book is intended primarily for people from Englan=
d and
Wales. For this reason =
I have
drawn comparisons with English law. &=
nbsp;
Scots law is somewhat different. Where the points apply also =
to
Scots law I have tried, depending on the context, to refer to either UK or
British law. The law is,
except where otherwise stated, intended to be up to date as at
There are drink drive laws – and truck drivers s= till regularly start the day with a couple of large brandies.
A foreigner needs a residence card or permit to stay i=
n
A person who stays for more than 183 days must pay tax=
in
The law requires the full price of a house to be decla= red in the title deed (escritura) so t= hat the right amount of tax can be calculated, yet it is still commonplace to declare only 60%
Things are changing.
In
At the back of the book you will find a simple glossary
showing the English and Portuguese equivalents of a variety of legal and
financial terms. Be careful.<=
span
style=3D'mso-spacerun:yes'> Words, when used in differing
contexts, can mean radically different things. (My brother has an interest in a house in
Our great European motherland comprises (January 2003)=
This comprises the EU countries and a number of others=
. This whole list comprises
Otherwise known as the Euro zone. This is the group of countri=
es
that have replaced their old national currencies with the new single Europe=
an
currency, the Euro (€).
At present (January 2003) this comprises
These are the countries that were signatories to the
Schengen agreement, essentially creating a series of common entry formaliti=
es
and allowing persons who have entered one Schengen state to travel without
further border formalities to and through the other member states. At present (January 2003) th=
e 15
Schengen countries are:
Although we have done our best to cover most topics of
interest to the buyer of a property in
At the end of each section I include a list of useful addresses and telephone numbers. &nbs= p; Any organisations referred to in the section should (with a bit of luck!) be in the list.
At the moment we are in a property "boom".
As a result of this people who are serious about buying
property in
The system of buying and selling property in
You cannot scour the whole of
This is not always as obvious as you might first think= . Once again the application of common sense can help inform your decision but, mercifully, the human spirit often ignores such considerations. &n= bsp; If you, or your spouse, falls in love with an abandoned farmhouse in= the middle of the countryside whereas reason tells you that you ought to be loo= king for an apartment near an airport you will probably buy the farmhouse. And you will probably enjoy = every minute of owning it.
This does not mean, however, that it isn't worth spend= ing a little time thinking about the type of property that would suit you best before you travel to Portugal to look at buildings. Buying an inappropriate type= of property can prove very expensive and troublesome. Worse still, it = can put you off the whole idea of a property abroad.
As well as helping you to focus your ideas, thinking a= bout these issues will help you give any estate agents a clear brief as to what = you are looking for. This will he= lp them to help you and avoid your valuable time being wasted by them showing = you totally inappropriate properties. &nb= sp; Always discuss your requirements with the local agents who are helpi= ng you find a property rather than dictate those requirements to them. They may well say that what = to are asking for is not obtainable in their area – but that something very similar is, and at reasonable cost.
Do not be afraid to change your mind. It is quite common for peopl= e to start off looking at rural properties for restoration and to end up deciding that, for them, a new property is a better bet. Or, of course, the other way round. If you do change= your mind you must tell the estate agents you are working with. Better still, you should be discussing your developing views with them and getting their confirmation t= hat what you want is "doable".
A checklist of some of the issues to think about is se= t out in the section on selecting a type of property below.
Fix a budget for the operation. What is the maximum that you= are prepared to spend to end up with a house ready to live in? Include the cost of pu= rchase, any essential repairs or improvements and the taxes and fees payable.
If you are buying a new property or one that does not = need major repair this is fairly simple.
If you are buying a house in need of repair fixing a b=
udget
is clearly more difficult. You
will always under estimate the cost of the repairs. No job ever finishes exactly=
on
budget! That is a=
s true
in
Unless you are in the happy position that money is no object, do not exceed your budget. &n= bsp; It is too easy, after a good lunch and in the company of a silver-tongued estate agent, to throw your financial plans to the wind. "Only another £30,000&q= uot; is a statement you may later come to regret.
It will save you a lot of time and trouble if you see = your lawyer before you find a property. There are a number of prelim= inary issues that can best be discussed in the relative calm before you find the house of your dreams rather than once you are under pressure to sign some d= ocument to commit yourself to the purchase. &= nbsp; These issues will include:
· who should own the property, bearing in mind= the Portuguese and British tax consequences of ownership
· whether to consider mortgage finance and if = so in which country
· what to do about buying the Euros needed to = pay for the property
· how to structure your purchase to minimise t= axes and cost
· if you are going to be living in Portugal, sorting out the tax, pension and investment issues that will need to be dea= lt with before your move if you are to get the best out of both systems.
Only
The lawyer may also be able to recommend estate agents, architects, surveyors, banks, mortgage lenders and other contacts in the ar= ea where you are looking. =
A physical meeting is still the best way to start an important relationship. It ha= s a number of advantages. It allo= ws you to show and be shown documents and to wander off more easily into related topics. Most importantly, it = is usually easier to make certain that you have each understood the other in a face to face meeting. B= ut, these days, "seeing" your lawyer does not need to involve an actu= al meeting. If it is more convenient to you it could be done by telephone conference call, by videoconference or over the Internet.
Who should be the owner of your new home? This is the most important decision you will have to make when buying a property. Because of the combination o= f the Portuguese and British tax systems, getting the ownership wrong can be a very expensive mistake indeed. It can lead to totally unnecessary tax during your lifetime and on your death. Even on a modest property this can amount to tens of thousands of pounds. This subject is dealt with m= ore fully later.
These days, with very low interest rates, more and more
people borrow at least part of the money needed to buy their home in
If you want to borrow money to finance your purchase i= t is better to get clearance before = you start looking at property.
Your lawyer should be able to get a preliminary mortga= ge offer within about 2 – 4 weeks.
In the end, the choice of location and type of propert=
y is
down to personal preference.
You are probably buying a home in
Beware of personal preference when it comes to buying investment property. The decision about which property to buy is then a business decision. Personal preference is then = often a potentially expensive distraction. = Buy the property that is likely to make you the most money, not the = one you like. Treat it as a= happy coincidence if the two are the same. = This issue is dealt with more fully in the chapter on buying as an investment.
The way that is most fun – and undoubtedly the b= est – is to travel extensively and to get to know the areas both in summer and in winter. The need to know them in both seaso= ns cannot be over emphasised. Some summer resorts close down almost completely in the winter month= s. The climate, which was so agreeabl= e in June, can be bloody awful in January. The place that was a tranquil twenty minute drive from town in May might well involve a two hour nose to = tail ordeal in August.
Very few people – the writer included – kn=
ow the
whole of
Most people know within a few minutes of arriving in a=
town
whether it is somewhere they would like to live. A two-week self drive holida=
y, using
some of
Provided the initial look at prices doesn't make you f= aint, if you like the town mark it on the map with a big aand move on to the next place. If it is not for you, mark the map with a big rand, likewise, move on.
Once you have short-listed your two or three most like=
ly
places visit them in both summer and winter. Spend a little time there.
Generally, when going to see property you will be
accompanied by the estate agent. &nbs=
p;
If the agent will not be going with you or if you are dealing with a
private seller (i.e. someone who is not using an agent), when you do finall=
y go
looking at property, take a mobile phone. If you don't have one, buy
one. Property in rural =
There are two types of people who decide to rent out t=
heir
home in
For the first group this is a business. Just as in any business, the decisions they take about where and what to buy, how to restore the property and what facilities to provide will be governed by the wish to maximise pro= fit.
The second group will have to bear in mind most of the= same considerations, but will be prepared to compromise (and so reduce potential income) in order to maximise their enjoyment of the property as a holiday home. Just where they d= raw the line will be determined by their need to produce income from the proper= ty.
The choice of the right area and the right property is= vital if you want to let your property successfully. See below.
Whichever group you fall in, you are most unlikely to cover all of = your expenses and both capital and interest repayments on a large mortgage from = letting your property, however efficiently you do so.
Most British people buying in
Remember that temperature & rainfall charts do not= tell the whole story. Wind, = lack of shelter, altitude and other factors can greatly influence your perceptio= n of the climate, which is what really matters. A place where it rains for 2= 00 days per year will seem wetter than a place with the same amount of rainfall but where it only rains for 60 days. = Figures can also conceal substantial daily variations.
|
Climates – a rough Compari=
son Average
Monthly Temperatures (Daily Maximum & Minimum) and Rainfall Source: |
||||||||||||
|
Jan |
Feb |
Mar |
Apr |
May |
Jun |
Jul |
Aug |
Sep |
Oct |
Nov |
Dec |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
7 |
7 |
11 |
13 |
17 |
20 |
22 |
22 |
19 |
14 |
11 |
8 |
|
Min Temperature (C)=
|
2 |
2 |
3 |
5 |
8 |
11 |
13 |
13 |
11 |
8 |
4 |
3 |
|
Rainfall (mm) |
61 |
36 |
51 |
43 |
46 |
46 |
46 |
43 |
43 |
74 |
46 |
58 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
6 |
6 |
9 |
12 |
16 |
18 |
21 |
21 |
17 |
13 |
9 |
7 |
|
Min Temperature (C)=
|
1 |
1 |
2 |
3 |
6 |
9 |
12 |
11 |
9 |
6 |
3 |
2 |
|
Rainfall (mm) |
58 |
48 |
53 |
46 |
56 |
56 |
51 |
71 |
56 |
53 |
64 |
66 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
7 |
7 |
9 |
11 |
15 |
18 |
19 |
19 |
17 |
13 |
9 |
7 |
|
Min Temperature (C)=
|
2 |
2 |
3 |
4 |
7 |
11 |
12 |
12 |
10 |
7 |
4 |
3 |
|
Rainfall (mm) |
71 |
58 |
58 |
51 |
64 |
71 |
86 |
94 |
81 |
94 |
84 |
86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
6 |
7 |
8 |
11 |
14 |
17 |
19 |
18 |
16 |
12 |
9 |
7 |
|
Min Temperature (C)=
|
1 |
1 |
2 |
3 |
6 |
9 |
11 |
11 |
8 |
6 |
3 |
2 |
|
Rainfall (mm) |
56 |
41 |
48 |
38 |
51 |
51 |
64 |
69 |
64 |
61 |
64 |
61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
7 |
7 |
9 |
12 |
15 |
18 |
20 |
20 |
17 |
13 |
10 |
8 |
|
Min Temperature (C)=
|
3 |
2 |
3 |
4 |
7 |
10 |
12 |
12 |
11 |
8 |
5 |
4 |
|
Rainfall (mm) |
91 |
64 |
74 |
53 |
64 |
64 |
69 |
76 |
84 |
91 |
99 |
94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
7 |
7 |
9 |
11 |
14 |
16 |
17 |
17 |
15 |
11 |
8 |
7 |
|
Min Temperature (C)=
|
4 |
5 |
6 |
7 |
9 |
12 |
13 |
13 |
11 |
8 |
6 |
5 |
|
Rainfall (Wet Days) |
23 |
21 |
26 |
20 |
18 |
19 |
21 |
23 |
21 |
22 |
21 |
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
8 |
8 |
9 |
11 |
14 |
17 |
19 |
18 |
16 |
13 |
10 |
8 |
|
Min Temperature (C)=
|
3 |
3 |
4 |
5 |
7 |
10 |
12 |
12 |
10 |
8 |
5 |
4 |
|
Rainfall (mm) |
64 |
51 |
51 |
48 |
56 |
56 |
66 |
76 |
64 |
74 |
69 |
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
17 |
15 |
18 |
20 |
24 |
27 |
30 |
30 |
28 |
23 |
20 |
17 |
|
Min Temperature (C)=
|
11 |
7 |
12 |
11 |
14 |
17 |
20 |
20 |
18 |
16 |
13 |
10 |
|
Rainfall (Wet Days) |
8 |
8 |
7 |
9 |
6 |
3 |
1 |
1 |
3 |
8 |
9 |
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
21 |
22 |
23 |
22 |
23 |
24 |
27 |
28 |
27 |
26 |
24 |
22 |
|
Min Temperature (C)=
|
16 |
16 |
16 |
16 |
17 |
19 |
21 |
22 |
22 |
21 |
19 |
17 |
|
Rainfall (Wet Days) |
3 |
3 |
4 |
3 |
2 |
1 |
0 |
1 |
2 |
2 |
5 |
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
13 |
12 |
14 |
16 |
20 |
23 |
27 |
27 |
24 |
20 |
16 |
13 |
|
Min Temperature (C)=
|
4 |
4 |
7 |
9 |
13 |
17 |
19 |
19 |
16 |
13 |
8 |
6 |
|
Rainfall (Wet Days) |
7 |
8 |
7 |
9 |
8 |
6 |
3 |
3 |
6 |
9 |
7 |
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
11 |
11 |
13 |
15 |
18 |
21 |
24 |
24 |
22 |
18 |
14 |
12 |
|
Min Temperature (C)=
|
3 |
4 |
5 |
7 |
10 |
14 |
16 |
17 |
14 |
11 |
7 |
5 |
|
Rainfall (Inches) |
3.2<= o:p> |
2.8<= o:p> |
2.7<= o:p> |
2.6<= o:p> |
2 |
1.3<= o:p> |
0.6<= o:p> |
1 |
2.7<= o:p> |
4.5<= o:p> |
4.4<= o:p> |
3.8<= o:p> |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Faro ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
13 |
14 |
16 |
17 |
18 |
21 |
24 |
24 |
23 |
19 |
17 |
14 |
|
Min Temperature (C)=
|
7 |
8 |
8 |
9 |
11 |
14 |
16 |
16 |
15 |
12 |
10 |
8 |
|
Rainfall (Inches) |
3.2<= o:p> |
2.5<= o:p> |
1.7<= o:p> |
1.6<= o:p> |
0.9<= o:p> |
0.5<= o:p> |
0.1<= o:p> |
0 |
0.5<= o:p> |
2.4<= o:p> |
3.9<= o:p> |
3.5<= o:p> |
|
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|
|
|
|
|
|
|
Max Temperature (C)=
|
12 |
13 |
14 |
16 |
18 |
21 |
24 |
24 |
23 |
18 |
15 |
12 |
|
Min Temperature (C)=
|
6 |
7 |
8 |
9 |
10 |
13 |
15 |
15 |
14 |
12 |
9 |
8 |
|
Rainfall (Wet Days) |
16 |
16 |
15 |
16 |
13 |
9 |
5 |
4 |
8 |
13 |
15 |
17 |
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
Max Temperature (C)=
|
15 |
15 |
16 |
16 |
17 |
19 |
20 |
21 |
21 |
19 |
17 |
16 |
|
Min Temperature (C)=
|
12 |
12 |
12 |
12 |
13 |
15 |
17 |
17 |
17 |
16 |
14 |
13 |
|
Rainfall (Inches) |
3.4<= o:p> |
3.5<= o:p> |
3.1<= o:p> |
1.7<= o:p> |
0.9<= o:p> |
0.3<= o:p> |
0.1<= o:p> |
0.1<= o:p> |
1.1<= o:p> |
3.4<= o:p> |
4.2<= o:p> |
3.4<= o:p> |
Second only to climate in most people's decision proce=
ss
should be the question of access to the property. How will you travel there?
There is interesting research in the tourist industry = that suggests that if visitors have a journey of more than 1 hour by road at eit= her end of their flight, 25% will not bother to travel. More than 1½ hours an= d 50% won't bother. This may not co= ncern you but it is worth bearing in mind as far as family and friends are concerned. It is even more re= levant if you are thinking of letting your property.
This makes driving to your home in
Most people travel by air. Air travel to
Buzz &#=
8211; www.buzz.com
Go R=
11; www.gofly.com
Easyjet www.easyje= t.com
BMI - www.flybmi.com
Ryanair=
– www.ryanair.com
Expedia=
– www.expedia.co.uk
British Airways – www.britishairways.com
TAP – www.tap-airportugal.pt
Cheap fares are not always cheap! Sometimes, particularly if you nee= d to travel at a particular time and cannot arrange your travel either a long wa= y in advance or right at the last minute, BA & Air Portugal can offer competitive prices and take you to more mainstream destinations.
Not all places in
|
Major
Air Links – |
|||||||||||||||||||
|
|
Stanstead |
Gatwick |
Heathrow |
|
|
East_Midlands |
|
Leeds/Bradford |
|
Humberside |
|
|
Teesside |
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|
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|
Faro |
* |
* |
* |
* |
* |
* |
* |
* |
* |
* |
* |
* |
* |
* |
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* |
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Note: = Not all flights are daily. No= t all are year round. The list is= probably not exhaustive. |
If you are buying a home for retirement, is it in a pl= ace that will still be accessible in 20 or 30 years time? Or will you be uncomfortable drivi= ng up the twisting mountain access road at age 85? Is there any public transport? There will be times when you will need it. Your car may need repair. &nbs= p; You may have broken a leg. &nb= sp; You may (with luck!) be invited to a boozy party.
Think about travel once you have arrived by air. Most people either hire a ca= r or own their own Portuguese car, which they leave at the house or (better) in = the airport car park waiting for their next visit. It is worth doing a careful = price comparison. Surprisingly often the cost of insuring, taxing and maintaining your local car plus airp= ort parking and the depreciation of its value can amount to nearly as much R= 11; or more – than renting a new, clean car on each visit. Renting also means you= can choose the type of car you need for that particular visit. If granny is coming, rent an= up market car with lots of legroom and easy rear seat access! Look to cheap, local car hire companies as well as the big na= mes, which sometimes have surprisingly good deals available.
Finally, how will your children/visitors travel when t= hey arrive in the area? Wil= l they have to/be able to rent a car? Remember that many car hire companies have a minimum age limit of 25= . Is there any public transport? Will you be = an unpaid taxi service for the duration?
Most people who have holiday homes in
Even if you are intending to live in
Your future happiness with the home you buy will depen= d upon the facilities in the area. Each person will have different requirements.
Are you a golfer?&nbs=
p;
If so just one or two golf course in the vicinity are unlikely to
satisfy you for long. A=
re you
thinking of retiring to the area? &nb=
sp;
If so you will need a major shopping centre within an hour or so by =
car. Do you visit the theatre or
opera? What is
available? Are you
sociable? Is this an ar=
ea
where you will find "your kind of (English speaking?) people"?
Most people prefer a property within about an hour's d= rive of a city or substantial town.
Each of us has our own preferences as far as the count= ryside is concerned. Is this really what you want, or i= s it a place that is beautiful but, ultimately, unsatisfying?
Much of
Will it still be accessible in a few years time?
Will you be comfortable about driving along the mounta= inous access roads?
There are various ways of keeping your eye on Portugue= se property prices generally. Take the various property magazines as Homes Overseas and Private Villas. Search the inte= rnet. Attend property shows – particularly the larger events.
Once you know the area you are interested in make cont= act with several estate agents in the area.
Remember that apparently similar properties can differ widely in price because of factors not known to you such as the property's = state of repair, location, views and convenience.
Remember that property in prime locations can be mu= ch more expensive.
Most people underestimate the space they will need in =
their
home overseas. This is becaus=
e they
underestimate how popular they will become once they have a villa in the
In the North of Portugal it can be as cold and wet as =
it is
in
Air conditioning still has the reputation of being a l= uxury item. Some of us think = that giving in to the heat and turning on the air conditioning is "sissy".
We recommend that everyone buying a home in southern <=
st1:country-region
w:st=3D"on">
For people buying a home for retirement, or with elder= ly relatives who will visit, it is worth remembering that, as we get older, we gradually lose our ability to adjust to extremes of temperature. A temperature that is unplea= santly hot for a 55 year old can be life-threatening for a 90 year old.
With portable heaters available for £300 - &poun= d;400 buying some type of cooling makes a lot of sense. As in the case of heating sy= stems it is better and cheaper to install before you move in.
If you have a nice car and want to keep it secure park=
ing is
an asset in any country. Much
property in
There is no right answer!
Traditionally the Portuguese, except for the wealthy, =
have
scorned older, restored property in favour of new build. 30 years ago I can remember =
Portuguese
friends thinking that expenditure on paint was quaint but foolish. This left the market open to=
the
British to buy up the older homes for a pittance, love them, restore them a=
nd
live happily ever after.
Things have changed. I=
n many
areas the Portuguese have developed an interest in older "character&qu=
ot;
property. A visit to a Portug=
uese
DIY store will show you that it is not just the British who spend money on =
home
improvements. Also, the seemi=
ngly
inexhaustible supply of houses and cottages abandoned as a result of rural
depopulation and drought has, in areas of the
The decision between new and old is, in
|
New & Old Property in |
|
|
New Property |
Older Property |
|
Advantages<= o:p> |
Advantages<= o:p> |
|
The technical specification and design will be bette= r than in an older property. This is particularly so in areas such as insulation and energy efficiency |
The property has "character". Its design may be classica= lly beautiful and the detailed workmanship will probably be superior to today= 's product |
|
It will have been inspected and built to known stand= ards |
The garden will be mature |
|
Most people prefer new kitchens, which get more sophisticated each year |
It may occupy a better site than a newer property &#= 8211; on the basis that the best were often built on first |
|
It will probably have a reasonable heating system |
It may be a more attractive rental proposition than = a new property, especially in rural areas |
|
Electrical and plumbing installations will be to a superior standard |
You will feel that you are living in a property in <=
st1:country-region
w:st=3D"on"> |
|
Few people will have used the bathrooms! |
What you see is what you get. You turn on the taps, ther= e is water. You can see the room= sizes and how the sun lies on the terraces. You can see the views and = the distances to adjacent properties |
|
Provision will probably have been made for car parki= ng |
It may be cheaper than a comparable new property |
|
You may share common resources such as pools or tenn= is courts with other people |
It will probably have more land than a comparable new property |
|
The building will require less maintenance than an o= lder property, certainly for the first few years |
|
|
It should be cheaper to run |
|
|
You can design your own property or, at least, often= fine tune the existing design to your special requirements |
|
|
The fabric will be guaranteed |
|
|
If you bought "off plan" you may well see = some pre-completion growth in value |
|
|
|
|
|
|
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|
Disadvantag=
es |
Disadvantag=
es |
|
The building will be new and brash, not mellow |
Older properties can need a lot of maintenance and l= oving care |
|
It can be hard to envisage what you are going to get= from a plan and specification |
It will be more expensive to heat and run |
|
You will have to sort out all the small snags inevit= able in any new building. You may spend all your holidays chasing the builder or doing this. You don't speak Portuguese. |
You may need to spend significant sums on, say, the kitchen and bathrooms to bring the property up to modern standards |
|
You will have to sort out the garden |
|
|
You may have to decorate |
|
|
Although technical design may have improved the aest= hetic appeal may be less than that of an older property and the detailed workmanship less rewarding than that of a time when labour was cheap |
|
|
As a rental property most (British) people prefer ei= ther a property with close access to golf or entertainment or a villa with a poo= l. |
|
The most important thing to understand i=
s that
there are thousands of properties in
Assessing rental potential is a skill th= at takes time to acquire. = There are, however some good indicators of property that is likely to let well.
See the section on renting out your prop= erty.
One of the great attractions of owning a property is the potential for the asset growing in value whilst, at the same time, you enjoy the use of it. Few would say that you get as much fun out of 100,000 Abbey National shares as you do out of a flat in Val do Lobo! The flat is also less likely to go= bust, or to be taken over and lose half its value overnight. In case there are any libel lawyers reading, I am not suggesting that Abbey National is likely to go bu= st or be taken over!
For some people the choice of place to b= uy a property – or the selection of which of several places to choose R= 11; is governed by likely capital growth.
The British view property as an investme=
nt as
well as a home. We expect our=
house
to rise in value, if not year by year, at least over time. Until recently this was not =
really
a consideration for the Portuguese. &=
nbsp;
As a result there has been a perception that property in
That perception is false.
There is some truth in relation to some = rural areas, where there is still a lot of property left over after the massive depopulation of the twentieth century. In 1914 over 80% of the Port= uguese lived in the countryside. It is now less than 20%. T= he thousands of rural homes they abandoned in their flight to the city and lar= ge towns lay empty for many years. This depressed rural property prices. Even in these areas, especia= lly where older property has "sold out", there have been increases in value.
In popular areas – and, in particu=
lar,
in popular tourist areas – there have been large amounts of property
inflation. In recent ye=
ars
this has been in the region of 10 – 20% per year. In some areas on the
At the moment we are seeing a sea change=
in
the people buying property in southern
99% of British people buying a property in
Whichever agent you use – and wherever they are = based – please remember that they are being paid by the seller to sell the property. They are not = being paid by you to look after your interests. However helpful and professi= onal they may be, if you do not sign a contract to buy then they do not receive their commission and their children starve. They therefore have their own interests to look after, which broadly coincide with those of the sellers b= ut which might not coincide with yours.
Despite this the estate agent can be a mine of useful
information, knowledge about the area and practical help. The large majority is genuin=
ely
enthusiastic about property in
Some agents will tell you that you do not need to use a
lawyer. They will say t=
hat
the services of the local Notary Public (notário)
will suffice. Ignore th=
at
advice. It is qui=
te
true that the average Portuguese person would not use the services of an
independent lawyer when buying a house unless there was something complex a=
bout
the transaction or about their own circumstances. For a foreigner, however, th=
is is simply
not good enough. There =
are
many issues on which you will need guidance that it is no part of the notar=
y's
duty to provide. Furthe=
rmore,
your Portuguese notary will almost certainly know nothing about British law=
and
so will be unable to give you any help as far as such vital issues as who
should own the property in order to make the most of
The role of the Portuguese estate agent is similar to = the role of the British estate agent. &nb= sp; Their job is to find buyers for properties entrusted to them by a seller. But there the s= imilarity ends.
In
There are quite large numbers of agents operating in <=
st1:country-region
w:st=3D"on">
You can tell whether the agent is licensed because he = must display details of his licence in his offices and he must give details of h= is licence in all correspondence and contracts. If you are dealing with the = agent by telephone, fax or email he will not take offence if you ask to see proof= of these documents.
It is the seller who pays the estate agents commission= . It is illegal for the agent = to take commission from both parties. &n= bsp; These fees are usually between 5% and 10% of the price of the property. The amount wi= ll depend on the value of the property, whether it is new or old and the area = it is located. Cheaper properties generally pay more commission than more expensive properties and properties in main tourist areas tend to pay more commission than in less s= ought after (and generally poorer) areas.
Beware of hidden commissions. These arise where the agent = agrees with the seller that the seller will receive a fixed amount from the procee= ds of sale and that the generous agent will forego charging his normal commiss= ion but will, instead, retain everything that he obtains over and above the guaranteed amount. The agent has a much better idea of the value of the property than the seller.<= span style=3D'mso-spacerun:yes'> This can mean that the selle= r, instead of receiving, say, €300,000 out of which he pays, say, €18,000 commission received his guaranteed €200,000 – lea= ving the agent to pocket €100,000 – and the buyer paying far more th= an is necessary for the house. These are generally illegal, but still exist.
In order to protect his substantial commission the age= nt may ask you to sign a document before he takes you to see the property. This is a statement that it = is he who has introduced you to the property, so avoiding later arguments about w= ho should be paid the commission due.
There are other significant differences from English
practice. Generally age=
nts
are rather less proactive than they are in
You are probably best off starting to look for propert=
y by
using an estate agent in the immediate vicinity of the place where you are
looking. Many rural age=
nts
will only cover an area about 40km in diameter. If you are still uncertain w=
here
precisely you intend to buy, try several adjoining agents or, if there is o=
ne
in your area, one of the big chains such as Century21. Local newspapers will give y=
ou an
indication of which agents are advertising, and so active, in your area.
Estate agents also often operate as property management companies and as property letting agents.&= nbsp;
There are growing numbers of people based in the
They very often work in association with one or more P= ortuguese agents, generally covering a wider area than a single Portuguese agent would cover. They advertise or mark= et the properties through exhibitions etc and then act as an intermediary between = the potential buyer and the Portuguese estate agent – who may not speak English. Because they d= eal with British buyers all the time they should be able to anticipate some of = the common problems that can arise and smooth the progress of the transaction.<= /p>
Generally they should share the commission of the Port= uguese agent – who is very pleased that they can expand his potential buyer = base by introducing foreign buyers. Thus their services should cost you nothing extra.
These people can be very useful, particularly if you h=
ave
little experience of dealing with
Unfortunately, it is not as simple as that. Some charge substantial amou=
nts of
extra commission for their services. =
Often they do not disclose that commission to the buyer. There is nothing wrong with =
paying
someone who is doing a useful job some commission, but you should be told t=
hat
you are expected to do so. Yo=
u can
then decide whether the convenience of dealing with someone in
Some
Many of these
In
As you drive around you will see a number of DIY for s= ale signs. They normally give a c= ontact telephone number. To ta= ke advantage of property offered in this way you, obviously, have to be in the area and you will probably need to speak Portuguese. If you do not speak Portugue= se it is worth a trial phone call. = You never know your luck! I= f the person who answers doesn't speak English there may be a local English speak= ing person – perhaps in your hotel – who would make contact on your behalf. As a last resort phone your lawyer. He s= hould be able to find out the necessary details for you and, if you wish, make arrangements to view. He will, of course, charge for this= work but the saving of estate agents fees will make his charges look cheap.
Individuals place advertisements in the "For Sale= " section of the local paper. Once again, the ability to speak Portuguese is an advantage.
An typical advert might be:
VENDE-S=
E Quinta do Lago, T3+1, D=
uplex,
2 quartos, Útil 160 m2, €1.000.000
The key bits to understand are:
T3+1 This is a three room (2 bedr= oom + living room or 1 bedroom + 2 living rooms – kitchens and bathrooms do= not count within this number) property with an additional room that is either t= oo small to count, legally, as a separate room or that is an internal area wit= hout a window, so again not capable of being described legally as a room.
Duplex Built on 2 levels.
2 quartos 2 bathrooms.
Útil 160 m2 Usable area, excluding passageways and common areas, of 160 square metres. A square metre is roughly 10 square feet.
€1.000.000. 1 million Euros. To this price will be = added the taxes and fees payable when buying a house. They are generally about 12%= to 13% of the price – say €130,000.
In some towns and in popular tourist areas in the
countryside there are free local news sheets, similar to those in the
In most areas there are specialist magazines which exi= st primarily to carry advertisements from private individuals selling their property. Some have jus= t a local coverage, others a regional or even national coverage. Go and browse through a coup= le of newspaper kiosks and see what is on offer. Buy them all. They will give you a good ge= neral guide to prices.
There are also several more "glossy" lifesty=
le
publications, covering property (particular more expensive property) in main
tourist areas such as the
Private individuals advertise in the main specialist B= ritish property press such as Homes Overseas.&nbs= p; Also try more general publications such as Daltons Weekly and Exchan= ge & Mart, especially for cheaper property. You may also find advertisem= ents from private sellers in The Sunday Times, Weekend Telegraph & Mail on Sunday. Generally speak= ing private sellers advertising in the British press are British.
There is a huge amount of property available for priva= te sale on the internet. F= inding it can sometimes be tricky. Remember that you should search in Portuguese as well as in English. Be extra caref= ul when buying over the internet. = Try www.newskys.co.uk, www.casaglobal.pt, www.casacerta.com, www.altacasa.pt, www.apemi.pt and many others.
Some of the international property shows have a section where private individuals can post details of property for sale. Contact the show organisers = for details.
Property in
Some auctions are voluntary, others run by court order= .
Prices can be very attractive. A few years ago, at the heig= ht of the last recession, there were incredible bargains with prices, perhaps, 30= % of "value". Now auctions usually offer less spectacular bargains but can still be attractive. This is bec= ause, particularly in many judicial auctions, the process is intended first and foremost to recover someone's debt. Once that and the considerable costs have been covered there is litt= le reason to press for a higher price, even though the owner will ultimately receive the excess.
Buying a property at auction is not simple for someone= who does not live in the area and it is vitally important that you have taken a= ll the normal preparatory steps – including seeing a lawyer – befo= re you embark on the process.
The procedure leading up to the auction is basically t= he same whether the auction is a judicial auction or a voluntary auction.
First, you must know that the auction is taking place.= They are usually advertised = 6 to 8 weeks in advance. Aucti= ons ordered by the court will be advertised by order of the court in the local press. Notices will als= o be posted in the area.
Second, you must find out what is in the auction. Brief details of the propert= y to be sold are published. = These details of the property will mean nothing to you. The place could be derelict or nex= t door to a nuclear power station – or both. You will need to inspect the property and decide whether it is of interest. This is a time consuming and poten= tially costly process. Remember that= you could have to inspect twenty properties to find three you might like and th= en you might be outbid on all three. &nb= sp; An alternative to personal inspection is to get someone to do it for you. This is not as satisfactory but a local estate agent will, for a fee, go to look at the property and give you a description of it. If you're lucky he might pos= t or email you some photographs. His fee, about £200 if the property is close to his office, wi= ll probably be less than the cost of travel. Some people buy blind. This is for real poker players.
Thirdly, you will need to check out the legal situatio= n of the property before the date of the auction. Most of the steps needed in = an ordinary purchase will be required (see below).
Fourthly, many properties on sale by auction are not i= n the best of condition. You will therefore need to get estimates as to the likely cost of repairs or improvements so as to make sure that the price you bid is not so high as to make the project non-viable.
Fifthly, you will have to appoint a lawyer to act on y= our behalf at the auction. = You would be brave or foolish not to be represented. The lawyer will explain precisely = what will need to be done for this particular auction. You will have to tell him the maximum price you want to offer and pay him the bidding deposit – a refundable deposit levied by the auctioneer in order to allow you to enter a bid. Your will also have to g= ive him your personal details (marital status, occupation, nationality, passport nu= mber etc) and a deposit of (usually) 10% of the price you are offering, less the bidding deposit. The fu= ll deposit is paid across at the time your bid is accepted.
You do not need to attend the auction – the lawy=
er
will be able to do so for you. He
will probably require a power of attorney for that purpose. He will, of course, charge y=
ou for
this work. Get an estimate.
Even though you do not need to be present, an auction
(especially a judicial auction) is a most interesting event, so you might w=
ant
to go along. Although the prices at auction can be very attractive =
you
must bear in mind that you will face additional costs over and above those =
on a
normal purchase. These =
are
likely to raise the overall costs of buying from the normal 12% – 13%=
of
the price to perhaps 15% - 17% of the price paid. The extra costs include the =
fees
paid to your lawyers for dealing with the auction. It is also possible to buy a Portuguese property at au=
ction
in If you are retiring there is a lot to be said for
temporarily renting a place in the area where you are thinking of living.Renting instead of Buying=
If you rent you are less likely to commit yourself to a
purchase in an area you turn out not to like. It also avoids the expensive proce=
ss of
having to sell the property and buy another, either in
There are drawbacks to renting:
1. In the recent past property prices in many areas have risen rapidly. For example, if 2 years ago = you had been buying in Almancil then delaying 18 months would probably have cost you about 15% - 25% in increa= sed property cost. This is = a lot more than your money would have made if invested, so the delay would have c= ost you money.
2. The rent you paid out is dead money. &nbs= p; This would probably be about 5% per annum of the value of a property= .
3. You will have to put your possessions into storage until you buy. Unless you have friends or relatives with lots of free space, this will cost you. It will also mean moving the= items twice, thus increasing removal expenses
4. You want to get on with your life, especially if you have just retired.
5. Moving is stressful. You will = have to do it twice rather than once.
6. Moving
into temporary accommodation can produce a lack of attachment to the area,
which can mean that you don't commit to it and give it a fair try. You are always looking back over y=
our
shoulder at
7. It can be hard to find good accommodation available on an 18 month let.
If you are thinking of a holiday home it can also make= sense to rent rather than buy. The biggest drawback to owning a property overseas is that you feel compelled to take all your holidays there. You are paying for it so you should use it! If you invested the mo= ney spent on the home it would generate a good income, which would pay for a holiday anywhere in the world. Of course, renting is never as good as owning your own home. You do not know the quality = of what you will find on arrival. You won't be able to leave your clo= thes there and so travel light. You won't have friends there and so feel part of the community. You won't be able to offer t= he use of the property to family and friends.&nbs= p; You may find that your investment of the cash saved has performed le= ss well than the house would have performed.
Whatever property you are thinking of buying you should
think about having it inspected be=
fore
you commit yourself to the purchase. =
It costs just as much and causes just as much disruption to repair
property in
In fact – foolishly – very few buyers of
property in
A new property will be covered by a short guarantee ru= nning from the date of handover and covering minor but not trivial defects in a n= ew property. The property = will also benefit from a guarantee in respect of major structural defects that w= ill last for 10 years. As a subse= quent purchaser you assume the benefit of these guarantees. After 10 years you are on yo= ur own! For property more than 10 years old (and, arguably, for younger property too) you should consider a survey.
If you decide on a survey there are a number of options available to you.
There are several things that you can do yourself. These will help you decide when to instruct a surveyor to do a proper survey and help direct him to any specif= ic points of interest.
|
Checklist – Do-it-yourself
inspection of property |
|
|
Task |
=
a<=
/span> |
|
Title |
|
|
&n= bsp; Check that the property corresponds with its description in the title |
|
|
&n= bsp; number of rooms |
|
|
&n= bsp; plot size |
|
|
Plot |
|
|
&n= bsp; Identify the physical boundaries of the plot |
|
|
&n= bsp; Is there any dispute with anyone over these boundaries? |
|
|
Are there any obvious f= oreign elements on your plot such as pipes, cables, drainage ditches, water tanks etc? |
|
|
Are there any signs of = anyone else having rights over the property? Footpaths, access ways, cartridges from hunting etc? |
|
|
Are any parts of what y= ou are buying physically separated from the rest of the property? E.g. a storage area or par= king area in a basement several floors below an apartment or a garage on a plo= t on the other side of the road from the house which it serves. |
|
|
Garden/Terrace |
|
|
&n= bsp; Are any plants, ornaments etc on site not being sold with the property? |
|
|
Pool |
|
|
&n= bsp; Is there a pool? If so:<= /p> |
|
|
&n= bsp; = ; What size is it? |
|
|
&n= bsp; = ; Is it clean and algae free? |
|
|
&n= bsp; = ; Do the pumps work? |
|
|
&n= bsp; = ; How old is the machinery? |
|
|
&n= bsp; = ; Who maintains it? |
|
|
&n= bsp; = ; What is the annual cost of maintenance? |
|
|
&n= bsp; = ; Does it appear to be in good condition?= = ; |
|
|
Walls - Stand back from property and inspect from ou= tside |
|
|
&n= bsp; Is there any signs of subsidence? |
|
|
&n= bsp; Are the walls vertical? |
|
|
&n= bsp; Are there any obvious cracks in the walls? |
|
|
&n= bsp; Are the walls well pointed? |
|
|
&n= bsp; Are there any obvious damp patches? |
|
|
&n= bsp; Are there any new repairs to walls or signs of re-pointing? |
|
|
Roof – inspect from outside property |
|
|
&n= bsp; Does the roof sag? |
|
|
&n= bsp; Are there any missing/slipped tiles? |
|
|
&n= bsp; Do all faces of the roof join squarely? |
|
|
&n= bsp; If there is lead flashing, is the lead present and in good order? |
|
|
Guttering & Downpipes – inspect from outsi= de property |
|
|
&n= bsp; Are they all present? |
|
|
&n= bsp; Do they seem to be in good order? |
|
|
&n= bsp; Are they securely attached? |
|
|
&n= bsp; Is the fall of the guttering constant? |
|
|
&n= bsp; Are there any obvious leaks? |
|
|
&n= bsp; Are there any signs of recent repairs? |
|
|
Enter Property |
|
|
&n= bsp; Does it smell of damp? |
|
|
&n= bsp; Does it smell "musty" |
|
|
&n= bsp; Does it smell of dry rot? |
|
|
&n= bsp; Any other strange smells? |
|
|
Doors |
|
|
&n= bsp; Are there any signs of rot? |
|
|
&n= bsp; Do they close properly – without catching? |
|
|
&n= bsp; Do they provide a proper seal? |
|
|
&n= bsp; Do all the locks work? |
|
|
Windows |
|
|
&n= bsp; Are there any signs of rot? |
|
|
&n= bsp; Do they open and close properly – without catching? |
|
|
&n= bsp; Do they provide a proper seal? |
|
|
&n= bsp; Do the window catches work? |
|
|
&n= bsp; Are there any security locks? Do the locks work? |
|
|
&n= bsp; Is there any sign of excessive condensation? |
|
|
Floor |
|
|
&n= bsp; Can you see it all? |
|
|
&n= bsp; If you can't see it all, will a surveyor be able to get access to the invisi= ble parts easily? |
|
|
&n= bsp; Does it appear in good condition? |
|
|
&n= bsp; Is there any sign of cracked or rotten boards, tiles or concrete? |
|
|
Under floor |
|
|
&n= bsp; Can you get access under the floor? |
|
|
&n= bsp; If so, is it ventilated? |
|
|
&n= bsp; Is there any sign of rot? |
|
|
&n= bsp; What are the joists made of? |
|
|
&n= bsp; What is the size (section) of the joists? |
|
|
&n= bsp; How close are joists? |
|
|
&n= bsp; Are joist ends in good condition where they go into walls? |
|
|
&n= bsp; What is maximum unsupported length of joist run? |
|
|
&n= bsp; Is there any sign of damp or standing water? |
|
|
Roof Void |
|
|
&n= bsp; Is it accessible? |
|
|
&n= bsp; Is there sign of water entry? |
|
|
&n= bsp; Can you see daylight through the roof? |
|
|
&n= bsp; Is there an underlining between the tiles and the void? |
|
|
&n= bsp; Is there any sign of rot in timbers |
|
|
&n= bsp; Horizontal distance between roof timbers |
|
|
&n= bsp; Size of roof timbers (section) |
|
|
&n= bsp; Maximum unsupported length of roof timbers |
|
|
&n= bsp; Is roof insulated – if so, what depth and type of insulation? |
|
|
General Woodwork |
|
|
&n= bsp; Are there any signs of rot? |
|
|
&n= bsp; Are there any signs of wood boring insects? |
|
|
&n= bsp; Is it dry? |
|
|
Interior walls |
|
|
&n= bsp; Are there any significant cracks? |
|
|
&n= bsp; Are there any obvious damp problems? |
|
|
&n= bsp; Are there any signs of recent repair/redecoration? |
|
|
Electricity |
|
|
&n= bsp; Is the property connected to mains electricity? |
|
|
&n= bsp; If not, how far away is the nearest mains electricity? |
|
|
&n= bsp; Check electricity meter. &nbs= p; |
|
|
&n= bsp; = ; How old is it? |
|
|
&n= bsp; = ; What is its rated capacity? |
|
|
&n= bsp; Check all visible wiring. <= /p> |
|
|
&n= bsp; = ; What type is it? |
|
|
&n= bsp; = ; Does it appear in good physical condition? |
|
|
&n= bsp; Check all plugs |
|
|
&n= bsp; = ; Is there power to the plug? |
|
|
&n= bsp; = ; Does a plug tester show good earth and show "OK" |
|
|
&n= bsp; = ; Are there enough plugs? |
|
|
&n= bsp; Lighting |
|
|
&n= bsp; = ; Do all lights work? |
|
|
&n= bsp; = ; Which light fittings are included in sale? |
|
|
Water |
|
|
&n= bsp; Is the property connected to mains water? |
|
|
&n= bsp; If not, what is the size of the storage tank? |
|
|
&n= bsp; If not connected to the water supply, how near is the nearest mains water supply? |
|
|
&n= bsp; Do all hot and cold taps work? |
|
|
&n= bsp; Is flow adequate? |
|
|
&n= bsp; Do taps drip? |
|
|
&n= bsp; Is there a security cut off on all taps between the mains and tap? |
|
|
&n= bsp; Do they seem in good condition? |
|
|
&n= bsp; Are pipes insulated? |
|
|
Hot Water |
|
|
&n= bsp; Is hot water "on"? If so, does it work at all taps, showers etc? |
|
|
&n= bsp; What type of hot water system is fitted? |
|
|
&n= bsp; Age? |
|
|
Gas |
|
|
&n= bsp; Is the property fitted with city (piped) gas? If so: |
|
|
&n= bsp; = ; Age of Meter |
|
|
&n= bsp; = ; Does installation appear in good order? |
|
|
&n= bsp; = ; Is there any smell of gas? |
|
|
&n= bsp; If the property is not fitted with city gas, is it in an area covered by city gas? |
|
|
&n= bsp; If it is in an area covered by city gas, how far away is the nearest gas sup= ply? |
|
|
&n= bsp; Is the property fitted with bottled gas? If so: |
|
|
&n= bsp; = ; Who is the supplier? |
|
|
&n= bsp; = ; If there is a safety certificate, when does it expire? |
|
|
&n= bsp; = ; Where are bottles stored? &nbs= p; |
|
|
&n= bsp; = ; Is the store area ventilated to outside of premises? |
|
|
Central Heating |
|
|
&n= bsp; Is the property fitted with central heating? If so: |
|
|
&n= bsp; = ; Is it "on"? |
|
|
&n= bsp; = ; Will it turn on? |
|
|
&n= bsp; = ; What type is it? |
|
|
&n= bsp; = ; Is there heat at all radiators/outlets? |
|
|
&n= bsp; = ; Do any thermostats appear to work? |
|
|
&n= bsp; = ; Are there any signs of leaks? |
|
|
&n= bsp; = ; How old is the system? |
|
|
&n= bsp; = ; When was it last serviced? |
|
|
&n= bsp; = ; If it is oil fired, what capacity is the storage tank? |
|
|
Fireplaces |
|
|
&n= bsp; Is property fitted with any solid fuel heaters? If so: |
|
|
&n= bsp; = ; Is there any sign of blow-back from the chimneys? |
|
|
&n= bsp; = ; Do the chimneys (outside) show stains from leakage? |
|
|
&n= bsp; = ; Do the chimneys seem in good order? |
|
|
Air conditioning |
|
|
&n= bsp; Which rooms are air-conditioned? |
|
|
&n= bsp; Are the units included in the sale? |
|
|
&n= bsp; Do the units work (deliver cold air)? |
|
|
&n= bsp; If the units are intended also to deliver heat, do they? |
|
|
&n= bsp; What type of air conditioning is it? |
|
|
&n= bsp; How old is it? |
|
|
&n= bsp; When was it last serviced? |
|
|
Phone |
|
|
&n= bsp; Is there a phone? |
|
|
&n= bsp; What type of line is it? |
|
|
&n= bsp; How many lines are there? |
|
|
&n= bsp; Is there an ADSL line? |
|
|
&n= bsp; Does it all work? |
|
|
&n= bsp; Number |
|
|
Satellite TV |
|
|
&n= bsp; Is there satellite TV? |
|
|
&n= bsp; If not, is the property within the footprint of satellite TV? Who is the loc= al supplier? |
|
|
&n= bsp; Does it work? |
|
|
&n= bsp; Is it included in the sale? |
|
|
Drainage |
|
|
&n= bsp; What type of drainage does the property have? |
|
|
&n= bsp; If septic tank, how old is it? |
|
|
&n= bsp; Who maintains it? |
|
|
&n= bsp; When was it last maintained? |
|
|
&n= bsp; Is there any smell of drainage problems in bathrooms & toilets? |
|
|
&n= bsp; Does water drain away rapidly from all sinks, showers and toilets? |
|
|
&n= bsp; Is there any inspection access through which you can see drainage taking pla= ce |
|
|
&n= bsp; Is there any sign of plant ingress to drains? |
|
|
&n= bsp; Do drains appear to be in good condition and well pointed? |
|
|
Kitchen |
|
|
&n= bsp; Do all cupboards open/close properly? |
|
|
&n= bsp; Is there any sign of rot? |
|
|
&n= bsp; Is the tiling secure and in good order? |
|
|
&n= bsp; Are there enough plugs? |
|
|
&n= bsp; What appliances are included in sale? |
|
|
&n= bsp; Do they work? |
|
|
&n= bsp; Age of appliances included? |
|
|
Bathroom |
|
|
&n= bsp; Security and condition of tiling? |
|
|
&n= bsp; Is there a bath? |
|
|
&n= bsp; Is there a shower? |
|
|
&n= bsp; Is there a bidet? |
|
|
&n= bsp; Age and condition of fittings? |
|
|
&n= bsp; Is there adequate ventilation? |
|
|
Appliances |
|
|
&n= bsp; What appliances generally are included in sale? |
|
|
&n= bsp; What is NOT included in the sale? |
|
|
Furniture |
|
|
&n= bsp; What furniture is included in sale? |
|
|
&n= bsp; What is NOT included in the sale? |
|
|
Repairs/Improvements/Additions |
|
|
&n= bsp; What repairs have been carried out in last 2 years? |
|
|
&n= bsp; What improvements have been carried out in last 2 years/10 years? |
|
|
&n= bsp; What additions have been made to the property in last 2 years/10 years? |
|
|
&n= bsp; Do they have builders' receipts/guarantees? |
|
|
&n= bsp; Do they have building consent/planning permission for any additions or alterations? |
|
|
&n= bsp; Are any repairs needed? I= f so what and at what projected cost? |
|
|
Lifts |
|
|
&n= bsp; Are there any lifts forming part of your own property? |
|
|
&n= bsp; How old are they? |
|
|
&n= bsp; When were they last maintained? |
|
|
&n= bsp; Do they appear to be in good condition? |
|
|
Common Areas |
|
|
&n= bsp; What are the common areas belonging jointly to you and other people on the complex? |
|
|
&n= bsp; Are any repairs needed to those areas? |
|
|
&n= bsp; Have any repairs already been approved by the community? |
|
|
&n= bsp; If so, what and at what coat? |
|
|
Disputes & Defects |
|
|
&n= bsp; Is the Seller are of any disputed in relation to the property? |
|
|
&n= bsp; Is the Seller aware of any defects in the property? |
|
It may be possible to arrange for another local estate= agent to give the property a quick "once over" to comment on the price asked and any obvious problem areas. = This is far short of a survey. It is likely to cost about £200. It is also possible to have a valuation carried out by an official valuer (técnico avaliador). This is also likely to cost = about £200 for a simple property, but can sometimes be less helpful and practical than the estate agent's valuation.
This is no substitute for a proper survey. Many lenders do not ask for = one and, where they do, it is normally fairly peremptory, limited to a check on whether it is imminently about to fall over and whether it is, on a forced = sale at short notice, likely to be worth the money the bank is lending you.
If you are going to do a virtual demolition and rebuil=
d then
it might make more sense to get a builder to do a report on the property.
Your lawyer can put you in touch with the right people= . In most rural areas there wi= ll be limited choice but. If you prefer you can select "blind" from a list of local members supplied by the surveyors professional body. The cost of a survey is typi= cally £500 - £1500.
You will find that the report is different from the so= rt of report you would get from an English surveyor. Many people find it a little "thin", with too much focus on issues that are not their primary = concern. It will, hardly surprisingly, usually be in Portuguese. You= will need to have it translated unless you speak very good Portuguese and have access to a technical dictionary. &nb= sp; Translation costs amount to about £60 - £100 per thousand words, depending on where you are located and the complexity of the document. Incidentally, always use an English person to translate documents from Portuguese into English. An alternative= to translation of the full report would be to ask your lawyer to summarise the report in a letter to you and to have translated any areas of particular concern.
A few Portuguese surveyors, mainly in the popular area= s, have geared themselves to the non-Portuguese market and will produce a repo= rt rather more like a British survey. They will, probably, also prepare it in bilingual form or at least supply a translation of the original Portuguese document. A few produce the report in English. Sometimes the English is not very good. Sometimes, coupled with the technicalities involved, the report is almost unintelligible!
A number of
Check they have indemnity insurance covering the provi=
sion
of reports in
Some
Most surveys can be done in 7 – 10 days.
This is unusual in
Get a recommendation before deciding which type of sur= veyor and which surveyor to use. Your lawyer is probably the best bet. For obvious reasons, be very careful before taking a recommendation from the estate agent selling the property!
Whichever report you opt for its quality will depend i=
n part
on your input. Agree cl=
early
and in writing the things you expect to be covered in the report. If you to not speak Portuguese (an=
d the
surveyor doesn't speak good English) you may have to ask someone to write on
your behalf. Your
|
Checklist – Things you may=
ask
your Surveyor to do |
|
Task |
|
Electrical condition and continuity check |
|
Drains check including assessment of drain to point = where they join mains sewers or septic tank |
|
Septic tank check |
|
Rot check |
|
Check on cement quality in a property constructed ou= t of cement |
|
Check of underfloor areas, where access cannot easil= y be obtained |
|
Check on heating and air conditioning |
|
Check on pool and all pool related equipment and hea= ting |
|
Wood boring insect check. Roughly half of |
In these days of low interest rates many more people a= re taking out a mortgage in order to buy property in abroad.
If the property is viewed simply as an investment a mo= rtgage allows you to increase your benefit from the capital growth of the property= by "leveraging" the investment. If you buy a house for £200,000 and it increases in value by £50,000 that is a 25% ret= urn on your investment. If = you had only put in £50,000 of your own money and borrowed the other £150,000 then the increase in value represents a return of 100% on yo= ur investment. If the rate= of increase in the value of the property is more than the mortgage rate you ha= ve won. In recent years, property in most popular areas has gone up in value by much more than the mortgage rate. The key questions are whether that will continue and, if so, for how long.
If you decide to take out a mortgage you can, in most =
cases,
either mortgage (or extend the mortgage on) your existing
Many people buying property in Portugal will look clos= ely at fixed rate mortgages so they know their commitment over, say, the next 5, 1= 0 or 15 years. Again there are advantages and disadvantages.
By a
It is outside the scope of this book to go into detail=
about
the procedures for obtaining a
|
Mortgaging your |
|
|
Advantages |
Disadvantages |
|
The loan wi=
ll
probably be very cheap to set up You will probably a=
lready
have a mortgage. If y=
ou
stay with the same lender there will be no legal fees or land registry fe=
es
for the additional loan.
There may not even be an arrangement fee. If you go to a new = lender many special deals mean that the lender will pay all fees involved. |
You will pa=
y British rates are a=
bout 4.5%
variable. Portu=
guese
rates vary from about 3.75% variable. Note that rates, at the mo=
ment,
are changing frequently. Make sure you compa=
re the
overall cost of the two mortgages. =
Crude rates (which, in any case, may not be comparable as they are
calculated differently in the two countries) do not tell the whole tale.<=
span
style=3D'mso-spacerun:yes'> What is the total monthly =
cost
of each mortgage, including life insurance and all extras? What is the total amount
required to repay the loan, including all fees and charges? |
|
The loan re=
payments
will be in £s If the funds to rep=
ay the
mortgage are coming from your £ Equally, if the &po=
und; |
If the &pou=
nd; Your loan of €=
;60,000
(now worth about £40,000 at £1.00 =3D €1.50) would only=
cost
about £30,000 to pay off if the Euro rose 20%. |
|
You will be
familiar with dealing with British mortgages and all correspondence and d=
ocumentation
will be in English |
If you are =
going to
let the property it will be difficult or impossible to get Portuguese tax
relief on the mortgage interest See "Renting Y=
our
Property" |
|
You can tak=
e out an
endowment of PEP mortgage or Pension Mortgage or Interest Only mortgage, =
none
of which are available in Portugal Normally only repay=
ment
mortgages are available in |
Many people=
do not
like the idea of mortgaging their main home – which they may only j=
ust
have cleared after 25 years of paying off an earlier mortgage! |
|
You will pr=
obably
need no extra life insurance cover This can add consid= erably to the cost of the mortgage, especially if you are getting older.<= /p> |
Some academ=
ics
argue that, in economic terms, debts incurred to buy assets should be sec=
ured
against the asset bought and assets in one country should be funded by
borrowings in that country |
All in all, we believe that a
By a Portuguese Mortgage I mean a mortgage taken out o=
ver
your Portuguese property.
This will either be from a Portuguese bank or from a British bank th=
at
is registered and does business in
The basic concept of a mortgage to buy property is the=
same
in
The main differences are:
·
Portuguese mortgages are almost always creat=
ed
on a repayment basis. That is=
to
say, the loan and the interest on it are both gradually repaid by equal
instalments over the period of the mortgage. Endowment, PEP, Pension and
interest only mortgages are not known in
· There are often restrictions or penalties on= the ability to impose penalties for early payment of the loan.
·
The formalities involved in making the
application, signing the contract subject to a mortgage and completing the
transaction are more complex and stricter than in the
·
Most Portuguese mortgages are usually granted
for 15 years, not 25 as in
· The maximum loan is generally 80% of the val= ue of the property and 75% or 66% is more common. As a planning guide, we suggest that you think of borrowing no more than 2/3rds of the price you are paying. This allo= ws for the value placed upon the property by your bank – a conservative figu= re intended to reflect what they might get for the property on a forced sale – being less that the price you are paying.
·
Fixed rate loans – with the rate fixed=
for
the whole duration of the loan – are more common than in
·
The way of calculating the amount the bank w=
ill
lend you is different from in
· There will usually be a minimum loan (say £20,000) and some banks will not lend at all on property less than a certain value. Some wil= l not lend in rural areas
·
The way of dealing with stage payments on new
property and property where money is needed for restoration is different fr=
om
in
· The paperwork on completion of the mortgage = is different. There may be= a separate mortgage contract (contrat= o de mútuo com hipoteca). Alternatively the mortgage can be reflevted solely in the escritura, which is prepared by and signed in front of a Notary Public (notário).
Different banks have slightly different rules and slig= htly different ways of interpreting the rules.
Generally they will lend you an amount that will give = rise to monthly payments of up to about 30% - 33% of your net available monthly income.
The starting point is your net monthly salary after deduction of tax and National Insurance but before deduction of voluntary payments such as to savings schemes. = If there are two applicants the two salaries are taken into account. If you have in= vestment income or a pension this will be taken into account. If you are buying a property= with a track record of letting income this MAY be taken into account. If you are buying a Leaseback (see below) then the leaseback rental income will usually be taken into account. If you are over 65 y= our earnings will not usually be taken into account, but your pension and investment income will be. If= your circumstances are at all unusual seek advice as approaching a different bank may produce a different result.
E.G. Mr Smith – Net Salary per mon= th, after tax and NI &= nbsp; £3,000
&nbs= p; Mrs Smith – Net Salary per month, after tax and NI &n= bsp; £2,000
&nbs= p; Investment income per month &nb= sp; = &= nbsp; &nbs= p; &= nbsp; £1,000
&nbs= p; Total Income taken into account = ; &= nbsp; &nbs= p; &= nbsp; £6,000 per month
The maximum loan repayments permitted will be 30% of t= his sum, less your existing fixed commitments
I.E. Maximum permitted loan repayment £6,000 * 30% =3D £1,800= per month
Regular monthly commitments would include mortgage pay= ments on your main and other properties, any rent paid, HP commitments and maintenance (family financial provision) payments. Repayments on credit cards do not count. If there are two applicants both of their commitments are taken into account.
E.G. = Mr & Mrs Smith – Mortgage on main home &= nbsp; &nbs= p; £750
&nbs=
p; Mr
& Mrs Smith – Mortgage oh house in
&nbs= p; Mrs Smith - HP on car &n= bsp; = ; &n= bsp; = ; &= nbsp; £200
&nbs= p; Total pre existing outgoings &nb= sp; = &nb= sp; &= nbsp; £1,350 per month
Maximum loan repayment permitted =3D £1,800 - £1,350 =3D £450 per month.&nbs= p; This would, at today's rates, equate to a mortgage of about £60,000 over 15 years.
If you are buying a property for investment (rental) t= he bank may treat this as commercial lending and apply different criteria.
Once again the information needed will vary from bank = to bank. It will also depend on whether you are employed or self employed.
Applications can receive preliminary approval (subject= to survey of the property, confirmation of good title and confirmation of the information supplied by you) within about 2 – 4 weeks.
Allow 4 weeks from the date of your application –= ; i.e. the date on which you supply the bank with all of the documentation needed = to support your application – to receiving a written mortgage offer. &= nbsp; It can take longer.
Once you receive the offer you will generally have 30 = days from receipt of the offer in which to accept the offer, after which time it will lapse.
Have the mortgage explained in detail by your lawyer.<= span style=3D'mso-spacerun:yes'>
In
Not all banks will finance such property.
If you have enough money to buy a property but need a mortgage to renovate it toy must apply for the mortgage before buying the property as it can otherwise be difficult to find a lender.
This will normally involve charges amounting to about = 4% of the sum borrowed. These charges are in addition to the normal expenses incurred when buying a prope= rty, which normally amount to about 12% of the price of the property.
You will probably be required to take out life insuran= ce for the amount of the loan, though you may be allowed to use a suitable existing policy. You may be requ= ired to have a medical. You = will be required to insure the property and produce proof of insurance – b= ut you would probably have done this anyway.
The offer may be subject to early payment penalties.
Early payment penalties are of particular concern in t= he case of a fixed rate mortgage.
Make sure you understand what you are signing up for.<= span style=3D'mso-spacerun:yes'> If an any doubt, have your l= awyer advise you.
If the funds to repay the mortgage are coming from your
£ It is possible to mortgage your home in There may be some attractions in borrowing in £ =
This option is mainly of interest to people who either=
do
not have sufficient equity in their Your mortgage will usually be paid directly from your =
Portuguese
bank account. Unless yo=
u have
lots of rental or other Euro income going into that account you will need to
send money from Every time you send a payment to There are steps that you can take to control both of t=
hese
charges. As far as the exchange rate is concerned you should be
receiving the so-called "commercial rate", not the tourist rate
published in the papers. The
good news is that it is a much better rate. The bad news is that rates vary fr=
om
second to second and so it is difficult to get alternative quotes. By the time you phone the se=
cond
company the first has changed!
In any case, you will probably want to set up a standing order for
payment and not shop around every month. There are various organisations that can convert your
£ Another possibility for saving money arises if you
"forward buy" the Euros that you are going to need for the year.<=
span
style=3D'mso-spacerun:yes'> It is possible to agree with=
a
currency dealer that you will buy all of your Euros for the next twelve mon=
ths
at a price that is, essentially, today's price. You normally pay 10% down an=
d the
balance on delivery. If=
the
Euro rises in value you will gain, perhaps substantially. If the Euro falls in value –=
well,
that's life! The main
attraction of forward buying is not so much the possibility for gaining on =
the
exchange rate – though at the moment this seems highly likely –=
but
the certainty that the deal gives you.&nbs=
p;
Only enter into these agreements with a reputable and, if possible,
bonded broker. Bearing in mind the cost of conversion and transmissio=
n of
currency it is better to make fewer rather than more payments. You will have to work out wh=
ether,
taking into account loss of interest on the funds transferred but bank char=
ges
saved, you are best sending money monthly, quarterly or every 6 months. Mortgaging your Portuguese Prope=
rty Advantages Disadvantages You will pa=
y Portuguese
interest rates which, at the time of writing (January 2003), are lower th=
an British rates are a=
bout 4.5%
variable. Portu=
guese
rates vary from about 3.75% variable. Make sure you compa=
re the
overall cost of the two mortgages. =
Crude rates (which, in any case, may not be comparable as they are
calculated differently in the two countries) do not tell the whole tale.<=
span
style=3D'mso-spacerun:yes'> What is the total monthly =
cost
of each mortgage, including life insurance and all extras? What is the total amount
required to repay the loan, including all fees and charges? The loan wi=
ll
probably be expensive to set up Arrangement fees, i=
nspection
fees, notaries fees and land registry fees will come to about 4% of the
amount borrowed. If you are =
going to
let the property you will usually be able to get Portuguese tax relief on=
the
mortgage interest See "Renting Y=
our
Property" You will fu=
rther
fees to pay to clear the record of the mortgage off your title once it has
been paid off This will usually o=
nly be a
problem if you want to sell the property during the two years following
paying off the mortgage. The loan re=
payments
will usually be in Euros If the funds to rep=
ay the
mortgage are coming from rental income paid to you in Euros this will give
you something to spend them on! The loan re=
payments
will usually be in Euros If the funds to rep=
ay the
mortgage are coming from your £ Equally, if the &po=
und; Many people=
do not
like the idea of mortgaging their main home – which they may only j=
ust
have cleared after 25 years of paying a mortgage! You will be
unfamiliar with dealing with Portuguese mortgages and all correspondence =
and
documentation will be usually be in Portuguese Some academ=
ics
argue that, in economic terms, debts incurred to buy assets should be sec=
ured
against the asset bought and assets in one country should be funded by
borrowings in that country Normally on=
ly
repayment mortgages are available – i.e. mortgages where you pay off
the capital and interest over the period of the mortgage You will pr=
obably
need extra life insurance cover This can add consid=
erably
to the cost of the mortgage, especially if you are getting older. Generally speaking, Portu=
guese
Euro mortgages will suit people letting their property on a regular basis.<=
/p>
Foreign
Currency Mortgages
Saving
Money on your Euro Repayments
Summary
Useful Names & Addresses
There are m=
any ways
of structuring the purchase of a home in
In some cas= es it could be sensible to put the property in the name of one person only. If your husband runs a high-= risk business, of if he is 90 and you are 22 this could make sense. It is seldom a good idea fro= m the point of view of tax or inheritance planning.
If two peop= le are buying together they will normally buy in both their names.
Your half i= s yours and your fellow owner's is theirs. &n= bsp; On your death your half will (subject to the requirement of your matrimonial regime – see below) be disposed of in accordance with Por= tuguese law (see below). = Generally, if you are British, this allows you to do as you please with your assets on your death.
A person wh= o owns in this way, even if they own by virtue of inheritance, can usually insist = on the sale of the property. So if your stepchildren inherit from your husband they could insist on a sale = of your home.
If you deci= de to buy together then, in certain cases, it can make sense to split the ownersh= ip other than 50/50. If, f= or example, you have 3 children and your wife has 2 then to secure each of tho= se children an equal share on your death, at the lowest possible tax rates, you might think about buying 60% in your name and 40% in your wife's name.
It is very
important to seek clear advice from your lawyer about the form of ownership
that will suit you best, both with regard to the consequences in
If you give= your children the money to buy part of the property and so put them on the title= now you may save quite a lot of inheritance tax. On your death you will only = own (say) one fifth of the property rather than one half. Only that part will be taxable. It may be such= a small value as to result in a tax free inheritance. This only works sensibly if = your children are over 18. Of course, there are drawbacks. <= /span>See the next paragraph.
If you put = the property only in the name of your children (possibly reserving for yourself= a life interest – see below) then the property is theirs. On your death there will be = little or no inheritance tax and there will be no need to incur the legal expenses involved in dealing with an inheritance. This sounds attractive. Remember, however, that you = have lost control. It is no longer= your property. If your children fa= ll out with you they can insist on the sale of the property – which you still (wrongly) think of as yours – and receiving their share. If your children divor= ce their husband/wife will be able to claim a share. If they die before you witho= ut children of their own, you may end up inheriting the property back from them and having to pay inheritance tax for the privilege of doing so!
A life inte= rest (usufructo) is the right to use the property for a lifetime. So, on your death, your rights would be extinguished but your second wife or partner, who still has a life interest, would still be able to use the property. Only on their death would the property pass in full to the people to whom you gave it years earlier. This device can not only pro= tect your right to use the property but also save large amounts of inheritance t= ax, particularly if you are young, the property is valuable and you survive for many years. As ever the= re are also drawbacks, not least being the fact that after the gift you no longer = own the property. If you wi= sh to sell you need the agreement of the "owners", who will be entitled= to their share of the proceeds of sale and who would have to agree to buy you a new house.
If you wish=
to do
this you must structure the gift carefully. Otherwise it could be taxabl=
e at once in
For some pe=
ople
owning a property via a limited company can be a very attractive option.
Ownership v=
ia a
company will mean that the income from letting the property is taxed in the=
way
usual for companies – basically, you pay tax only on the profit made
– rather than at the flat rate applicable in the case of an individual
owner who is not tax resident in
Buying thro= ugh a Portuguese company gives rise to a host of potential problems as well as benefits. The plan needs to be s= tudied closely by your advisers so that you can decide whether it makes sense in t= he short, medium and long term.
It is rare =
for a
purchase through a
Following a decision in the I=
nland
Revenue's favour in the House of Lords in the case of Regina vs. Dimsey and
Allen in October 2001, the Revenue are now able to contend that if an
individual owns shares in a UK company and that company owns a property whi=
ch
the individuals used he would be regarded as a shadow director of that comp=
any
and, accordingly, be liable to be charged tax on the benefit for occupying =
that
property.
The taxable benefit for offshore companies is the annual value, i.e. what t=
he
property would be let for on the open market. This is normally taken as 8% =
of the
capital value. Therefor=
e on a
£1,000,000 property this is the equivalent to a rent of £80,000=
per
annum. The effect of an £80,000 per annum benefit in kind is (for mos=
t
Take carefu=
l legal
advice before buying in the name of a
There are t=
ax
problems for people who buy through an offshore company. They arise both in the
Historicall=
y, many
people have bought properties in
The main
RE-SALE
A Company does not die unless it is "struck off" the register of
companies. This is, nor=
mally,
either because you ask for it to be removed, it is wound up on the applicat=
ion
of a third party or because it did not file its annual paperwork. Therefore, generally, provide=
d your
company is up to date with its filing requirements, it always remains the r=
egistered
owner of the property.
There is no saving when buying the property in the name of a Company but, w=
hen
you decide to sell the property, if the Buyer chooses (or can be persuaded)=
to
buy the Company rather than the house itself, he/she is not required then to
pay Property Transfer Tax (Sisa), Land Registry fees or Notaries Fees. There may also be a possible
saving in legal fees. These could, together, =
amount
to a saving of between 13-15% of the price and thus prove a much more
attractive proposition to a Buyer. So, it is argued, he might be=
prepared
to pay a bit more for the house.
SUCCESSION
As a Company does not die there is no requirement for the Portuguese equiva=
lent
of Probate on the "owner's" death.
This may lead to the non-payment of Inheritance Tax in
Whether Probate is needed or Portuguese Inheritance Tax is payable will dep=
end
on the legal requirements of the country where the Company is registered and
whether the shares of the Company are officially registered in your name. <=
br>
CAPITAL GAINS TAX
Depending on the jurisdiction governing the Company, capital gains will not
normally be payable on the sale of the property either in Portugal or in the
country where the Company is resident, unless you bring the proceeds of sale
into the UK or the country where you are tax resident.
The disadvantages of owning via a
limited company have always been:
COST
The annual =
cost of
maintaining the company, which varies from jurisdiction to jurisdiction but=
is
typically £500 per year, amounts to a lot of money if you own the
property for, say, 20 years.
The intende=
d buyer
may not want to buy the property in the name of the Company. The cost is then, largely, w=
asted.
For the per=
son who
is tax resident in the
PORTUGUESE TAX
In
About two ye=
ars
ago, the Portuguese Government got a bee in its bonnet about tourist proper=
ty
rentals. Many own=
ers
rent out their houses for the summer, often for quite sizeable sums. While they are meant to decla=
re
this income to the Portuguese tax authorities, it was suspected, quite
correctly, that many owners didn’t bother. The government was also upset=
at
the amount of tax it was missing out on when property was transferred and on
inheritance. So it was decide=
d that
this tax evasion by overseas property owners should be targeted. To do this they needed =
to
look no further than
So what have=
they
done?
Firstly, a t=
ax will
be payable on deemed rentals.
A legally very doubtful decision has been made to assume that all
offshore companies established in more favourable tax regimes (tax havens) =
are
renting out their villas. This is most such companies.<=
span
style=3D'mso-spacerun:yes'> An annual tax charge of up t=
o 40
per cent of the deemed rental income is then levied. This is based on a dee=
med
rental income of 1/15th of the official (rateable) value of the property. <=
span
style=3D'mso-spacerun:yes'> This step is subtly combined =
with
an imminent and long overdue revaluation of rateable values. Together they will amount to=
a
huge increase in the cost of running a property via an offshore company.
Second, the annual property rates – which presently range between 0.8%
& 1.3% of the (currently very low) rateable value of the property ̵=
1; are
to be reduced for ordinary 'non-company' owners to between 0.2% & 0.8% =
of
the new, revised value
This will probably still mean a steep increase in the amount actuall=
y payable
for most people as it is so long since the properties were revalued. But offshore company owners w=
ill
pay 5%. of the new valuation. This will increase the
average bill for a 4 bedroom house on the
In short, if=
you
are thinking of buying a home in
What if you
already own a property in this way? Take immediate and det=
ailed
legal advice. There are=
a
number of options available to you. &=
nbsp;
None are hugely attractive. &n=
bsp;
You can transfer the "home" of the company to a better tax
jurisdiction. There are potential legal problems =
in
this, and of course associated costs.
Many owners =
are
therefore thinking about transferring the property back into their personal
names. This is easy but expensive. SISA tax will be payabl=
e. This is typically 10% of the=
value
of the property transferred. =
Add on
to this legal costs and the usual notary and land registry fees. In addition, you are faced wi=
th CGT
on the gain in value of the property from the date you bought it until the =
date
upon which it is transferred back to you. This can be as high as 25% of the g=
ain.
There may be=
a
limited window of opportunity to reduce the transfer costs. See your lawyer and accountant with=
out
delay.
As a vehicl= e for owning a property trusts are of little direct use.
Portuguese = law does not fully recognise trusts and so the trustees who are be named on the titl= e as the owners of the property would be treated as private individual owners, having to pay all of the income, wealth and inheritance taxes applicable in their case. In a few ca= ses this could still give some benefit but there are probably better ways of getting the same result.
This does n=
ot mean
that trusts have no place for the owner of property in
Again, care= ful specialist advice is essential.
The choice =
is of
fundamental importance. If
you get it wrong you will pay massively more tax than you need to, both dur=
ing
your lifetime and on your death. &nbs=
p;
The tax consequences arise not only in
For each Bu=
yer of a
home in
The trouble= is, it is not obvious which is the right choice! You need in every case to ta= ke advice. If your case is simple so will be the advice. If it is complex the time and money spent will be repaid many times over.
The "new" civil code – which
governs the treansfer of ownership of property – became law on
As you would expect, this law relating to the ownership of property is complicated. A basic textbook on Portugue= se property law might extend to 500 pages. There are certain basic prin= ciples that it is helpful to understand.
1.&n=
bsp;
The main legal provisions relating to property law =
are
found in the Civil Code, which was introduced in 1867 but modified since, m=
ost
notably in 1967. The an=
alysis
of rights reflects the essentially agrarian society of late 18th
Century
2.&n= bsp; The civil code declares that foreigners are to be treated in the same way as Portuguese people as far as the law is concerned= .
3.&n= bsp; Portuguese law divides property into two classes – moveable property (bienes m= uebles) and immovable property (bienes inmu= ebles). The whole basis of own= ership and transfer of ownership depends on which classification property belongs = to. The distinction is similar to the E= nglish concept of Real and Personal property but it is not exactly the same. Immovable property includes land and buildings, but not the shares i= n a company that owns land and buildings.
4.&n=
bsp;
The sale of real estate located in
5.&n= bsp; The form of ownership of land is always absolute ownership. This is simi= lar to what we would call freehold ownership.
6.&n= bsp; It is possible to own the buildings – or even parts of a building – on a piece of land separately from the land itself. This is of part= icular relevance in the case of flats, which are owned "freehold".
7.&n= bsp; Where two or more people own a piece of land or oth= er property together they will generally own it in undivided shares (pro indiviso). That is to say the piece of = land is not physically divided between them.&nb= sp; Each owner may, in theory, mortgage or sell his share without the consent of the others – though the others might have certain rights of pre-emption – that is the right to buy the property in preference to = any outsider.
8.&n= bsp; Where a building or piece of land is physically div= ided between a number of people a condominium (condomínio) is created. The land is divided into privately owned parts – such as an individual flat ̵= 1; and communally owned areas. The management of the communally held areas is up to the owners of t= he privately held area, but can be delegated to someone else.
9.&n= bsp; Transfer of ownership of real estate is usually by simple agreement. This = must be in writing. That agr= eement binds both the parties to it but is not effective as far as the rest of the world is concerned, who are entitled to rely upon the content of the land register. Thus as betwe= en buyer and seller ownership of land can be transferred, for example, by sign= ing a sale contract even if the seller remains in possession and some of the pr= ice remains unpaid. But that ownership would not damage the interests of someone other than the buyer or seller (such as someone owed money by the seller) who is entitled to take action against the person named as owner in the Land Registry. Ownership can also be acquir= ed by possession, usually for 30 years.
10.&= nbsp; Other rights – short of ownership – can exist over land. These include rights of way, tenancies, life interests, mortgages and option contracts. Most require some sort of formalit= y in order that they are valid against third parties but are always binding as between the people who made the agreements.
11.&= nbsp; There are TWO land registers. Each area maintains a tax register (registo p= redial). In this all the land in the district is divided into plots and assessed for tax purposes. The second register is= the deed and mortgage register (registo= de propriedade). Not a= ll land is registered here. The entries (size, boundaries etc) do not necessarily correspond in the two registries.
Enough of that. Now for the practical s= tuff.
The general
procedure when buying a property in
The notary is a special type of lawyer. He is in part a public offic=
ial
but he is also in business, making his living from the fees he charges for =
his
services.
Notaries also exist in
Under Portuguese law only deeds of sale (escrituras públicas de compra e=
The notary also carries out certain checks on property= sold and has some duties as tax enforcer and validator of documents to be presen= ted for registration.
His fee is fixed by law. It is modest. For each signatory to the ti= tle he is paid €11 plus a fee for the deed of a fixed €175, irrespecti= ve of value. This level of= fees is being challenged by the notaries, who have threatened to go on strike to secure better payment.
The notary is strictly neutral. He is more a referee than so= meone fighting on your behalf. He is, in the usual case, someone who checks the papers to make sure that they comply with the strict rules as to content and so will be accepted by the l= and registry for registration.
Many Portuguese notaries, particularly in rural areas,=
do
not speak English – or, at least, do not speak it well enough to disc=
uss
complex issues. Very fe=
w will
know anything about English law and so will be unable to tell you about the=
tax
and other consequences in
For the Engli=
sh buyer
the notary is no substitute for also using the services of a specialist
Most Portuguese people buying a home in
For English people the services of the Notary are unli=
kely
to give them all the information or help they need to buy a home in
This can be freely agreed between the parties. Depending on the economic cl= imate there may be ample or very little room for negotiating a reduction in the asking price. At the mo= ment (March 2003) the scope is limited for popularly priced properties in the main citi= es and tourist areas, which are in short supply.
For many years there was a tradition in
At the moment most buyers are declaring values of betw= een 66% and 80% of the true value. The more enlightened are pressing for higher amounts.
Nonetheless you may find that you have little choice b= ut to under declare. The Sell= er will often refuse to sell unless you do. Fortunately, there is a semi-legitimate "grey area" for manoeuvre over declared price, ra= ther like doing 40 mph in a 30 limit. &nbs= p; It is wrong but you will not get into serious trouble. It is better not to go there at all= . The goalposts move all the time. Apart from the tax issues there are other practical problems. In a world of anti money laundering legislation and terrorism such irregular transactions may well be reported to the authorities, with the result that (at best) you are forever branded a "dodgy person". &= nbsp; You cannot, these days, simply place £50,000 in someone's bank account – or even take it out of your own – without generating paperwork that you might not want to generate. People have been mugged or k= illed whilst dealing with this cash. The exchange rates for cash are very poor. You cannot take cash freely = from one country to anmother. If you try and are caught the money may be confiscated. At best, you will have to fi= le the necessary declarations and pay the necessary tax to get it back. Increasingly lawyers and oth= ers are refusing to touch 'black' money. = All in all, the sooner we end the practice the better.
Seek advice from your lawyer.
The price, together with the taxes and fees payable, is
usually paid by the Buyer to the Seller in front of the notary. This is the best and safest
way. You can, in =
fact,
agree to pay in whatever way and wherever you please. So, for example, in the case=
of a
British Seller and a British buyer the payment could be made in £
Try to avoid arrangements, usually as part of an under-declaration, where part of the money is handed over in cash in brown-paper parcels. Ap= art from being illegal it is dangerous at a practical level. Buyers have lost the bundle = - or been robbed on the way to the notary's office. Sometimes there is a suspici= on that the Seller, who knew where you were going to be and when, could be involved.
Certain enq= uiries are made routinely in the course of the purchase of a property.
These inclu= de, in appropriate cases, a check on the planning situation of the property. This enquiry will reveal the position of the property itself but it will no= t, at least directly, tell you about its neighbours and it will not reveal gen= eral plans for the area.
If you want=
to know
whether the authorities are going to put a prison in the village or run a n=
ew motorway
through your back garden (both, presumably, bad things) or build a motorway
access point 3 km away (presumably a good thing) you will need to ask. There are various organisati=
ons
you can approach but, just as in
Normal enqu= iries also include a check that the seller is the registered owner of the property and that it is sold (if this has been agreed) free of mortgages or other charges.
In order to= advise you what special enquiries might be appropriate your lawyer will need to be told your proposals for the property. Do you intend to rent it out= ? If so is it on a commercial basis?= Do you intend to use it for busine= ss purposes? Do you want to extend or modify the exterior of the property? Do you intend to make interi= or structural alterations?
Agree in ad= vance the additional enquiries you would like to make and get an estimate of the = cost of those enquiries.
The general enquiries that will need to be made will vary a little from case to case but will generally include the following:
Is the sell= er the registered owner? If not does the seller have a valid power of attorney to sell on behalf of the owner?
Is the prop= erty subject to an outstanding mortgage?
Are there a= ny charges registered against the property?
Are there a= ny court cases involving the house or its owner?
What is the official tax value of the property?
Is the prop= erty registered as rural or urban?
Are any deb= ts registered against the property?
What is the= status and permitted use of the property in the Town Plan (Plano Director Municipal (PDM))?
Is there a habitation certificate (licença de utilizaç&atil=
de;o)
What are the community rules?
What is you= r share of the expenses?
What expens= es are likely to be incurred – agreed projects, reserve funds etc.
This is som=
ething
you will have given no thought to. &n=
bsp;
For most of the time it is a matter of unimportance in
When prepar=
ing
documents in
This is no =
idle
point. The declaration =
in
your escritura is a public
declaration. It is trea=
ted in
If appropri= ate you will declare that you are single, separated, divorced, widowed etc at this point.
The authori= ties are entitled to ask for proof of all of these points by birth certificates, marriage certificates etc. If the documents are needed the official translations into Portuguese may be needed. Often the notary will take a slightly more relaxed view and ask you= for only the key elements of your estado civil. It is worth checki= ng in advance as to what is required, as it is embarrassing to turn up to sign th= e escritura only to find the ceremony cannot go ahead because you do not have one of the documents required. In the worst case that could put y= ou in breach of contract and you could lose your deposit!
To own a pr=
operty
in
This is a d=
evice
familiar in continental
The basic i= dea is than when a number of people own land or buildings in such a way that they = have exclusive use of part of the property but shared use of the rest then a comunidade is created. Houses on their own plots wi= th no shared facilities will not be a member of a comunidade.
In a comunidade the buyer of a house or= an apartment owns his own house or apartment outright – as the English w= ould say, "freehold" – and shares the use of the remaining areas= as part of a community of owners. It is not only the shared pool that is jointly owned but (in an apartment) the lift shafts, corridors, roof, foundations, entrance areas, parking zones etc.
The members=
of the comunidade are each responsible for
their own home. They, collect=
ively,
agree the works needed on the common areas and a budget for those works.
The communi= ty is managed by an elected committee and appoints a president and secretary R= 11; both of whom are residents in the community.
Day to day management is usually delegated to an administrator, who need not be a resi= dent in the community.
The charges= of the comunidade are divided in the proportions stipulated in deed creating the comunidade. You will pay the= same comunidade fees whether you use the place all year round or only for two weeks holiday. Of course your other bills (= water, electricity etc) will vary with usage.
The comunidade should provide not only= for routine work but, through its fees, set aside money for periodic major repairs. If they do not – or if the amount set aside is inadequate – the general meeting can authorise a supplemental levy to raise the sums needed.
The rules s=
et by
the comunidade (the regulamentos do condomínio)=
are
intended to improve the quality of life of residents. They could, for example deal=
with
concerns over noise (no radios by the pool), prohibit the use of the pool a=
fter
In
Generally the preliminary contract is prepared by the =
estate
agent – who is professionally qualified in
Estate agent's contracts are often based on a pre-prin= ted document in a standard format.
Many contracts coming from Estate Agents – espec= ially the unqualified and, therefore, illegal ageny – are legally muddled a= nd not properly thought through. They can blur or mix different types of contractual obligation, often referring to mutually exclusive concepts in the same document – for example, referring to it as a contract of sale and an option contract.
Sometimes the contracts are extremely one sided, giving their client – the Seller – all of the rights and taking away a= ll of the rights of the Buyer.
It is very important that these contracts are not just accepted as final. In e= very case they will need to be modified. &= nbsp; In some cases they will need to be modified extensively.
You will be invited to sign one of three different documents. Each has dif= ferent features. Each has diff= erent legal consequences. Each is appropriate in certain circumstances and inappropriate in others.
This is a written document in which the seller offers = to take a stated property off the market for a fixed period and to sell it at a stated price to a stated person at any time within a stated period.
The seller will usually require that any person taking= up his offer pays him a deposit. Once he has received this deposit the seller must reserve the property for you u= ntil the end of the period specified in the contract.
You will see that this is similar to an English "= Option Contract". If you = want to go ahead and buy the property you can but you are not obliged to do so.<= span style=3D'mso-spacerun:yes'> If you do not go ahead you l= ose your deposit.
The contract could contain special "get out clauses" stipulating the circumstances in which the buyer will be enti= tled to the refund of his deposit if he decides not to go ahead. The drafting of these clause= s is of vital importance. See your lawyer.
If you do want to go ahead you can exercise the option= at any point up to the end of the agreed period.
If the seller refuses to go ahead the buyer is entitle= d to claim compensation.
If you do not go ahead with the purchase the Seller wi= ll keep the reservation fee.
It is, in most parts of
It is called a contrato promessa (promissory contract) not because it is secret but because it = is not recorded in the public register kept by a notary.
It is an agreement that commits both parties. The seller must sell a stated property at a stated price to a stated person on the terms set out in the contract. The buyer mus= t buy.
This is the more far reaching of the documents and so = it is particularly important that you are satisfied that it contains all of the t= erms necessary to protect your position. &= nbsp; Take legal advice. Remember that under Portuguese law by signing and completing this contract you become, in some senses, the owner of the property, though you = will need to sign a deed of sale (escrit= ura) and register your ownership to be safe as far as third parties are concerned.
The contract will contain a variety of "routine&q= uot; clauses.
· The seller and buyer should both be stated fully.
· The property should be described fully, both= in an everyday sense and by reference to its land registry details.
· A date for the signing of the deed of sale (= escritura) will be fixed or the contract will permit either party to requ= ire the signing of the escritura at= any point by giving notice to the other. =
· A statement will be made as to when possessi= on will take place – normally, on the date of signing the title.
· The price is fixed.
· A receipt for any deposit is given.
· The property should be sold with vacant possession.
· The property should be sold free of any char= ges, debts or burdens and all bills should be paid up to date before signing the= escritura
· It will provide for who is to pay the costs = of the purchase.
· It may confirm the details of any agent invo= lved and who is to pay his commission.
· It will set out what is to happen if one or = both of the parties break the contract. <= /span>
· It will establish the law to cover the contr= act and the address of the parties for legal purposes.
If the buyer or seller drops out of the contract or otherwise breaks it various arrangements may be made.
A deposit (sin= al) is payable by the Buyer. T= his is typically 10%, though occasionally more. If the Buyer fails to comple= te he will lose the deposit. = If the Seller fails to complete he will have to return (usually) double the deposit paid.
Alternatively the contract may provide for a deposit t= o be paid as a simple part of the price of the property. The contract can provide for= all or part of this deposit – and any other sums paid up to the relevant moment – to be lost if the Buyer does not proceed.
If the parties fail to comply with their obligations t= here is the ultimate remedy of seeking a court order. As in any country this is very muc= h a last resort as it is costly, time consuming and (as in any country) there i= s no guarantee of the outcome of a court case. If a court order is made in = your favour this order can be registered at the land registry.
There are three possible types of contract in this case.
You sign a contract agreeing to sign title deed in res= pect of the land – and anything the Seller has so far built on it – now. This involves payi= ng for the land and work so far undertaken in full at this stage. At the same time you enter i= nto a contract to build your house on the land.
As the building continues it automatically becomes the property of the buyer. = The Buyer, of course, has the obligation to pay the agreed price, usually by instalments dependent upon the progress of the building work.
This has the great advantage of securing the money you= pay to the builder. I= f the builder goes bust you own the land and everything built on it. It only really works for pro= perty built on its own plot rather than, say, apartments. It can be tax and cost inefficient.
You agree to buy a property once it has been built and= agree to make payments in stages as the construction progresses. Sometimes the payments are dependent upon the progress of the building works. On other occasions they are due on= set dates. The latter are n= ow the more common, though less attractive to the Buyer.
Once the property has been built you will sign the dee= d of sale and pay the balance of the price. It is only then that you bec= ome the owner of the property and register your title. Until then if the builder go= es bust you are simply one of many creditors.
The law requires that the contract must give details o=
f a
guarantee to secure completion of the construction in the event, for exampl=
e,
that the seller went bust. In
most parts of
You agree to buy a plot of land and building. You agree to pay once it has= been built. Simple! You take title and pay the m= oney at the same time. This = is really the same as buying a resale property. This type of contract is lit= tle used.
Usually in these cases there is a preliminary contract= . This is the reservation cont= ract (see above). This allow= s you to reserve a plot when you see it and allows you time to sign one of the ot= her types of contract when you have made the necessary enquiries.
Has the property got planning permission/a building li= cence?
You should be given a full specification for the prope= rty, a copy of the community rules and constitution if the property shares common facilities and a copy of any agreements you have entered into regarding ong= oing management or letting of the property. All are important documents.= Pay particular attention to = the specification. It is not unknown for the show flat to have marble floors and high quality wooden kitchens but for the specification to show concrete tiles and MDF.
|
Checklist – Signing a cont=
ract |
|
|
Property i=
n the
course of construction |
Existing P=
roperty |
|
Are you c= lear about what you are buying? |
|
|
Have you = taken legal advice about who should be the owner of the property? |
|
|
Have you = taken legal advice about inheritance issues? |
|
|
Are you c= lear about boundaries? |
|
|
Are you c= lear about access? |
|
|
Have you = seen the seller's escritura (title)? |
|
|
Have you = seen an up to date nota simple (land reg= istry extract)? |
|
|
|
Are you sure you can change property as you want? |
|
|
Are you sure you can use property for what you want?= |
|
|
Connected to water, electricity, gas etc? |
|
|
Have you had a survey done? |
|
Have you = made all necessary checks OR arranged for them to be made? |
|
|
Have you = included "get out clauses" for all important checks not yet made? |
|
|
Is your m= ortgage finance arranged? |
|
|
Is the se= ller clearly described? |
|
|
If the se= ller is not signing in person, have you see a Power of Attorney/Mandate to author= ise the sale? |
|
|
Are you f= ully described? |
|
|
Is the pr= operty fully described? Iden= tification? Land Registry details? |
|
|
Is the pr= ice correct? |
|
|
Are any p= ossible circumstances in which it can be increased or extras described fully? |
|
|
Are the stage payments fully described? |
Does contract say when possession will be given? |
|
Are arrangements for stage payments satisfactory? |
Is there a receipt for the deposit paid? |
|
Is the date for completion of the work agreed? |
In what capacity is deposit paid? |
|
Does the property have planning permission/licence to build? |
Does property have a habitation licence? |
|
Is the da= te for signing the escritura agreed?= |
|
|
Does cont= act provide for the sale to be free of charges and debts? |
|
|
Does cont= ract provide for vacant possession? |
|
|
Which not= ary is to act? |
|
|
Is the es= tate agent's commission dealt with? |
|
|
What happ= ens if there is a breach of contract? |
|
|
Are all t= he necessary special "get out" clauses included? |
This notifies any other person that a purchase is in progress. Anything that person does is= done subject to whatever rights ultimately flow from the contract to buy. Once registered it las= ts for 6 months, within which time the esc= ritura should be signed and presented for registration.
You need to weigh up the additional cost of this process against the benefits t= hat flow from it.
Very often it will not be convenient for you to have t=
o go
to
Just as often you will not know whether you will be available to sign in person. Completion dates on Portuguese property are notoriously fluid and so= you could plan to be there but suffer a last minute delay to the signing that m= akes it impossible.
The solution to this problem is the Power of Attorney.= This document authorises the person appointed to do whatever the document authorises on behalf of the pe= rson granting the Power.
The most sensible type of Power to use will be the Por=
tuguese
style of Power that is appropriate to the situation. The power will be signed in =
front
of a notary either in the
The type of Portuguese Power of Attorney that you will= need depends on what you want to use it for.&nb= sp; Your specialist English lawyer can discuss your requirements with you and prepare the necessary document. &= nbsp; Alternatively you can deal directly with the Portuguese notary who w= ill ultimately need the Power.
In theory an English style Power should be sufficient,= but in practice the cost and delay associated with getting it recognised are li= kely to be unacceptable.
Even if you intend to go to
Even if you have granted a Power of Attorney, if you g=
et the
opportunity to go to
There are a=
number
of ways of getting the money to
The most pr=
actical
is to have it sent electronically by SWIFT transfer from a UK bank directly=
to
the recipient's bank in
You can sen= d the money from your own bank, via your lawyers or via a specialist currency dea= ler.
For the sum=
s you
are likely to be sending you should receive an exchange rate much better th=
an
the "tourist rate" you see in the press. There is no such=
thing
as a fixed exchange rate in these transactions. The bank's official inter ba=
nk
rate changes by the second and the job of the bank's currency dealers is to
make a profit by selling to you at the lowest rate they can get away with!<=
span
style=3D'mso-spacerun:yes'> Thus if you do a lot of busi=
ness
with a bank and they know you are "on the ball" you are likely to=
be
offered a better rate than a one off customer. For this reason it is often =
better
to send it via your specialist
You or your=
lawyers
might use a specialist currency dealer to make the transfer of funds instea=
d of
a main UK bank. Such de=
alers
often give a better exchange rate than an ordinary bank. Sometimes the difference can=
be
significant, especially compared to your local branch of a high street
bank. The author recent=
ly
carries out a spot check. His
secretary, anonymously, asked a major high street bank to convert £50=
,000
into Euros and send it to
Although th= ese dealers use major banks actually to transfer the funds you need to make sure that the dealer you are dealing with is reputable. Your money is paid to them, = not to the major bank, as so could be at risk if the dealer was not bonded or otherwise protected.
However you=
make
the payment make sure you understand whether you or the recipient is going =
to
pick up the receiving banks charges. =
If you need a clear amount in
The bank in=
You can arr=
ange for
your UK bank to issue you with a bankers draft (bank certified cheque) which
you can take to
Generally t= his is not a good way to transfer the money. It can take a considerable t= ime – sometimes weeks – for the funds deposited to be made available for your use. The recip= ient bank's charges can be surprisingly high. The exchange rate offered ag= ainst a £ sterling draft may be uncompetitive as you are a captive customer= .
This is not
recommended. You will n=
eed to
declare the money on departure from
For EC nati=
onals
there is no longer any exchange control when taking money to or from
When you se=
ll your
property in
All of the = points outstanding as must be resolved to your satisfaction, as must any other poi= nts of importance to you.
The date st=
ated in
the contract for signing the escrit=
ura
could, most charitably, be described as flexible or aspirational. Often it will move, if only =
by a
day or so. For this rea=
son it
is not sensible to book your travel to
|
Checklist
– Steps to be taken before signing the escritura |
|
|
Property in the course of construct=
ion |
Existing Property |
|
Prepare Power of Attorney |
|
|
Check what documents must be produce=
d on
signing escritura |
|
|
Confirm all outstanding issues have = been complied with |
|
|
Confirm all other important enquirie= s are clear |
|
|
Confirm arrangements (date, time, pl= ace) for completion with your lender if you have a mortgage |
|
|
Confirm arrangements (date, time, pl= ace) for completion with notary |
|
|
Send necessary funds to |
|
|
Receive rules of community |
|
|
Insurance cover arranged? |
|
|
Sign off = work or list defects |
Proof of = payment of community fees |
| <=
/span>
|
Proof of = payment of other bills |
Before
the deed is signed the SISA tax must be paid. A receipt for the payment is
produced to the notary who witnesses the escritura.
As I have already said, this must be signed in front o= f a Portuguese notary either by the parties in person or someone holding power of attorney= for them.
It will contain a statement that the notary has advise= d you of your fiscal obligations arising out of the sale. Because it is rare for notar= ies actually to perform this important part of their duty it is worth setting o= ut some of these sanctions.
1. The right to raise a supplemental demand for tax not paid + interest + penalty.=
2. If the amount declared is less than 80% of the value as assessed by the tax of= fice – or the apparent under declaration exceeds €12,000 – to treat the balance as a gift from the Seller to the Buyer. This is a TAXABLE gift.
3. If there is a clear and intentional understatement, the right to buy the prope= rty at the price stated
There are other consequences of under declaration, ref= erred to above.
Certain procedures are followed at the signing of the = escritura.
The parties are identified by their passports or ident= ity cards. This will normal= ly be done, initially, by the notary's clerk and then also by the notary.
The notary's clerk may also go through the content of = the escritura with the parties. This tends to be very superf= icial and often the person concerned will have limited English.
The parties will then be ushered into the presence of =
the
notary. In addition to =
the
buyer and seller it would be possible for the group to comprise also the
notaries clerk, your lawyer, a translator, a representative of your mortgage
lender, the estate agent and any sub-agent appointed by the estate agent.
If you do not speak Portuguese an interpreter should be present when you sign the escritura= . The attitude of notaries whe= n it comes to assessing when an interpreter is necessary varies enormously. No written translation is pr= ovided as a matter of course.
Your title and any mortgage should be presented for registration at the land registry. This should be done as quickly as possible. He= who registers first gets priority.
After several months the land registry will issue a certificate to the effect that the title has been registered.
There are fees and taxed payable by a buyer when acqui=
ring a
property in
We can, however, give a general guide.
These costs are calculated on the basis of the price t=
hat
you declared as the price paid for the property in the escritura. =
The
size of these expenses, coupled with the Portuguese dislike for paying tax,=
has
led to the habit of accidentally under declaring the price in the escritura. These days are now largely o=
ver
and we can only suggest that the full price of the property is declared.
These are fixed by law, so are not negotiable. They are modest. See above.
This is charged instead of VAT on properties bought fr= om private individuals. Th= e rate is usually 10%, depending on the type of property and its value.
|
SISA TAX RATES |
||
|
Property Value |
Tax Rate |
Deduct from= sum payable |
|
Up to €60,015.49 |
0% |
0 |
|
From €60,015.49 to €82,207.38 |
5% |
€3,00= 0.77 |
|
From €82,207.38 to €109,678.18 |
11% |
€7,93= 3.22 |
|
From €109,678.18 to €137,097.72 |
18% |
€15,6= 10.69 |
|
From €137,097.72 to €166,054.81 |
26% |
€26,5= 78.51 |
|
Over €166,064.81 |
10% |
Nil |
E.G. Property value €70,000. = Tax rate 5%. Tax= due €3,500. Deduct €3000.77. Pay €499.33.
It is likely that the SISA will be either replaced or reformed substantially during 2003.
Since drafting this book the rules as to SISA tax have= been replaced. It is not yet= clear from which date the new rules will take effect. It is possible July 2003 and possibly December 2003.
The new rules, which have yet to be finalised, can be summarised as follows:
SISA will be replaced by what will be known as a municipal tax over
transactions or IMT.
Several uncertainties remain as to the finer details of the new tax.=
Properties valued at €80,000 or under will be exempt from any
initial taxes (the current SISA tax limit for exemption is €61,000). =
In addition, the maximum rate will be dropped from 10% of the value =
of
the property to 6%, while this top rate will only be applied to properties
whose value exceed €500,000 (currently, any property priced at €=
;170,000
or more was liable to pay the maximum rate).
|
Value of the transaction |
% of Tax |
Amount to deduct |
|
Under € 80.000 |
0 % |
€0 |
|
From € 80.000 until € 110.000 |
2 % |
€ 1.600,00 |
|
From € 110.000 until € 150.000 |
5 % |
€ 4.900,00 |
|
From € 150.000 until € 250.000 |
7 % |
€ 7.900,50 |
|
From € 250.000 until € 500.000 |
8 % |
€ 10.400,00 |
|
Over €
500.000 |
6% |
€0 |
Rates will also drop for the annual municipal tax
(contribuição autárquica). Currently, this annual tax =
is
charged at a rate varying between 0.7% and 1.3% of the property’s val=
ue.
The new system will discriminate between new and old homes, with newer homes
being charged between 0.2%and 0.5% of their respective values, while older
properties will be subjected to a rate that varies between 0.4% and 0.8%.
Enforcement of the new municipal tax, previously the sole responsibi=
lity
of the local tax department, will now be passed onto city and town halls, w=
ho
will be granted the authority to evaluate a property and adjudicate on
potential tax benefits, such as the ten-year exemption from paying municipal
tax.
This is normally 0.8% of the price of the property.
If you are taking out a mortgage there will be additio= nal costs. See section on R= aising Finance above. These typically amount, altogether, to about 4% of the amount borrowed.
Architect's fees, Surveyors fees,
When buying a new property the key points to look out = for are:
· Make sure you understand exactly what you are buying. How big is the property? What will it = look like? How will it be fi= nished? What appliances are included= ? What facilities will it enjoy?
· Think about who should own the property so a= s to minimise tax and inheritance problems
· Make sure the contract has all of the necess= ary clauses required to protect your position
· Make sure there is a bank guarantee if you a= re buying "off plan"
· Be clear about the timetable for making paym= ents
· Think about whether you should forward buy currency
· When you take delivery of the property consi= der carefully whether it is worth incurring the expense of an independent surve= y to confirm that all is in order with the construction and to help draft any "snagging list".
When buying a resale property the key points to look o= ut for are:
· Make sure you understand exactly what you are buying. Are the boundar= ies clear? What furni= ture or fittings are included?
· Think about whether to have the property sur= veyed, especially if it is nearly 10 years old and your statutory guarantee will s= oon be expiring
· Think about who should own the property so a= s to minimise tax and inheritance problems
· Make sure the contract has all of the necess= ary clauses required to protect your position
· Think about whether you should forward buy currency
· When you take delivery of the property make = sure that everything agreed is present
When buying an old property – by which I mean a property built more than, say, 50 years ago, there are one or two additional special points to look out for:
· Are you having a survey? Not to do so can be an expensive mistake.
· Are you clear about any restoration costs to= be incurred? Do you have estimates for those charges?
· Are there any planning problems associated w= ith any alterations or improvements you want to make to the property?
· When you take delivery of the property make = sure that everything agreed is present
· Such properties have often acquired a number= of rights and obligations over the years. Are you clear about any obligations you might be taking on?
· You are probably buying for peace and quiet = and the rural idyll. Are yo= u sure that nothing is happening in the vicinity of your property that will be detrimental?
· If you have any plans to change the property= or to use it for other purposes, will this be permitted?
· If you intend to build on the site be very c= lear about minimum permitted plot sizes – which can vary up to 25,000 M2 – and other planning limitations.
· City properties will usually be apartments, concerning which see below.
· Unless you are used to living in a city R= 11; and, in particular, a continental city – do not under estimate the no= ise that will be generated nearby. If you are in a busy area (and you are likely to be) this will go on until late at night. Ho= w good is the sound insulation?
· Are your neighbouring properties occupied by full time residents, are they weekday only "pieds à terre"= or are they holiday homes. Think about security issues.
· If you intend to use a car, where will you p= ark?
· Have you thought about a survey of the property? Will it include the common parts? This can be expensive.
· Make sure you understand the rules of the community – see below.
· Make sure you understand the charges that wi= ll be raised by the community.
· Make contact with its administrator. Ask about any issues affecti= ng the community. Are there any major works approved but not yet carried out? Make sure that the contract = is clear about who is responsible for paying for these.
· Make contact with owners. Are they happy with the community = and the way it is run? Reme= mber that no-one is ever fully happy!
· Understand how the community is run. Once you are an owner try to attend the general meetings of the community.
· Insure the property and its contents.
· Make a full photographic record of the property. This is usefu= l in the event of an insurance claim and for your scrap book.
· Make arrangements for your bank to pay your local property tax, water & electricity bills etc.
·
Make a will in the Portuguese form covering =
your
assets in
· Appoint a Fiscal Representative. This is your point of contac= t with the Portuguese tax office. He will also usually complete and file your annual tax return. Your lawyer may provide this service or should be able to suggest a suitable person.
Anybody. You will need to prove that you ar=
e over
18 and provide the bank with proof of your identity, your civil status (estado civil), your address in
The type of bank=
account
that you will open will depend upon whether you are resident on non-residen=
ts
in
Banking needs vary dramatically from person to person.=
If you are retiring to
We believe that =
it is
important to deal with your local bank if at all possible. It will make you feel part of a lo=
cal
community and, more importantly, will make the local community feel that you
want to be part of them. Who =
knows,
your bank manager might even take you for lunch!
If you have the =
luxury
of a choice between various convenient banks that speak English, perhaps the
most significant factor to take into account would be the bank's charging
structure for receiving money. Portuguese
banks charge for absolutely everything.&nb=
sp;
Some charge a lot more than others for the simple task of receiving
money that you sent from
If you choose to=
use a
"British" bank, remember that they are a separate Portuguese enti=
ty
and that you are likely to receive the same service as from any other Portu=
guese
bank.
Many Portuguese =
banks
offer excellent – and, for non-residents, really useful – Inter=
net
banking facilities.
Most people will=
operate
a simple current account (conta cor=
rente)
and will ask the bank to make payments of the electricity, water and other
bills by direct payment from that account. There are no cheque
guarantee cards in
Portuguese banks
generally pay very little interest on current accounts. Say 0.1%. No change there then. They do not usually pay inte=
rest
on current accounts held by non residents. It is sensible also to have a
deposit account (depósito a =
prazo). Most banks will arrange for the ba=
lance
on the current account over a certain sum to be transferred automatically i=
nto
an interest bearing account.
Interest rates in Euroland are low.
If your needs ar=
e more
sophisticated than this, study carefully the various types of account avail=
able
to you. These, and the terms =
of
conditions of use, differ substantially from the accounts you may be famili=
ar
with in
Do not even thin= k about writing a cheque on your Portuguese bank account if there are not sufficient funds in that account to cover the value of the cheque. Bounced cheques lead to substantial bank charges and later problems with your bank and others. If you bounce three cheques y= our bank can ban you from writing cheques on any Portuguese bank for up to two years.
There is no reason why you should not retain this acco=
unt
when you move to
These are the su=
bject of
considerable mystique. Many p=
eople
resident in
Whichever bank y=
ou use
and whichever account you open the two most important messages are:
· =
&nb=
sp;
Cheque=
s can
be written in English but it will be more reliable if you write them in
Portuguese
· =
&nb=
sp;
Learn =
to
write at least the date in Portuguese.
· =
&nb=
sp;
Rememb=
er
that in
· =
&nb=
sp;
Keep a=
close
eye on your bank statements and reconcile them to the payments you sent to =
· =
&nb=
sp;
Make s=
ure
that you do not write cheques when there are insufficient funds in the acco=
unt
to cover those cheques.
See the section =
on
taxation for more details.
Electricity is u=
sually
supplied by the regional electricity company in your area.
It is expensive =
by
When you buy a n=
ew
property it will have to be connected to the electricity supply. You will sign a contract stimulati=
ng the
amount of electricity you want (the peak Wattage that you think that you wi=
ll
need) and the tariff you want to subscribe to. Do not under estimate the amount of
power you may consume, particularly during the winter months. If you contract for too little pow=
er
then your supply will keep on cutting out at times of the demand - which is
precisely when you needed most. The
extra cost of contracting for, for example, 15 kW instead of 12 kW is well
worth spending. This wo=
uld be
enough to run to electric fires, a washing machine, an electric cooker and =
the
few lights at the same time. =
It is
adequate for most medium-sized homes. Some holiday homes have
ridiculously limited wattage.
My old house started with 3.3kw – just enough for the lights a=
nd a
TV!
When you take ov=
er an
existing property you will take over the supply that is already connected to
it. You will have to ask the
electricity company to put the supply into your name and in order to do this
will need to produce all of your usual documents (passport, details of civil
status, proof of residence, bank account details etc.) and complete applica=
tion
form. In the main tourist are=
as
this is a well trodden and painless path. There is a small fee for thi=
s. If you feel that the supply
connected to the property is not going to be adequate for your needs then y=
ou
can at this stage ask for it to be upgraded. There will be an additional fee to=
pay.
You can ask your=
local
electricity office to make a special reading of the meter when you take over
the property.
If your house is=
not
already connected to the electricity supply make sure that you get a quotat=
ion
for collecting the property before you commit yourself to the purchase. The cost can be considerable.
There are several
different tariffs available from the Electricity Company. Check them carefully. If you are think=
ing of
renting the property it is better to go for the standard tariff because
otherwise in considerate tenants can run-up enormous electricity bills by
connecting to the supply at costly times.
You will be bill=
ed every
months with the standing challenge being paid in advance and the consumptio=
n in
arrear. Electricity bil=
ls can
most conveniently be paid by direct debit from your Portuguese bank
account. The Electricity Comp=
any is
quite quick to cut-off non-payers. &n=
bsp;
As the inconvenience of arriving at your house late at night to find=
you
have been disconnected is considerable, make sure that there are sufficient
funds in your bank account to cover the likely charges.
Electrical wirin=
g in
All property in =
These are surprisingly common, especially outside main cities and major tourist areas. Things are getting better. &nb= sp; Much of the problem stems from the Portuguese being unprepared for rain. They tend to build substations and junction boxes in stream beds. As soon as it rains they flood and= short out. Cuts can vary from= a split second to many hours.
Get a UPS (uninterruptable power supply) to protect computers and other vital equipment. = Get a surge protector to guard sensitive devices. Both are cheap.
Mains gas is onl=
y available
in larger towns and cities. T=
he way
of connecting to the mains supply and billing for the gas supplied are simi=
lar
to electricity.
Rural and town
properties will use bottled gas. It
is usually brought to your door.
The gas is Butane. The
company will carry out a safety check on your appliances before they will a=
llow
you to sign a contract of supply.
Some apartments =
and
other developments in urban areas buy bottled gas in huge quantities and st=
ore
it in their own gas tanks. Th=
ey
then supply the gas to the units in the development by their own pipe syste=
m.
Telephone connec=
tions
are readily available in almost all tourist areas. The days of long waiti=
ng
lists have, largely, gone.
The way of conne=
cting to
the system and billing for the calls is similar to electricity.
All houses in to=
urist
areas will have mains water.
Many rural properties do not. =
Water is stored in a tank (c=
isterna)
which is refilled by truck. If
your house is not already connected to the mains water supply make sure that
you get a quotation for connecting the property before you commit yourself =
to
the purchase. The cost can be
considerable.
Despite huge engineering projects to bring water from =
the
north of
The result is restrictions on supply, particularly in = summer months. Some properties= were in the past built with a separate water tank (deposito) that could be filled by tanker. This system has been reinsta= ted in some areas so that properties have an emergency supply.
Water prices in =
Cost varies form=
area to
area. Allow £4 per
M3. This can add up to =
quite
a large bill. If you do=
n't
pay then, after a warning, you will be cut off.
Portuguese plumb=
ing is,
in the nicest possible way, different from English plumbing! Just like you should not usually E=
nglish
electrician to wire a Portuguese home so you are ill-advised to use your
English plumber to plumb a Portuguese home.
There are many d=
ifferent
types of water heater. There =
is a
much greater variety in the marketplace them there is
All Portuguese t= ap water is drinkable – unless marked otherwise. Not all water from wells is drinkable. Not all of the wat= er that is drinkable tastes nice!
A well is a good
thing! Even though you may no=
t use
it for drinking water it will be an excellent and cheap way of watering your
garden or filling your swimming pool.
Some wells dry up in the summer.&nb=
sp;
Some have gone salt, so are useless. If your property has a well =
and you
think that it is going to be important to you make sure that your rights to=
it
and its water are protected in your contract of purchase. If you want to use your well for
drinking water you should get it checked by the health department or by your
local water company who will issue a certificate that it is fit for human
consumption.
Most rural Portu=
guese
properties depend upon a septic tank for their drainage. For city dwellers this is a strange
concept but there is nothing wrong with it. A septic tank is, essentially, a f=
ilter
that treats sewage by breakin=
g it
down bacteriologically before discharging relatively harmless water into the
ground. There are two types of
septic tank commonly found in
Septic tanks hav=
e a
natural lifespan, which can be extended by careful treatment but cannot be =
extended
indefinitely. If you have to
replace an old-fashioned tank you will have to do so with a new style
tank. You will need planning
permission.
If you are repla=
cing the
tank make sure that the size is adequate for your requirements. It should be based on the maximum =
use of
the house and the amount of water that would be generated by people used to
having lots of baths showers etc..
If you install a tank that is too small you will simply have to have=
it emptied
with monotonous frequency and considerable cost. If you install a large tank emptyi=
ng
will be a rare event and, more importantly for maintenance and longevity, w=
ill
not just be a means of disposing of excess volumes of liquid.
If you are buyin=
g a
house with a septic tank have it checked by your surveyor.
Swimming pools a=
re
expensive. There is not just =
the
capital cost of building the pool (typically about £10,000 for a mode=
st
pool) but there is the annual cost of maintaining the pool. That can be several thousand pound=
s if you
are often absent from the property and thus require a professional maintena=
nce
company to come in and treat it - often twice per week in the summer
months.
If you wish to p=
ut pool
into an existing property you will need permission to do so. This will involve an application f=
or
planning permission from your local town hall. The process is swifter if
entrusted to a local builder/pool specialist.
As in
Satellite televi=
sion is
available throughout
You will be resp=
onsible
for payment of your community bill.
This is the bill for the services that you enjoy jointly with other
people living in your block of apartments or complex of houses sharing comm=
on
facilities. See the explanation above as to the way in which that bill is
calculated.
These charges are usually billed either monthly or quarterly. The rules of your community will s= pecify the arrangements for billing.
Most owners of p=
roperty
in
The only legally
obligatory insurance is fire insurance in the case of condominiums. If you have a mortgage your =
bank
will probably impose a condition of insurance. Not insuring is, however,
generally foolish.
Premiums are
comparatively cheap in rural areas, more expensive in
There are three
important points to bear in mind when choosing a suitable policy.
1.&n=
bsp;
Make s=
ure
that the level of cover is adequate.
Just as in
The amount for which you should be covered as far as civil liability =
is
concerned should be a minimum of one million Euros and preferably higher.
The amount of cover you should have for the building itself should be=
the
full cost of reconstruction of the building. If you own an apartment then the c=
ost of
the buildings insurance for the whole block of apartments may well be inclu=
ded
in your service charge. You w=
ill
then only need contents and public liability insurance.
As far as contents are concerned, you should make a detailed estimate=
of
the value of your furnishings and possessions likely to be in the property =
at
any time. Remember to allow f=
or
items such as cameras that you may take with you on holiday. Pay particular attention to =
the
details of this policy and study the small print about what you have to spe=
cify
when taking out the insurance and any limitations on claims that can be made
against it. Notice in particu=
lar
whether there is a requirement to stipulate items of high value. If you have any items of high valu=
e it
is worth having them photographed and, possibly, valued. The insurance company might =
specify
security measures that must be in place in your home. If you do not use them you may fin=
d that
you are not covered.
2.&n=
bsp;
If you=
are
using the property as holiday accommodation (or spend long periods away from
home) you must specify a policy which is a holiday policy. If you do not you are likely to fi=
nd
that one of the conditions of the policy is that cover will lapse if the
property is empty for 30 or 60 days. =
Premiums will be higher for holiday homes because the risk is higher=
.
3.&n=
bsp;
If you
intend to let your property you must notify the insurance company and comply
with any requirements of the insurance company with regard to the
lettings. Otherwise your cover
could be void. Your pre=
miums
will be higher.
There are some <=
st1:country-region
w:st=3D"on">
If you have to m=
ake a
claim note that there are usually time limits for doing so. If the claim involves the theft or
break-in you will usually have to report the matter to the matter to the
police. This should normally =
be
done immediately after discovery of the incident and in any case within 24
hours. The claim should be no=
tified
to the insurance company without delay.&nb=
sp;
Check the maximum period allowed in your policy, which could be as
little as 48 hours. As with
all-important documents in
There will, inev=
itably,
be other expenses involved with owning property. These will include routine repairs,
maintenance etc..
As a very genera=
l guide
we find that the basic annual cost of owning a holiday home in
Don't.
You will be much=
better
buying a "new" car when you arrive in
Cars in
If you insist on=
taking
your British car you will be able to use it on Portuguese roads for a maxim=
um
of six months per year without converting it to a Portuguese car by having =
it
tested and re-registered in
If you intend to=
keep
the vehicle in
As I have alread=
y said,
it is far better not to do this.
Many people tota=
lly
ignore all these rules and keep a
If you buy a Por=
tuguese
car from a dealer he will often register it for you. Otherwise – unle=
ss you
live in a main tourist area and know someone who has already done it –
get someone to do it for you.
Whether you buy =
a car in
If, even though =
you are
resident in
If you are resid=
ent in
As a British (or=
other
EU) citizen you will be able to take your possessions with you to
The most practic=
al way
is to use a specialist removal company, who will charge about £2,000 -
£3,000 for taking the contents of a medium size house from the
If you wish you =
can take
the items out yourself. You
may be asked for an inventory in Portuguese.
The reductions r=
egarding
the importation of pets to and from
You are allowed =
to bring
in most domestic pets but if you own something exotic it is best to check
first. Animals other than ord=
inary
pets would require a special importation certificate from the Portuguese
Ministry of Agriculture. That=
could
have conditions attached to it.
Your main decisi=
on is
whether you intend ever to bring the pet back to this country. If so you will have to comply with=
the
British rules for the importation of pets into the
If you know that=
you are
not going to want to bring your pet back to this country then all you need =
to
take the pets to
You are generall=
y only
allowed to take two animals into
Once you arrive =
in
About 70% of the people who =
buy
houses in
There are fundamental differences in the way these two groups should approach the tas= k.
The first g= roup should put itself in the head of the person they want to rent their property. Which part of= the market are they trying to capture? &n= bsp; You cannot be all things to all men. The single person or childle= ss couple wanting to enjoy Portuguese culture and cuisine will have very diffe= rent requirements from the family wanting a cheap and quiet holiday in the countryside. Where woul= d they like to rent? What type= of property would they prefer? &nb= sp; What features do they require? They should buy a prop= erty, convert it and equip it solely with their prospective tenants in mind.
The second = group should make few concessions to their tenants. After all, theirs is - first and foremost - a holiday home for their own use. They will have to make some changes to accommodate visitors but they should be as few as possible. Perhaps slightly darker shad= es of upholstery, an area where they can lock away their valuables when not in residence and more sets of bedding. Most importantly, they should provide a "house book" and a visitor pack. The first= gives visitors guidance as to what tourist attractions are available in the area = and emergency contact numbers for the inevitable time when someone is ill or the plumbing springs a leak. The second gives directions to the property, maps and other informat= ion useful before they set off on holiday.
This section relates mainly to the first group. &n= bsp; I will make some comments directed specifically at the second and th= ey can pick and choose from the other ideas, depending on how far they are pre= pared to compromise their wishes to increase letting income.
The choice of th=
e area
in which to buy your rental property is far and away the most important
decision that you will make. =
There
are many parts
The factors to t=
ake into
consideration when deciding upon the area are slightly different from the f=
actors
relevant when you're thinking about buying a home for your own personal
use. They will al=
so
vary depending upon your target clientele and your preferred way of
administering the property.
Strangely, the d=
ecision
as to how you are the going to let your property is one of the first that y=
ou
are going to have to take. Th=
is is
because if you decide to use a professional management or letting agencies =
it
will alter your target market and therefore the area in which you ought to =
be
buying. See the section=
on
Management below.
If you are going=
to let
your property through a professional management agency then it is worth
contacting such agencies before you make a final select=
ion of
area to see what they believe they can offer in the way of rental returns.<=
span
style=3D'mso-spacerun:yes'> They will also be able to tell you=
what
type of property is likely to be most successful as a letting property in t=
hat
area.
If you are think=
ing of
finding the tenants yourself then you will have to decide upon your primary
market. Most British pe=
ople
letting property themselves let it primarily to the British. There are a number of reasons for =
this. Lack of language skills is probabl=
y the
most common. The rest of this
section is targeted mainly at the person wishing to let to a British market=
.
Most people goin=
g on
holiday hope for decent weather.
Fortunately, not everybody has the same idea about what this means.<=
span
style=3D'mso-spacerun:yes'> The number of people taking summer
holidays in
It is particular=
ly
important that the area has decent weather during the prime British holiday
season. This is normally July,
August and September. A=
part
from this main holiday season there are the the months of May, June and Oct=
ober
which offer reasonable letting prospects if you are in an area with a mild
climate. There is also a rela=
tively
small market for longer term winter lets in areas with particularly mild
climates or which are socially desirable.
Study the climat=
e charts
in the section on finding a property.
Information is also available from your tourist office, in travel
publications and on the Internet.
Just as importan=
t as the
climate is the ability of tenants to get access to your property. This is true at two levels. The area in which the property is
located must offer convenient access from the places where the tenants live=
and
the property itself must be easy to find.
For most British
visitors convenient access to the area means convenient access from a major
local airport. Convenient acc=
ess is
much more difficult to define if you are trying to attract Portuguese visit=
ors.
It is worth repe=
ating
the results of the research conducted by the travel industry that shows that
25% of all potential visitors will not travel in it involves travelling for
more than one hour from a local airport at either end of their journey. If the travelling time rises=
to
1½ hours then the number that will choose not travel rises to 50%.
Do not under-est=
imate
the importance of being able to find your property! Navigation in the depths of rural =
Governments are =
keen on
tourist attractions because they attract tourists! The fact that they are prepared to
invest billions of taxpayers money in encouraging these attractions should
persuade you that having one near to you is a "good thing" when it
comes to letting your property.
"Tourist
attractions" is a term that covers a multitude of things. At one extreme it could be a major=
theme
park, attracting millions of visitors each year, all of whom have to find
somewhere to sleep. Going sli=
ghtly
down in scale it could mean being near to a championship golf course or a
famous beach or sailing area. At
the lowest level the tourist attraction could be a lady in your village who
teaches pottery classes or falconry.
The point is that there must be something to bring people to your ar=
ea
so that they will need to use your accommodation. The mere fact that the house is lo=
cated
in the middle of the countryside is not, of itself, enough to attract a sig=
nificant
number of tenants.
Many people goin=
g on
holiday want to eat out. Even=
those
who will probably end up buying food in their local supermarket and cooking=
at
home think they want to eat out. It
will be much easier to let your property in this is within easy distance -
preferably walking distance - of one or more restaurants. It should also be within walking
distance or a short drive of shops and other facilities. The choice of pr=
operty
is almost as important as the choice of area. Not all properti=
es rent
to the same extent. Our exper=
ience
suggests that properties that the potential client finds attractive will re=
nt
up to five times more frequently than properties that do not stand out for =
any
reason. This is such a signif=
icant
difference that you ignore it at your peril. New property is
generally cheaper to maintain than older property. It is, however, not nearly as like=
ly to
be attractive to potential tenants.
Most people going on holiday to rural Make sure that t=
here is
no restriction on your ability to let your property. This will normally only be the cas=
e in a
very small number of apartments or condominiums (condomínios – see above) where the rules of the
community impose restrictions. To let legally y=
our
property should be registered with the tourist authorities. Many people ignore this
rule. There are also
significant restrictions in the Canaries and Balearics. If you want to rent in these=
areas
check your plans carefully with your lawyer. Most people will=
decide
whether to rent your property after they have seen only a brief description=
and
a photograph. The photograph =
is by
far the more important. Resea=
rch
that we carried out showed that 80% of a group shown 32 potential rental
properties picked the same three properties. The common factor in these propert=
ies
was that they were all pretty. If
the person was looking at properties in Make sure the external decoration and garden/pool area=
are
kept in good order. The=
se are
what will show up in your photographs and will create the first impression =
on
your guests on arrival. If you advertise=
the
property well you will get tenants.
You will only get repeat tenants and recommendations from existing t=
enants
if the property meets or exceeds their expectations in terms of the facilit=
ies
it offers and its cleanliness. The facilities r=
equired
will depend upon the target audience you trying to attract. Think about that audience and think
about what you would want if you will part of it. For example, if you are trying to
attract an audience of mountain walkers or sailors they will appreciate
somewhere to dry their clothes quickly so that they can be ready to get wet
again the following day. The top general =
tips
are: It is much bette=
r if
someone is present either at the property or in a nearby house to welcome y=
our
guests when they arrive. They=
can
sort out any minor problems or any particular requirements of the guests. The property mus=
t be
spotlessly clean. This applie=
s in
particular to the kitchen and bathroom.&nb=
sp;
This may require some training for your cleaner as our expectations =
when
going into rented accommodation are possibly higher than our expectations i=
n an
ordinary home. This must be mod=
ern,
even if traditional in style.
Everything should work. You
should have a microwave. You =
should
also make sure that there is sufficient cutlery and cooking equipment and t=
hat
it is all in good condition. A
cookbook giving local recipes is a nice touch. These days, more=
usually
bathrooms. En Suite bathrooms=
for
each bedroom are ideal. A bid=
et
will be welcomed by Portuguese visitors and contribute a local feel for Bri=
tish
visitors. Make sure that ther=
e is
soap in the bathrooms. Guests=
will
much prefer it if you provide towels as part of your service. A washing machin=
e and
drier are now commonplace. The number of be=
drooms
you choose is very important.
Generally in cities you will get a better return on your investment =
on
properties with fewer (1 or 2) bedrooms - which will be cheaper to buy - th=
an
on larger properties. In
rural areas, or by the seaside, where the majority of your guests may well =
be
families, a three-bedroom property is probably your best compromise. Bedrooms should =
have
adequate storage space. Most importantly=
, they
should have clean and comfortable beds.&nb=
sp;
The only beds that last well in a regularly used property and where =
the
people sleeping will be all sorts of different sizes and weights are expens=
ive
beds such as those used in the hotel industry. Beds should be p=
rotected
from obvious soiling by the use of removable mattress covers which should be
changed with each change of tenants. Nothing except d=
irtiness
produces more complaints than uncomfortable beds. Clients will muc=
h prefer
it if you supply bedding as part of your service rather than expecting them=
to
take their own. Furniture and up=
holstery
should be in good condition. =
The
style is a matter of personal preference but a "local" style is o=
ften
attractive. The furniture mu=
st be
comfortable. There should be =
adequate
means of cleaning, including a vacuum cleaner. Heating is
essential. It should be effec=
tive
and cover the whole house. Air-conditioning=
is
probably best avoided except in the most expensive lettings. It is not yet considered compulsor=
y and
can be expensive both to run and maintain. If you are cater=
ing to
the British audience a swimming pool is highly desirable. In a rural area it will significan=
tly
increase your potential number of tenants.=
A pool should be of reasonable size but need not be heated. You should make =
sure
that basic groceries such as bread, milk, coffee, sugar and a bowl of fruit=
are
left in the house to welcome your guests.&=
nbsp;
A bottle of wine goes down well too! Make sure that a=
ll
guests are sent a pre-visit pack. The should include notes about the=
area
and local attractions (usually available free from your local tourist offic=
e),
a map showing the immediate vicinity, notes explaining how to get to the
property, emergency contact numbers and instructions as to what to do if th=
ey
are for any reason delayed. A house book should be available in the property. It should give much more informati=
on
about local attractions, restaurants etc. and a comprehensive list of conta=
ct
numbers for use in the case of any conceivable emergency. It can also act as a visitors' boo=
k. This will be a useful vehicle for
obtaining feedback and a means of making future contact direct with visitors
who might have been supplied by an agency. In your marketin=
g it is
well worth stressing that your property is clean, modern and well-equipped =
at
the same time showing the traditional outside appearance and pool. When buying a pr=
operty
as a business you will be concerned to pay as little as is possible for the
property consistent with getting the right level of rental return. If you are only buying the propert=
y as a
business proposition then this price/rental balance (or return on investmen=
t)
together with your judgement of the extent to which the property will rise =
in
value over the years are the main criteria upon which you will decide which
property to buy. If you are going=
to use
the property not only as a rental property but also as a holiday home then
there is an additional factor. This
is the amount of time that you will be able to use the property yourself
consistent with getting a certain level of rental return. For example, if you bought a one b=
edroom
property on the sea front in Madeira for £100,000 that property might=
be
let for 45 weeks per year and produce you a return after deduction of all
expenses of, say, 7.5%. If you
bought a two-bedroom apartment in the province of Algarve for, say, £=
100,000
and let that for 25 weeks per year you might also generate 7.5% on your
investment. Both would be
performing equally well but the Whatever way we =
look at
it, paying the minimum necessary to buy the property is the key to maximisi=
ng
performance. Properties do no=
t let
themselves. You will have to =
do
some marketing. In the early =
years
you will have to do more marketing than in later years because you will hav=
e no
existing client base. As in a=
ny
other business, the cheapest type of marketing is catching repeat clients a=
nd so
some money spent on making sure that the property lives up to or exceeds th=
eir
expectations (and so secures their return next year) is probably the best s=
pend
that you will make. There seems to b=
e no
correlation between the amount spent on marketing and the results
achieved. Much money spent ap=
pears
to be wasted. What are the key=
points? ·
Choose=
the
method of marketing most appropriate to your property and your circumstance=
s ·
Follow=
-up
all leads generated at once.
Contact them again after a couple of weeks to see whether they have =
made
the mind up. ·
Send t=
hem
your details again next year at about the same time, as they are likely to =
be
taking another holiday. Remember that yo=
ur
marketing is only as good as the quality of the response you give to people
making inquiries. You
will probably do better spending less money on advertising and paying more
attention to following up the leads that you have actually generated. If your property=
is
pretty then you are likely to get good results from the various directories=
and
magazines focusing on properties to let in The problems with
advertising are its scatter gun approach and, in many cases, its cost. You only need a very small number =
of
responses. You cannot afford =
to pay
a large amount in advertising fees for each week let. Except for very
expensive properties traditional advertising is too expensive. We have had good reports of result=
s from
the specialist Portuguese property press and from Your own contact=
s are,
without doubt, the best opportunity you have for marketing your property in=
The people who f=
ind this
easiest are those who work for large organisations. If you are lucky enough to work fo=
r a
major hospital or British Telecom or a large factory you will almost certai=
nly
be able to find enough people to keep your property fully occupied with in =
your
working environment. You will=
have
the additional advantage of knowing the people who are going to rent the
property. This reduces =
the
risk that they will cause it damage or fail to pay you. Even without peo=
ple from
work most owners will be able to find enough friends, neighbours and relati=
ves
to rent a nice property in When renting to =
family
and friends or indeed close working colleagues you will have to learn how to
raise the delicate issue of payment.
Given that you are not going to be incurring any marketing costs and,
probably, very little in the way of property management costs you should be
able to offer them an attractive price and still generate as much income as=
you
would have done by letting through an agency. To make sure that you address the =
issue
when you accept the booking as doing so later can be very embarrassing. Most British peo=
ple do
not speak Portuguese sufficiently well to be able to offer the product on t=
he Portuguese
market other than through a letting agency. There are signif=
icant
English speaking markets in The Internet off=
ers
tremendous opportunities for bringing a specialist niche product to the
attention of a vast audience at very little cost. It also offers the possibility of
showing lots of pictures and other information about your property and the =
area
in which it is to be found. A=
s such
it is ideal for the person wanting to rent out property. It is worth havi=
ng your
own little Website designed especially for this purpose. Not only can it be your brochure b=
ut it
can also act as a way of taking bookings.&=
nbsp;
It is much cheaper to have someone print off a copy of your brochure
from their own computer than it is for you to send it by post. You may have the expertise to
create your own Website. If y=
ou do
not it's quite fun learning. =
If you
have not got the time or inclination a simple but very effective site can be
put together for perhaps £250. As well as havin=
g your
own Website you should consider listing your property on one of the many Po=
rtuguese
property Websites currently to be found on the Internet. These listings are either fr=
ee or
low cost. You will soon find =
the
ones that work and the ones that don't. You will have to=
decide
whether you want to use the site only as a brochure or whether you are prep=
ared
to take electronic bookings and whether to price your product only in Two particular f=
orms of
deal might appeal to you. If your property=
is in a
rural area where there is somebody offering a very local tourist service it=
can
be sensible to make contact with them and to try to arrange for the people
visiting that facility or attending that course to be introduced to your
property. This can significan=
tly
increase your lettings, particularly off peak. If you pay the person concerned, s=
ay,
20% commission you will be well ahead. The second type =
of deal
is worth considering if you know some other people in the area who have
properties to let. One of the
frustrations of marketing your property is when you find four lots of people
who want to rent the property for the same week. Getting together with others in a =
mutual
assistance group will allow you to pass excess lettings to each other. Letting agencies=
- or at
least good letting agencies - will have the opportunity to capture clients =
from
the domestic Portuguese market as well as from various international
markets. They will argue that=
the
fee that you will pay them (typically 17.5 to 20% of your letting income + =
VAT)
will be recovered by extra lettings that they make during the season. This may or may =
not be
true. In our expe=
rience
the people who are most successful at letting their property are those who
attract the clients themselves. This, however, assumes=
a
level of commitment that many people simply cannot afford. It is simpler to use a Letting age=
ncy. If you decide to=
use a
letting agency the choice of agency is critical. There are some excellent agencies =
both
in When selecting w=
hich
letting agency to appoint there are various checks that you should make.The right property=
Can you let the property?
Pick a pretty home=
Making it attractive
Equipping
the property
Welcome
Cleanline=
ss
Kitchen
Bathroom<=
/span>
Laundry
Bedrooms<=
/span>
Living ar=
eas
Heating
Air-condi=
tioning
Swimming =
pool
Welcome p=
ack
Documents=
The right price
Marketing
Directories
Advertising
Your own contacts
Portuguese market<=
/span>
Other markets
Internet
Doing deals=
Management<=
/a>
Selecting=
an
agency
·
If the
agency is a Portuguese agency, are they professionally qualified and
experienced? Many such
services are offered as an adjunct to estate agencies.
·
Check =
their
premises. Do they seem welcom=
ing
and efficient? Is there evide=
nce of
significant letting activity?
·
What
marketing do they do? If they=
are
reliant upon passing trade then, except in the most exceptional areas, they
will not get you good results.
·
Ask to=
see a
sample information pack sent to a potential client. You will be able to judge a lot fr=
om
this. Is it the image you wan=
t to
give of your property?
·
Inspec=
t two
or three properties that they are presently managing. If they are dirty or ill cared for=
then
so will yours be. Then
it will not let.
·
Ask the
references. Preferably they s=
hould
be from other overseas clients.
Take the references up.
Preferably speak to the people on the telephone. Ask whether there are happy with t=
he
performance and whether the financial projections given to them have been m=
et.
·
What
contract are they offering you?
Unless you are familiar with Portuguese law it is sensible to get th=
is
checked before you sign it as some give you far more rights than others.
·
How ma=
ny
weeks rental do they think you will be able to obtain in this area? How much do they think they would
generate for you after deduction of all expenses including the charges?
·
What t=
ype of
property do they think would be the best for letting purposes in this area?=
Once you have ap=
pointed
a letting agency you must control it.
·
Check =
the
report you receive from the agency and check that the money you receive
corresponds to the amounts shown in the reports.
·
Let the
agency know, in the nicest possible way, that you and all of your friends in
the area check each other's properties every time you are there and compare=
notes
about which are occupied and the performance of your letting agencies. If they believe you then this is a
deterrent to unauthorised lettings.
·
Teleph=
one
the property every week. If s=
omeone
answers the phone make a note and make sure that there is income shown for =
the
week of the phone call.
·
From t=
ime to
time, have a friend pose as a prospective customer and send for an inquiry
pack.
·
If you=
get
the opportunity, calling to see the property without warning to see what st=
ate
it is in.
All this may sou=
nd like
hard work. It is not. It will significantly increase the
income you receive from your rental property.
From the point o=
f view
of the landlord the safest type of letting is a short holiday letting of
furnished property.
To be classified=
as
furnished the property must be properly or fully furnished. In other words, it must have all o=
f the
key items required to live successfully in the home. A property let without, for exampl=
e, a
bed or a cooker or a table or a refrigerator or chairs would in each case t=
he
likely to be treated as an unfurnished property. The result could be that the tenant
could acquire the right to stay on at the end of the tenancy.
A holiday lettin=
g is a
letting that takes place during the recognised holiday season. That season is obviously different=
in a
If a furnished p=
roperty
is let as a holiday letting for a period of less than 12 months the tenant's
rights to stay on at the end of the period of the tenancy are limited.
A suitability dr=
afted
tenancy agreement will take into account all these factors and protect you =
in
the event of a dispute with your tenant and, in particular, in the event th=
at
he wishes to stay on at the end of the tenancy.
If your property=
forms
part of a condomínio your
tenants will have to agree to abide by the rules of the community and shoul=
d be
supplied with a copy of the rules or at least of the part of the rules that
govern their conduct.
In the rental co=
ntract
you should stipulate what things are going to be covered by your insurance =
and
what are not. Typically the t=
enants'
personal possessions would not be covered under your policy.
See the section =
on
Taxation below.
All tax systems are complicated. The Portuguese system is no
exception. The Po=
rtuguese
would say that it is nearly as complex as ours! Fortunately, most peop=
le
will only have limited contact with the more intricate parts of the
system. For many owners of ho=
liday
homes in
It is helpful to have some sort of understa=
nding
about the way in which the system works and the taxes that you might face.<=
span
style=3D'mso-spacerun:yes'> Be warned: getting even a basic
understanding will make your head hurt.&nb=
sp;
You also need to be particularly careful about words and concepts th=
at
seem familiar to you but which have a fundamentally different meaning in
There are several points in this book where=
I
have said that the contents are only a general introduction to the
subject. There is nowhere whe=
re
this is more true that in this section.&nb=
sp;
Books (and long ones at that) have been written about the subject of=
Portuguese
taxation. This general introd=
uction
does little more than scratch the surface of an immensely complex subject.<=
span
style=3D'mso-spacerun:yes'> It is intended to allow you to hav=
e a
sensible discussion with your professional advisers and, perhaps, to help y=
ou
work out the questions that you need to be asking them. It is not intended as a substitute=
for
proper professional advice.
Your situation when you have a foot in two =
countries
- and, in particular, when you are moving permanently from one country to
another - involves the consideration of the tax systems in both countries w=
ith
a view to minimising your tax obligations in both. It is not just a question of payin=
g the
lowest amount of tax in, say,
What should guide you when making a decisio=
n as
to which course to pursue? &nbs=
p;
Each individual will have a different set of priorities. Some are keen to screw the last
halfpenny of advantage out of their situation. Others recognise that they will ha=
ve to
pay some tax but simply wish to moderate their tax bill. For many the main concern is a sim=
ple
structure which they understand and can continue to manage without further
assistance in the years ahead. Just
as different clients have different requirements so different advisers have
differing views as to the function of the adviser when dealing with a clien=
t's
tax affairs. One of your first
tasks when speaking to your financial adviser should be to discuss your bas=
ic
philosophy concerning the payment of tax and management of your affairs, to
make sure that you are both operating with the same objective in mind and t=
hat
you are comfortable with his approach to solving your problem.
The biggest sing=
le
factor in determining how you will be treated by the tax authorities in any
country is whether you are resident in that country for tax purposes. This concept of tax residence caus=
es a
great deal of confusion.
Tax residence ca=
n have
different meanings in different countries.
Let us first loo=
k at
what it does not mean.
It is nothing to do with whether you have registered as resident in a
country or with whether you have obtained a residence permit or residence c=
ard
(though a person who has a card will usually be tax resident). Nor does it have anything to do wi=
th
whether you have a home (residence) in that country - although a person who=
is
tax resident will normally have a home there. Nor is it much to do with your
intentions.
Tax residence is=
a
question of fact. The law lay=
s down
certain tests that will be used to decide whether you are tax resident or
not. If you fall into the
categories stipulated in the tests then you will be considered tax resident
whether you want to be or not and whether it was your intention to be tax
resident or not.
It is your
responsibility to make your tax declarations each year. The decision as to whether y=
ou
fall into the category of resident is, in the first instance, made by the t=
ax
office. If you disagree=
with
the decision you can appeal through the courts.
Because people n=
ormally
change their tax residence when they move from one country to another the b=
asis
upon which decisions are made tends to be regulated by international law an=
d to
be pretty, but not totally, consistent from country to country.
You will have to
consider two different questions concerning tax residence. The first is whether you will be t=
reated
as tax resident in
It is outside th=
e scope
of this book to go into any details about
In
Your domicile is=
the
place that is your real home. It is
the place where you have your roots.
For most people it is the place where they were born. You can change your domicile but i=
t is
often not easy to do so. Chan=
ges in
domicile can have far-reaching tax consequences and can be a useful tax
reduction tool.
Residence falls =
into two
categories. Under English law=
there
is a test of simple residence - actually living here other than on a purely
temporary basis - and of ordinary residence.
A person will ge=
nerally
be treated as resident in
A person can con=
tinue to
be ordinarily resident in the
From our point o=
f view,
the most important thing to understand is that, once you have been ordinari=
ly
resident in this country, the simple fact of going overseas will not
automatically bring that residence to an end. If you leave this country in order=
to take
up permanent residence elsewhere then, by concession, the Inland Revenue wi=
ll
treat you as ceasing to the resident on the day following your departure.
In other words, =
they
don't want you to escape too easily!
Until 1993 you w=
ere also
classified as ordinarily resident in the
Tax residence in
·
If you spend more than 183 days in
· If you have accommodation available in Portu= gal (owned or rented) on December 31st and the Portuguese tax authorities have reasonable grounds for assuming that you intend to use it = in the following year as your principal residence you will be treated as tax resident in Portugal.
·
If your centre of economic interests is in <=
st1:country-region
w:st=3D"on">
·
If the head of your family is resident in
Remember that you can be tax resident in more than one
country under the respective rules of those countries. For example, you might spend=
230
days in the year in
The most basic d=
ecisions
that you will have to make when planning your tax affairs is whether to cea=
se
to be resident in this country, whether to cease to be ordinarily resident =
in
this country and whether to change your domicile to another country. Each of these has many consequence=
s,
many of which are not obvious.
The second consi=
deration
is when in the tax year to make these changes. Once again, that decision has many
consequences.
For many ordinar=
y people
getting these decisions wrong can cost them tens of thousands of pounds in
totally unnecessary taxation and a great deal of aggravation and
inconvenience. It is vital th=
at you
seek proper professional advice before making these decisions. You will need advice from speciali=
st
lawyers, accountants or financial advisers all of whom should be able to he=
lp
you.
The significance=
of
these residence rules is that you will continue to be liable for some Briti=
sh
taxes for as long as you are either ordinarily resident or domiciled in
·
you wi=
ll
continue to have to pay tax in
·
you wi=
ll
continue to be liable to British inheritance tax on all of your assets loca=
ted
anywhere in the world for as long as you remain domiciled here. This will be subject ot doub=
le
taxation relief (see below). =
Other,
more complex, rules apply in certain circumstances.
·
you wi=
ll
always pay
·
you wi=
ll pay
Income from "self employed" trade of profession carried out=
in
the
Income from interest, annuities or other annual payments from
Income from investments & businesses outside
Income from government pensions (fire, police, army, civil servant et=
c)
in all cases
Sundry profits not otherwise taxable (Case VI) arising out of land or
building in the
·
You wi=
ll pay
income tax on any income earned from salaried employment in the
If you are only =
buying a
holiday home and will remain primarily resident in the
I said it would =
make
your head hurt. Now rea=
d the Portuguese
part and feel what a real headache is!!
Under Portuguese law it is your responsibility to fill= in a tax return in each year when you have any taxable income.
The tax office is generally known as finança. &nb= sp; It is organised by province.
There are three key points to remember:
· Lots of Portuguese people don't pay the taxes they owe – and view with mild derision the fact that the British do s= o!
· The rules are applied more strictly every ye= ar.
· If you are caught not paying the taxes you o= we the penalties are substantial. The aggravation can be even more substantial.
The tax office provides a lot of help and advice ̵= 1; including tax forms and guidance notes – over the internet. It is, not surprisingly, alm= ost all in Portuguese.
Both residents and non-residents pay these taxes.
It is levied by the municipality where your property is located. It applies to = both urban and rural property and whether the property is rented out or not.
The tax rates vary according to the type of property a= nd its value. Rural property is taxed at a lower level (0.8% of the registered value) than urban property and building plots. Town halls= are free, within the permitted range of 0.7% to 1.3% of the official value of t= he property, to fix whatever tax rate they think appropriate for urban propert= y.
Each property has an official value (valor patrimonial or va= lor tributável), which is recorded in the tax register (matriz predial). These values are, gener= ally, very low compared to the true market value for the property as there has not been a revaluation for many years. &n= bsp; There is likely to be a revaluation soon. This will, of course, tend to increase the level of taxes payable.
If you have bought a property that you intend to use a= s your own residence or to rent out and you have paid SISA you will be allowed a period free of local property tax. &n= bsp; This can be up to 10 years, depending on the valor tributável. =
|
Official Tax Value =
of the
Property |
Tax free period (years) |
|
Up to €111,266.97 |
10 |
|
From €111,266.97 to €139,199.03 |
7 |
|
From €139,199.03 to €168,258.62 |
4 |
|
Over €168,258.62 |
0 |
Each year you will be sent a bill. If it is more than €25= 0 you can pay in two parts in April & September of the following year.
In general a person who is non-resident for tax purpos=
es has
few contacts with the Portuguese tax system and they are fairly painless.
Please bear in mind what I said at the outset of this section about the complexity of the Portuguese tax system. What I set out here can only= be a very brief summary of the position. &= nbsp;
As a non-resident you will generally only pay tax on:<= /p>
1. Income
generated from land and buildings located in
2. Income
from Portuguese securities and capital invested in
3. Income
from business activities in
4. Earned
income if you are employed or self employed in
Income tax is calculated on these amounts. Before calculating the tax d= ue you are allowed to deduct any social security payments made and various types of expenses. In particular, in the case of rental income, repair and maintenance costs and certain administrative expenses will be tax deductible provided they are supported by documentation.
Note that if you own your home in the name of an offsh= ore company the company will generally pay tax at a fixed rate of 25% on a notional inc= ome of 6.67% of the official value of the property whether or nor the property is actually let. If it is let and the tax on the lettings would exceed this notional s= um then the larger sum is payable. See below.
Certain withholding taxes are collected to ensure paym= ent of what is due. For exampl= e, if you let your property the agent should keep back 25% of the rent received a= nd send it to finanças. You should, therefore,= file your tax return and claim the appropriate allowances so as to be able to cl= aim back any refund due.
The tax rates applicable are on a sliding scale:
|
Taxable Income |
Rate |
Cumulative = tax to top of band |
|
Up to €4,100.12 |
12% |
€492.= 01 |
|
From €4,100.12 to €6,201.42 |
14% |
€786.= 19 |
|
From €6,201.42 to €15,375.45 |
24% |
€2,98= 7.96 |
|
From €15,375.45 to €35,363.52 |
34% |
€9,78= 3.90 |
|
From €35,363.52 to €51,251.48 |
38% |
€15,8= 21.32 |
|
Over €51,251.48 |
40% |
|
The tax is calculated in tranches. That is, the tax is calculat= ed separately on each portion. E.G. Income €20,= 000. Tax payable on first €15,375.45 =3D €2,987.96. = ; Balance of €4,624.55 at 34% =3D €1,572.34. Total payable €4,560.30. This equates to an overall r= ate of 22.8%.
Tax on your income for the year
A company will pay tax on the profits it makes from
activities in
The tests of company residence and these taxes are not considered further here.
There is no Portuguese wealth tax.
Firstly, a t=
ax will
be payable on deemed rentals.
A legally very doubtful decision has been made to assume that all
offshore companies established in more favourable tax regimes (tax havens) =
are
renting out their villas. This is most such companies.<=
span
style=3D'mso-spacerun:yes'> An annual tax charge of up t=
o 40
per cent of the deemed rental income is then levied. This is based on a dee=
med
rental income of 1/15th (6.67%) of the official (rateable) value of the
property. This step is =
subtly
combined with an imminent and long overdue revaluation of rateable values.<=
span
style=3D'mso-spacerun:yes'> Together they will amount to=
a
huge increase in the cost of running a property via an offshore company.
Second, the annual property tax – which presently range between 0.7%
& 1.3% of the (currently very low) rateable value of the property ̵=
1; are
to be reduced for ordinary 'non-company' owners to between 0.2% & 0.8% =
of
the new, revised value
This will probably still mean a steep increase in the amount actuall=
y payable
for most people as it is so long since the properties were revalued. But offshore company owners w=
ill
pay 5% of the new valuation. This will increase the
average bill for a 4 bedroom house on the
British com=
panies
do not have to pay this tax but "tax haven" companies, including =
There may be= a limited window of opportunity to reduce the transfer costs. See your lawyer and accountant with= out delay. If your property is owned in a way that attracts this tax it is probably worth seek= ing advice as to how to restructure the ownership to avoid the tax.
You will pay tax on the capital gain you make on the s=
ale of
real estate in
The apparent gain (the difference between the sale pri= ce and the purchase price) is subject to various allowances. These include the costs of purchase and sale and the document= ed value of any improvements made to the property. The resulting figure i= s then adjusted, effectively to reflect inflation. For these purposes there is a scale of coefficients which are applied to the price you paid for the prope= rty, depending on the year in which it was bought.
|
Year Bought |
Coefficient |
|
1989 |
1.82 |
|
1990 |
1.64 |
|
1991 |
1.45 |
|
1992 |
1.35 |
|
1993 |
1.25 |
|
1994 |
1.19 |
|
1995 |
1.14 |
|
1996 |
1.10 |
|
1997 |
1.08 |
|
1998 |
1.05 |
|
1999 |
1.03 |
|
2000 |
1.00 |
|
2001 |
1.00 |
Tax is payable on 50% of the gain calculated in accord= ance with these rules.
The taxable gain is treated as income in the year in w= hich it was made and taxed at the appropriate rate.
Example: Property bought in 1995 for £100,000. Sold in 2001 for £200,000. G= ain £100,000. Adjuste= d by coefficient (£200,000 – (£100,000 * 1.14)) =3D £86,000. Costs of acquisition £12,000. Costs of disposal £10,000. Documented improvements £20,000. Taxable = gain (£86,000 – £42,000) =3D £44,000. Tax payable on 50% of the ga= in (£22,000).
There is no withholding tax in respect of capital gain=
s, so
gains made by people selling and leaving
Inheritance tax is paid in
The tax is an inheritance tax rather than, as in the <=
st1:country-region
w:st=3D"on">
All of the assets will have to be declared for the pur=
poses
of
The overall value of the part of the estate you inheri= t is calculated in accordance with guidelines laid down by the tax authorities.<= span style=3D'mso-spacerun:yes'> Assets are generally valued = as at the date of the death. = This valuation is declared by the person who inherits but is subject to challenge by the t= ax authorities. The death = must be declared to the tax office within 30 days if the deceased lived in the a= rea, 60 days if he lived elsewhere in Portugal and 180 days if he lived overseas – e.g. in England. The deceased's assets must be listed and declared within 60 days of notification. The amoun= t due can be paid at once or by instalments - but interest is then charged on the amount due.
Any debts (including mortgage or overdraft) are deduct= ed from the asset value as are medical bills and funeral costs.
The tax payable depends, =
in part,
on the amount you inherit and in part on your relationship to the deceased.=
There are four groups of relationships of the person receiving the
gift:
Class I &nbs=
p; - &=
nbsp; Minor
children and grandchildren under 21 years of age
Class
II =
; - &=
nbsp; Spouse,
children and grandchildren over 21 years of age
Class
III &nbs=
p; - &=
nbsp; Parent
and grandparents, brothers and sisters
Class IV &= nbsp; - &= nbsp; Other – including same sex and common law partners
The tax rates on the taxable amount of any gift are as follows:
Value =
; Class
|
I
% |
II
% |
III
% |
IV % |
|
|
|
|
|
|
|
Up to € 3,641=
|
- |
7 |
13 |
16 |
|
€ 3,641 - € 14,625 |
3 |
10 |
17 |
20 |
|
€ 14,625 – € 36,212 |
6 |
13 |
21 |
25 |
|
€ 36,212 – € 71,328 |
9 |
16 |
25 |
30 |
|
€ 71,328 – € 178,968 |
13 |
21 |
31 |
36 |
|
€ 178,968 – € 355,343 |
17 |
26 |
38 |
43 |
|
Over € 355,343 |
24 |
32 |
45 |
50 |
The tax is calculated in tranches. A gift of €10,000 to y= our son will therefore be taxed at 7.65% for the first €7,970 and 8.5% on= the balance.
The tax is paid by the person who inherits, not as in =
If these figures alarm you there are many legal ways of
limiting the amount of tax payable in
Please bear in mind what I said at the outset of this
section about the complexity of the Portuguese tax system. What I set out here can only=
be a
very brief summary of the position. &=
nbsp;
The detail is immensely complicated and is made worse because it is =
so different
from what you are used to. Wh=
at is
written here is written with reference to the person retiring to
Income is divided, as in
For a married couple income tax is generally assessed = by reference to the income of your household, rather than on your sole income. Unmarried coupl= es are assessed as two households – which is, generally, a disadvantage.
When assessing the income of the household the income = of any dependent children is included. Dependent children are, generally, children under 18 though the definition can include older children in certain circumstances.
As a tax resident you will generally pay tax in
Remember that
From your gross income you can deduct:
· Any payments made to the Portuguese social security scheme
· Your (or your family) personal allowances
· Payments made to an ex-wife or child as a re= sult of matrimonial proceedings
There may be other deductions too. See your adviser.
The tax payable is calculated using the following table. The tax is calcu= lated in tranches. That is you calc= ulate the tax payable on each complete slice and then the tax at the highest applicable rate on any excess.
Taxes are paid partly to the national government and p= artly to the regional government. This table shows the combined total.
|
Income
Tax Rates – 2001 (payable 2002) |
||
|
Income from € |
To € |
Rate (%) |
|
0 |
4,100 |
12 |
|
4,100 |
6,201 |
14 |
|
6,201 |
15,375 |
24 |
|
15,375 |
35,363 |
34 |
|
35,363 |
51,251 |
38 |
|
51,251 |
No upper limit |
40 |
Various tax credits are available. These are deducted from the = tax otherwise payable as calculated above.
The rules are complex. They include credits for
· A personal allowance of €175.58 for a single taxpayer, 133.68 for each married taxpayer.
· An allowance of €96.77 for each child<= /p>
· Mortgage interest and other housing costs in certain cases – usually 30% of applicable amounts – up to €1,536.30 or rental payments up to the same amount.
· Health care, Education & Life Insurance expenses up to certain limits
·
Personal taxes paid in another country ̵=
1;
up to the amount that would have been paid in
See your adviser for the up to date list of credits.
You will be sent a tax form in January. You must complete your tax f= orm and submit it by the dates applicable in your case. If you have only a pension or income from employment it must be filed between February 1st and March 15th. = If you have other income as well you must file between March 16th and A= pril 30th. = You will then be sent a tax bill – usually within 2 months – and you must pay it within 1 month. &nb= sp; Late payment incurs a penalty.
If you don't file a tax return – or if the amoun= t of income you disclose is out of kilter with your apparent wealth – the = tax office can assess you to income tax based on your visible wealth.
There are detailed rules as to how your assets should = be viewed for this purpose. For example, the taxman will expect your declared income to be no less than 20%= of the cost of your home plus, if you have an expensive car (over €50,00= 0), 50% of the price of the car. This provisional assessment can be challenged. For example, if you can show= that the assets were acquired by gift or loan or prior to your retirement the tax office will not take account of them.
These taxes are not considered further h= ere.
There is no wealth tax in
You will pay on your world-wide gains.
Gains are generally only taxed when the gain is crysta= llised – e.g on the sale of the asset.
Gains are, generally, taxed as part of your income for= the year in which the gain occured.
Real estate is treated a little differently.
If a resident sells his main residence and then uses t= he money to buy another then the gain will not be taxed provided the new purch= ase is made within 3 years. If a gain on the sale of real estate is taxable then only 50% of the taxable gai= n is taxable.
The method of calculating the tax payable on the sale = of real estate is complicated.
You will pay tax on the capital gain you make on the s=
ale of
real estate in
The apparent gain (the difference between the sale pri= ce and the purchase price) is subject to various allowances. These include the costs of purchase and sale and the document= ed value of any improvements made to the property. The resulting figure i= s then adjusted, effectively to reflect inflation. For these purposes there is a scale of coefficients which are applied to the price you paid for the prope= rty, depending on the year in which it was bought.
|
Year Bought |
Coefficient |
|
1989 |
1.82 |
|
1990 |
1.64 |
|
1991 |
1.45 |
|
1992 |
1.35 |
|
1993 |
1.25 |
|
1994 |
1.19 |
|
1995 |
1.14 |
|
1996 |
1.10 |
|
1997 |
1.08 |
|
1998 |
1.05 |
|
1999 |
1.03 |
|
2000 |
1.00 |
|
2001 |
1.00 |
Tax is payable on 50% of the gain calculated in accord= ance with these rules.
The taxable gain is treated as income in the year in w= hich it was made and taxed at the appropriate rate.
Example: Property bought in 1995 for £100,000. Sold in 2001 for £200,000. G= ain £100,000. Adjuste= d by coefficient (£200,000 – (£100,000 * 1.14)) =3D £86,000. Costs of acquisition £12,000. Costs of disposal £10,000. Documented improvements £20,000. Taxable = gain (£86,000 – £42,000) =3D £44,000. Tax payable on 50% of the ga= in (£22,000).
If these have been held for more than 12 months the ga= ins are tax free. If owned = for less than 12 months they bear tax at a maximum of 10%.
The taxes are similar to the taxes paid by non-residen=
ts
(see above). Even for
residents tax is paid only on your assets located in
If your only asset in
The proceeds of life policies are only taxable in
Remember that, as long as you remain domiciled in
VAT is a ma= jor generator of tax for the Portuguese. = Detailed consideration of VAT is beyond the scope of this book.
There is a
miscellany of other taxes and levies on various aspects of life in
New residen=
ts will
be liable to tax on their world-wide income and gains from the date they ar=
rive
in
Until that =
day they
will only have to pay Portuguese tax on their income if it is derived from
assets in
The most im=
portant
thing to understand about taking up residence in
The detaile= d effect of double taxation treaties depends on the two countries involved. Whilst treaties may be simil= ar in concept they can differ in detail. &n= bsp; I confine myself to the effect of the Portugal/UK treaty. This dates from 1969. It covers income tax, capital gains taxes and corporation taxes. &n= bsp; It does not specifically cover inheritance tax.
The main po= ints of relevance to residents are:
·
Any income from letting property in the
·
Pension received from the
·
Government pensions will continue to be taxe=
d in
·
You will normally not be required to pay
·
You will pay Portuguese capital gains tax on=
the
disposal of moveable (personal) property in
·
If you are taxed on a gift made outside
·
If you pay tax on an inheritance outside
Double tax = treaties are detailed and need to be read in the light of your personal circumstance= s.
Do it and do it as soon as possible. Every day you delay will mak= e it more difficult to get the results you are looking for.
There are many possibilities for tax planning for some=
one
moving to
Some points worth considering are:
·
Time your departure from
·
Think, in particular, about when to make any
capital gain if you are selling your business or other assets in
·
Arrange your affairs so that there is a gap
between leaving
· Think about Trusts. Although the Portuguese syst= em has more restrictions on their effective use than many continental systems they= can still be very effective tax planning vehicles.
· Think about giving away some of your assets.= You will not have to pay wea= lth tax on the value given away and the recipients will generally not have to p= ay either gift or inheritance tax on the gift
A Portuguese person living in
If you have children under the age of 18 they are enti= tled to be included on your residence paper work unless they are working.
Which paper work you require depends on what you are d=
oing
in
Many clients confuse the issue of residence permits wi=
th the
issue of citizenship. As an E=
nglish
person (or, come to that, any other nationality) you are entitled to retain
your nationality for as long as you like even though you are living in Port=
ugal. Most British people, who have sett=
led in
The granting of a residence permit of whatever type ma= kes no difference whatsoever to your nationality.= Nor does it generally make any difference to your tax residence, whi= ch will be calculated in accordance with the rules set out in above.
Finally I must say a word about "illegals".<=
span
style=3D'mso-spacerun:yes'> Many British people went to live i=
n
For a British person seeking a residence permit in
Subject to any special arrangements between
=
The
quality of health care in
In
main tourist areas the state system provided good to adequate levels of
care. Residents complai=
n of
waiting lists and delay – but so they do in
In rural areas hospitals tend to be small and many are outdated.=
When
you are thinking of moving to
To benefit from medical treatment as a tourist from an=
EU
country you are best asking for a form E111 before you leave home. Although the form E111 is va=
lid
indefinitely it only provides cover for up to 90 days at a time. If you have a form E111 then=
upon
presentation of the form you will be entitled to free emergency medical car=
e. If you require further treat=
ment
you will have to pay only the same contribution to charges as a Portuguese
person would pay. If yo=
u do
not have a form E111 you may be charged the full cost of your treatment.
EU or EEA (European Economic Area) Pensioners enjoy a special status as "tourists". They are entitled to any tre= atment that may become necessary during a stay in another EU country – whate= ver the cost and whether it is urgent or routine.
Non-pensioners from EU or EEA countries (and their dependants) enjoy the slightly more restricted entitlement to "immedia= tely necessary benefits". This covers accident and sudden illness.
In principal for both groups this treatment includes, =
under
EU regulations, medical and basic dental care, medicines and hospitalisation
costs. Your entit=
lement
is assessed by reference to the local Portuguese regulations – after =
all,
you could not expect the local Portuguese doctor to understand the rules in
every EU country when assessing what to allow or prescribe. Thus you will be treated exa=
ctly
like a Portuguese person.
This is no bad thing as the health care system is generally good.
Both groups are only entitled in
Neither group can travel abroad for the purpose of obt= aining medical treatment, for example to bypass NHS waiting lists. To do this requires the prior consent to the UK NHS.
If you use the form E111 you will have to pay the cost= of the treatment an reclaim it on your return home. The E111 explains how to do = this.
Despite your entitlement under the E111 provisions it =
is
well worth considering taking out a multi-visit travel policy if you intend=
to
go to
The form E111 will not, in theory, protect you. You need specialist long stay visitors' health insurance. This is available from many sources. Read the policies very caref= ully to see what is covered and what is not. Shop around.
Many people who regularly spend more than 90 days in <=
st1:country-region
w:st=3D"on">
Visitors from non-EU countries have no such entitlemen=
ts and
need health insurance. =
There
may, however, be bilateral agreements between your country and
Those entitled to state medical care include qualifying workers (workers paying Social Security contributions), retired people from= EU countries & their respective dependants.
Workers may also be entitled to a daily sickness allow=
ance,
similar to
Your contributions to the UK National Insurance scheme=
are
taken into account when calculating your entitlements in
If you are a pensioner you should obtain form E121 fro=
m your
pensions office before leaving the
All groups should register with a local doctor in
You may generally choose treatment from any doctor, de= ntist or authorised hospital registered with the state health scheme run by the Ministry of Health (ministér= io de saúde). Cert= ain types of treatment need prior consent from your local health service administrators or a prescription from your local doctor.
If you are entitled to Portuguese medical treatment the general system is that hospital care received is free as are essential medicines. But you will= pay part or all of the cost of treatment by your doctor or in a health centre a= nd for any non vital drugs and medicines. Dentists are also expensive.=
In emergencies or cases of hardship there can be excep= tions to these rules. If you = choose to be treated by a private hospital, not part of the state care system, you will have to pay all of the costs and then, possibly, reclaim part repaymen= t.
These include:
· the economically inactive – i.e. those "retired" below retirement age
·
students no longer the dependants of an EU/E=
EA
worker or pensioner (but they may be covered by special schemes in
· non EU/EEA nationals
They will need health care insurance in order to obtain their residence cards. = Study the cover on offer carefully and shop around.
You will usually access all medical care via your GP or dentist. Referrals are = then made as necessary to more specialist services.
In an emergency you can go direct to a hospital.
There are various sources of ambulances. If in doubt and you sp= eak Portuguese you can often get advice from the operator. Ambulances are listed in the= phone book.
If you qualify for State medical aid you will be treat= ed in hospital free of charge by the state. Most normal treatment is covered.
Otherwise – i.e. if you need treatment other tha=
n in a
hospital or if you need hospital treatment but are not covered by the state
system – you will be expected to pay, either directly, via a medical
insurer's charge card or from your own resources. In the latter case you will reclai=
m the
cost from your insurers.
Choose one that pays quickly! =
Expenses are tax deductible if you are resident in
Many people will carry insurance to cover these expenses.
People can = qualify for welfare benefits in one of three ways – by enforced reciprocal EU= /EEA rules, under the rules of the country where they pay social security contributions or under the rules of the country where you are living.
The basic i= dea behind the EU/EEA rules is that a person exercising his right to move from = one EU/EEA state to another should not lose out on his welfare benefit rights by doing so.
The people = covered by the EU/EEA rules are:
· employed and self-employed nationals of EU/E= EA states.
· pensioners who are nationals of EU/EEA state= s
· subject to certain restrictions, members of = the families of the above, whatever their nationality
·
civil servants of EU/EEA states and members =
of
their families, provided they are not covered by an enhanced scheme for civ=
il
servants in their own country.
This is generally not a problem for
Note that t= he EU/EEA rules do not cover the economically inactive (people retired early, students etc).
The rules c= over:
· sickness and maternity benefits
· accidents at work
· occupational diseases
· invalidity benefits
· old-age pensions
· widows and other survivors benefits
· death grants
· unemployment benefits
· family benefits
The rules d= o not replace the national benefits to which you might be entitled. They co-ordinate the national schemes. Th= ey decide in which of several possible countries a person should make a claim = and which country should pay the cost.
Apart from = the basic principle that you should not lose out by moving within the EU the ot= her principle is that you should only be subject to the rules of one country at= a time.
The law of =
a
If you rema= in entitled to a, say, a UK benefit whilst living in Portugal payment of benef= it to which your were entitled in your original Member State can be paid in a number of different ways, depending on the State and benefit concerned:
·
it can be paid by the benefit authorities in=
the
· It can be paid to you directly in your new country by the benefit authorities in your old country.
There are t= wo main factors:
You are ins=
ured in
the country where you carry out your work. If you work regularly in mor=
e than
one
Retired peo=
ple who
have only worked in one
Some benefi= ts flow from your presence in a country.
Each potent=
ial
benefit, both in
The law is complex and so if you think you may have an entitlement to benefit seek specialist advice.
If you need to claim benefits in
See section on health care above.
Unless you have worked in
Unless you have worked in
Unless you have worked in
You should continue to receive any benefits you are en=
titled
to in your former country – e.g. the
Unless you have worked in
You will, of course, continue to receive your
If you lose your job the Portuguese unemployment benef=
it
authority must take into account any periods of employment or NI contributi=
ons
paid in another EU country when calculating your entitlement to benefits in=
You must, however, have paid at least some insurance
payments in
You should obtain form E301 from the
If you travel to
·
You must have been unemployed and available =
for
work in your home country for at least four weeks before going to
·
You must contact your "home"
unemployment benefit authority and obtain a form E303 from them before leav=
ing
for
·
You must&nb=
sp;
register for work in
· You must comply with all the Portuguese procedural requirements
· You will be entitled to benefit for a maximu= m of 3 months
· If you cannot find a job during that period = you will only be entitled to continuing unemployment benefit in your home count= ry if you return within the 3 month period. If you do not you can lose a= ll entitlement to benefits.
· You are only entitled to one 3 month payment between two periods of employment.
If the members of your family live in the same country= as you are insured in then that country pays the benefits. You are entitled to the same benef= its as nationals of that state.
If your family do not live in the same country as you = are insured in then, if you are entitled to benefits under the rules of more th= an one country, they will receive the highest amount to which they would have = been entitled in any of the relevant states.
If you work in one State and your spouse works in anot= her State the benefit is paid by the State in which the children live with, if necessary, a top up from the State in which the other parent works.
Pensioners normally receive family benefits from the S= tate that pays their pension.
In practical terms these cases are complex and you sho= uld seek advice.
Welfare benefits in the
The former are benefits to which you only become entit= led if you have paid (or been credited with) sufficient National Insurance contributions to qualify you for payment. The latter do no= t depend on paying any National Insurance contributions.
In the
The categories are:
Class 1 - Paid by employees and their employers. A percentage of income up to= a certain maximum.
Class 2 – A flat rate payment paid by self-emplo= yed people.
Class 3 – Voluntary payments made by people no l= onger paying Class 1 or Class 2 contributions. These protect their right to= a limited range of benefits.
Class 4 – Compulsory "profit related" additional contributions paid by self-employed people.
The differing types of NI payments qualify you for dif= fering types of benefit:
|
NI Contributions & Entitlemen=
t to
|
|||
|
|
Class 1 |
Class 2/4 |
Class 3 |
|
Maternity Allowances |
Yes |
Yes |
No |
|
Unemployment Benefit |
Yes |
No |
No |
|
Incapacity Benefit |
Yes |
Yes |
No |
|
Widows Benefit |
Yes |
Yes |
Yes |
|
Basic Retirement Pension |
Yes |
Yes |
Yes |
|
Additional Retirement Pension |
Yes |
No |
No |
As well as being categorised as "contributory&quo= t; and "non-contributory" benefits, benefits are also categorised into "means tested" and "non means tested" benefits. The former are paid only if = you qualify under the eligibility criteria for the benefit in question and are poor enough to qualify on financial grounds – generally covering income and savings. The latter are paid to anyone who meets the eligibility criteria, irrespective = of their wealth.
Means tested
See the section on Health above.
Any benefits you presently receive from the
Any benefits you receive from the
Any National Insurance benefits you receive from the <=
st1:country-region
w:st=3D"on">
Attendance Allowance, SDA & DLA are not usually pa= yable if you go to live abroad permanently.
If you are already retired and you only ever paid Nati=
onal
Insurance contributions in the
If you have established an entitlement to a retirement
pension in several EU countries by virtue of working in them all of the
pensions will be payable to you in
If you have not yet retired and move to
This freezing of your pension can be a disadvantage,
especially if you are still relatively young when you move to
You may choose to pay either continuing Class 2 or Cla= ss 3 contributions.
You may pay Class 2 contributions if:
· You are working abroad
·
You have lived in the
·
You were normally employed or self employed<=
span
style=3D'mso-spacerun:yes'> in the
You may pay Class 3 contributions if:
·
You have at any time lived in the
· You have already paid a minimum amount in UK= NI contributions
Class 2 contributions are more expensive but, potentia= lly, cover you for Maternity Allowance and Incapacity benefits. Class 3 contributions do not= .
In both cases you apply in the
The decision as to whether to continue to make
Any benefits you receive from the
The position here is complex. Seek advice.
You may be able to get contribution-based Jobseeker's Allowance in the EEA for up to 13 weeks if you:
· Are entitled to contribution-based Jobseeker= 's Allowance on the day you go abroad
· Have registered as a jobseeker for at least 4 weeks before you leave. This can be less in special circumstances
·
Are available for work and actively seeking =
work
in
· Are going abroad to look for work
·
Register for work at the equivalent of a
Jobcentre in the country you are going to within 7 days of last claiming
Jobseeker's Allowance in the
· Follow the other country's system for claimi= ng benefit, and
·
Follow the other country's benefit rules, su=
ch
as being available for and actively seeking work, that would have applied if
you had stayed in the
See the section on Portuguese benefits above.
Most of us = don't like making investment decisions. &nb= sp; They make our head hurt. They make us face up to unpleasant things – like taxes and dea= th. We don't really unders= tand what we are doing, what the options are or what is best. We don't know who we should = trust to give us advice. We k= now we ought to do something, but it will wait until next week – or maybe the week after. Until then = our present arrangements will have to do.
If you are = moving to live overseas you must review your investments.<= span style=3D'mso-spacerun:yes'> Your current arrangements are likely to be financially disastrous – and may even be illegal.
Most of us are, in financial terms, worth more than we think. When we come to = move abroad and have to think about these things it can come as a shock.
Take a piece of paper and list your actual and potenti= al assets:
|
Asset |
Value – Local Currency |
Value – £s |
|
Current Assets |
|
|
|
|
|
|
|
|
|
|
|
Contents of main home |
|
|
|
Contents of holiday home |
|
|
|
Car |
|
|
|
Boat |
|
|
|
Bank Accounts |
|
|
|
Other Cash type investments |
|
|
|
Bonds Etc |
|
|
|
Stocks & Shares |
|
|
|
PEPs |
|
|
|
Tessas |
|
|
|
ISAs |
|
|
|
SIPS |
|
|
|
Other |
|
|
|
Value of your business |
|
|
|
Value of share options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future Assets |
|
|
|
Value of share options |
|
|
|
Personal/Company Pension – likely lump sum |
|
|
|
Potential Inheritances or Other Accretions |
|
|
|
Value of endowment mortgages on maturity |
|
|
|
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
This will give you an idea as to the amount you are wo= rth now and, just as importantly, what you are likely to be worth in the future. Your investment= plans should take into account both figures.
You may already have an investment adviser. You may be very happy with t=
heir
quality and the service you have received. They are unlikely to be able=
to
help you once you have gone to live in
Nor is it a simple question of selecting a new local (=
Portuguese)
adviser once you have moved.
They will usually know little about the
Choosing an investment adviser competent to deal with =
you
once you are in
Above all be careful. There are lots of very dubio=
us
"Financial Advisers" operating in the popular tourist areas of
Fortunately there are also some excellent and highly professional advisers with good track records. Make sure you choose one.
For British people the big issue is whether they shoul=
d keep
their £
Most British people will have investments that are lar=
gely
£
You will be spending Euros.
As the value of the Euro fluctuates against the £=
;
To my way of thinking this is unacceptable, particular= ly as you will inevitably have to accept this problem in so far as your pension is concerned.
In general terms I therefore prefer investments paying= out in Euros if you live in a Euro country.
Trusts are an important weapon in the hands of the per=
son
going to live in
Trusts offer the potential benefits of:
1. Allowing you to put part of your assets in the hands of trustees so that they no lon= ger belong to you for wealth tax or inheritance tax purposes
2. Allowing you to receive only the income you need (rather than all the income generat= ed by those assets) so keeping the extra income out of sight for income tax purposes.
3. Allowing a very flexible vehicle for investment purposes.
So how do these little wonders work?
After leaving the
Those trustees hold the asset not for their own benefi= t but "in trust" for whatever purposes you established when you made the gift. It could, for exa= mple, be to benefit a local hospital or school or it could be to benefit you and your family. If the trust is set up prope= rly in the light of the requirements of Portuguese law then those assets will no longer be treated as yours for tax purposes.
On your death the assets are not yours to leave to your children (or whoever), and so do not (subject to any local anti avoidance legislation) carry inheritance tax. &= nbsp;
Similarly the income from those assets is not your income. If some of it is given to you it may be taxed as your income, but the income that is not giv= en to you will not be taxed in Portugal and, because the trust will be located= in a nil/low tax regime, it will not be taxed elsewhere either.
The detail of the arrangements is vitally important.
Trustees can manage your investments in (virtually) wh=
atever
way you stipulate when you set up the trust. You can give the trustees fu=
ll
discretion to do as they please or you can specify precisely how your money=
is
to be used. There are
particular types of trusts and special types of investments that trusts can
make that can be especially beneficial in
Trusts can be beneficial even to Portuguese resident p=
eople
of modest means – say £350,000. It is certainly worth invest=
ing a
little money to see if they can be of use to you as the tax savings can run=
to
many thousands of £ Sterling. &=
nbsp;
If you are thinking of trusts as an investment vehicle and tax plann=
ing
measure you must take advice early – months before you are thinking of
moving to
Whatever you decide to do about investments – pu= t them in a trust, appoint investment managers to manage them in your own name or manage them yourself you should always keep an up to date list of your asse= ts and investments AND TELL YOUR FAMILY WHERE TO FIND IT. Make a file. By all means have a computer= file but print off a good old-fashioned paper copy. Keep it in an obvious place = known to your family. K= eep it with your will and the deeds to your house. Also keep in it either the originals of bank account books, share certificates etc or a note of where = they are to be found.
As a lawyer it is very frustrating – and expensi= ve for the client – when, after the parents death, the children come in with= a suitcase full of correspondence and old chequebooks. We have to go through it all= and write to all these old banks lest there should be £1,000,000 lurking = in a forgotten account. There never is and it wastes a lot of time and money.
<= /p>
Your State pension will be paid in the way described i= n the section on Welfare Benefits (above).
If you have a company pension it will be paid wherever= the pension scheme rules dictate. Some permit the administrators to pay the money into any bank anywhere and other= s, ostensibly for security reasons, insist on the money being paid into a UK b= ank account.
If yours does this you can, of course, simply ask the =
bank
to send it on to you in
If you have a government pension (army, civil service,
police etc) your pension will still be taxed in the
As a retired person (over 65 for a man and, currently,= 60 for a woman) you are entitled to the full use of the Portuguese health care system on the same basis as a Portuguese person. See the section on Hea= lth Care (above) for more information.
Many people=
report
that the cost of living in
You are, of course, free to return to
Very few people do.
Many people wonder whether they should preserve an esc=
ape
route by, for example, keeping their old house and renting it out until they
are sue of their intentions.
Generally I feel this is a bad idea. The house will be a worry an=
d a
distraction. How do you
manage it? Are the tena=
nts
ruining my lovely home? The
house will probably not be ideal for investment purposes and may generate y=
ou
less than you could get by putting the value elsewhere. It may not be in an area wit=
h good
capital growth. The inc=
ome
(and capital value in Euro terms) will be at the mercy of exchange rate flu=
ctuations. The house might not even sui=
t your
requirements if you do return to
If you die in
Burial is much more common in
Funerals are as ridiculously expensive in
Taking your body home to
All in all, it is hardly worth bothering. Far better to stay alive and= have another glass of wine.
The Portuguese cannot do just as they please with their property when they die. Inheritance rules apply.
These rules for Portuguese people are much= more restrictive than the rules under English law. Certain groups of people have (almost) automatic rights to inherit a part of your property.
Fortunately, if you are NOT Portuguese you can dispose of your property in whatever way your nation= al law allows. For British people this is, basically, as they please.
It is always best to make a Portuguese Will. If you do not your English W=
ill
should be treated as valid in
If you are not a resident in
Always use a lawyer to advise as to the contents of yo= ur Will and to draft it. L= awyers love people who make home-made Wills. They make a fortune from dea= ling with their estates because the Wills are often inadequately drafted and pro= duce lots of expensive problems.
A person who dies without a Will dies intestate.
This gets complicated. Will the
It is much cheaper to make a will.
Buying a home in
The rules may appear complicated. Our rules would if you were = a Portuguese person coming to this country. That apparent complexity is often no more than lack of familiarity.<= /p>
There are hundreds of thousands of British people who =
have
bought homes in
For a trouble-free time you simply need to keep your h= ead and to seek advice from experts who can help you make the four basic decisi= ons:
· Who should own the property?
· What am I going to do about inheritance?
· What am I going to do about controlling my potential tax liabilities?
·
If I am going to live in
If you don't like lawyers, remember that they make far= more money out of sorting out the problems you get into by not doing these things than by giving you this basic advice!
Enjoy yourself.