Madeira Legal tax cost tips

 Madeira Legal tax cost tips

Buying property-legal tax tips and Tax values


Once the agent/broker you decided to work with and you have selected that the property suits your needs and lifestyle requirements, you make your offer through him who will negotiate your price, terms and conditions in your name with the owner of the property. If your offer is accepted verbally, a written agreement must be drafted by a lawyer/Attorney and signed by all parties.
Before signing the contract you will require a tax number issued by the local tax office. Your attorney will usually arrange this for you. There may be a small charge for this.
You will need to apply for permanent residence if you want to live in Madeira for more than 183 days in a calendar year. This document gives you the same rights that a Portuguese national.
This tax was abolished on inheritances by a spouse, children, grandchildren or parents.  If inherited by others, then the inheritance is subject to a 10% tax.  Should you not be a local resident, your estate may be liable for inheritance tax in your country of domicile/residence.  
This is a one off payment to the Portuguese State ichargeable on property transfer tax payable immediately before the final action being performed. The tax-free limit is €115 000 (115,000 Euros) for a permanent home.  Different rates applicable for secondary accommodation.  In addition there is a 0,8% stamp duty chargeable.  Above this, there is a range up to a maximum of 6% of the purchase price for the acquisition of property over €700 000 (700,000 Euros). The purchase of land is only charged at a fixed rate of 6.5%-regardless of the value of the sale.

Municipal Tax -IMI

An annual rate of municipality for services rendered, roads, schools, local services etc. These rateable values are periodically reassessed.
In the initial purchase of a property in Madeira, a small tax is paid to the land registry in order to register the property in your name and is also pays a fee to the notary to oversee the Final action. These quantities vary, however, shall not exceed 1% of the purchase price of the property, unless you are taking a mortgage bond with any of the local Portuguese banks, in this case, this tax will be slightly larger.
This tax is payable on the difference between the original purchase price and the sale price. Tax residents are subject to tax at ordinary rates on 50% of the capital gain.  Should the proceeds be re-invested within 3 years of the sale of another primary residence, whether in Portugal, including Madeira or in the EU, then there is no capital gains liability. Non residents are taxed on 28% of the capital gain.  There is an inflation adjustment on the original purchase price. It is essential to keep original documents and paperwork on any improvements made to ensure that the capital gain is reduced to a minimum.
For further information, contact us.