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Madeira Real Estate Purchase - Tax Legal Fiscal Tips and Values

Real Estate Purchase Contract

Once the broker/agent you decided to work with finds your property suitable to your needs and lifestyle requirements, you make your offer through him/her who will negotiate your price, terms and conditions on your behalf with the registered owner of the property.

If your offer is verbally accepted, a written agreement needs to be drawn up by an attorney/lawyer and signed by all parties.

Real Estate Tax and Fiscal values

Before you sign the contract agreement you will require a fiscal number (numero de contribuinte) which is issued by the local tax office.

Your attorney will normally organize this for you.There is no cost or value to be paid to the local authority.

Residency in Madeira

You will need to apply for residency should you wish to live in Madeira either permanently or for more than 183 days in one calendar year. This document entitles you to the same rights as a Portuguese national.

Property Inheritance Tax

This tax has been abolished in Madeira for a spouse, children or parents inheriting property which is an incentive for tax residents;  all other parties, however will be liable only for 10%.

Should you not be a local tax resident, you may be liable for inheritance tax in your country of tax domicile on your asset in Madeira.

Property purchase taxes stamp duty - IMT

This is a one off payment made to the Portuguese State in respect of property transfer tax - payable immediately prior to the final deed being carried out. The tax-free limit is €115 000 (one hundred and fifteen thousand Euros).

Above this, there is a sliding scale up to a maximum of 6% of the purchase price for a property purchase above €700 000 (seven hundred thousand Euros). The purchase of land only is levied at a flat rate of 6.5% - irrespective of sale value.

Municipality Tax - IMI

An annual municipality tax for services provided, garbage collection and removal, roads, schools etc, determined by two factors, namely i) the ratable value of your property as assessed by the local municipality and ii) the percentage tax rate as set out by the municipality.

These taxes vary from each town anywhere between 0.3% to 0.35% of the ratable value depending on the area/region. These ratable values are periodically reassessed.

Other Taxes

On the initial purchase of a property in Madeira, a small tax is payable to the Land Registry in order to register the property in your name and a fee is also paid to the Notary Public for overseeing the Final Deed.

These amounts vary, however, should not exceed 1% of the property purchase price unless you are taking a mortgage bond with any of the local Portuguese banks, in which case, this tax will be slightly higher.

Capital Gain Taxes

This tax is payable on the profit made from a sale between the original purchase price and the sale price.

Tax residents in Madeira pay 20% on 50% of the profit -  or nothing at all if the asset sold was registered as the vendors principal residence for at least the last 6 months and the "gain" (profit) is reinvested into a new principal residence in Madeira.  There are time limits set for this reinvestment and should all of the gain not be used in the subsequent purchase, CGT is due on the balance.

Non-residents pay 28% on the total gain less some allowances.

Any assets acquired prior to the 1st January 1989, currently registered in the name of the owner on that date, are 100% exempt of CGT.