The Portuguese real estate market is evolving. Under Decreto-Lei n.° 97/2026, which came into force on May 20th, Portugal introduced a flat 7.5% IMT rate for non-resident buyers acquiring urban residential property.
For anyone looking to buy a home in Portugal as a non-resident — whether it is a holiday home, an investment property, or part of a future relocation plan — this major update significantly alters the total cost of acquisition.
What Exactly Changes With the New Law?
IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is Portugal’s municipal property transfer tax, due on the day of the final deed (escritura).
This new 7.5% flat rate specifically targets non-residents buying residential property.
- A matter of status, not nationality: The law is strictly based on tax residency (governed by Article 16 of the IRS Code), not your passport. A foreign citizen can be a Portuguese tax resident, just as a Portuguese citizen can be classified as a non-resident.
- The tax residency rule: You are generally considered a Portuguese tax resident if you spend more than 183 days in Portugal within any 12-month period, or if you maintain a home there that implies it is your habitual residence.
The Main Exceptions to the 7.5% Rule
Fortunately, the decree outlines specific scenarios where buyers can avoid or recover this higher tax rate:
- You are already a Portuguese tax resident: The flat 7.5% rule does not apply. You will be taxed under the standard, progressive residential rates.
- You become a tax resident within two years: If you officially relocate your tax residency to Portugal within 24 months of the purchase, you can request a refund for the difference between the 7.5% paid and the standard progressive IMT. This is an excellent option for those buying a home before moving.
- Qualifying long-term residential rental: If the property is rented out within 6 months of purchase for a minimum of 36 months (consecutive or not) during the first 5 years, and the rent complies with the “moderate rent” limits defined by the decree, you can claim a refund for the difference.
- Specific public functions: This applies to individuals living abroad while fulfilling public duties or diplomatic missions on behalf of the Portuguese State.
How the Refund Process Works :
Even if you fully intend to qualify for one of these exceptions later, you must pay the 7.5% IMT upfront at the time of purchase.
Once the requirement is met (e.g., you change your tax residency or sign the lease), you have a 6-month deadline to submit a formal refund request to the Portuguese Tax Authority (Autoridade Tributária e Aduaneira).
What This Means for Different Types of Buyers
Portugal remains one of Europe’s top lifestyle and real estate destinations. This law doesn’t stall the market, but it does require smarter financial engineering.
- Future Expats: You can still buy before relocating, but you must carefully align your visa process, move-in date, and tax registration to fit within the two-year refund window.
- Holiday Home Buyers: If you plan to remain a tax resident abroad, you must factor the flat 7.5% IMT directly into your upfront buying budget from day one.
- Investors: Short-term holiday rentals (like Airbnb / Alojamento Local) do not qualify for the rental tax break. Only long-term, affordable residential rentals will allow you to bypass the 7.5% rate.
- Luxury Buyers: The impact is less significant on a percentage basis for high-end properties, as the top tiers of the standard progressive IMT scale were already approaching these percentage levels.
What Buyers Should Do Before Making an Offer
Do not rush into an agreement blindly. Before signing a Promissory Contract (CPCV), take the following steps:
- Confirm your tax status: Consult a Portuguese tax advisor to clearly define your residency positioning under Article 16 of the IRS Code.
- Calculate the total cost of acquisition: IMT is just one piece of the puzzle. Factor in Stamp Duty (Imposto de Selo), signing fees, registration costs, legal fees, and mortgage arrangement fees. For example, if you have a total budget of €500,000, your property offer must be lower to preserve cash for these closing costs.
- Conduct early legal due diligence: Ensure your lawyer thoroughly reviews the property registry, habitation license, building plans, and condominium history before making any financial commitment.
Ready to Buy Property in Portugal Safely?
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