Portugal’s New 7.5% Transfer Tax for Foreign Buyers, Refunds Available

Portugal’s housing market is on the verge of a significant tax shake-up that could reshape foreign investment and affordability trends.

Quick Snapshot

• Flat 7.5% IMT for non-residents on urban residential purchases

• Progressive 2%–7.5% bands scrapped for overseas buyers

• Refund available if tax residency is obtained within two years or property is let at moderate rent

• 183-day rule, public service postings, and Portuguese emigrants remain exempt

• Measure sits within the Construir Portugal – Arrendamento e Simplificação package

Why the government is recalibrating taxes

Portugal has witnessed a surge in cross-border property deals, driving home prices upward in many coastal and urban areas. To rebalance the market and ease the pressure on local buyers, Lisbon’s coalition is proposing a flat levy on incoming capital. Officials argue that a single 7.5% charge will discourage speculative demand without penalizing long-term residents or socially oriented projects.

A single levy for overseas purchasers

Under the draft legislation now before deputies, anyone without tax residency in Portugal who acquires an urban housing unit faces an immutable 7.5% IMT. This replaces the existing tiered system, which starts at 2% for modest homes (from €104,261) and caps at 7.5% for high-end purchases (over €1,128,287). Lawmakers maintain the change will simplify compliance, align foreign and domestic contributions, and bolster the state’s equity objectives.

Carve-outs and refund pathways

Not all buyers will pay the headline 7.5%. Three key exceptions allow relief:

Those who establish tax residency—by spending 183 days or more in Portugal during a 12-month span or by registering with the authorities—as well as individuals entering public service roles, avoid the surcharge.

Purchasers who become fiscal residents within two years of closing can claim a rebate reflecting the difference between the flat rate and the standard progressive bands.

Investments in rental housing that respect moderate rent ceilings (up to €2,300 monthly) and remain leased for a minimum of 36 months over a five-year period qualify for the same refund mechanism.

To secure a reimbursement, buyers must apply to the Autoridade Tributária e Aduaneira with proof of residency status or a valid rental contract meeting the stipulated conditions.

Political and industry pulse

Infrastructure Minister Miguel Pinto Luz labels the proposal a matter of justice and balance, arguing it rewards those committed to Portugal’s social fabric. In contrast, Iniciativa Liberal has decried the move as punitive, urging the outright abolition of IMT. On the left, Bloco de Esquerda champions an even tougher line, calling for an outright ban on non-resident acquisitions.

Real-estate groups are divided. The Associação Portuguesa de Turismo Residencial e Resorts warns that a higher tax may redirect investment to Spain or Greece, imperiling projects in the Algarve and Alentejo. Meanwhile, the Associação de Proprietários (Aprop) welcomes the potential for rental-driven exemptions, viewing it as a spur for leasing activity.

How Portugal compares in Europe

Across the continent, non-resident buyers face a patchwork of levies:

• Italy: up to 9% registration tax on second homes and VAT on new developments

• Germany: 3.5%–6.5% transfer tax, plus notary fees of around 2%

• Spain: regional transfer taxes and a wealth tax on non-resident assets exceeding €700k

• France: acquisition costs approaching 10% once notarial charges are included

Portugal’s proposed 7.5% flat rate positions it in the mid-range but stands out due to the elimination of lower brackets for entry-level purchases.

Next steps for prospective buyers

For foreign investors weighing a Portuguese home:

• Factor in the higher upfront cost of a flat 7.5% tax when calculating your budget.

• Explore whether you can trigger tax residency within two years to recoup part of the levy.

• Consider dedicated rental schemes that meet the government’s moderate rent and lease-duration criteria.

• Monitor Parliament’s vote—approval will integrate the measure into the 2026 State Budget, likely making the change effective by spring.

As deputies deliberate, domestic purchasers may find breathing space in local auctions and mid-priced segments, while developers recalibrate their pricing strategies to reflect a slowdown in speculative foreign demand.

Understanding these reforms and planning early will be crucial for anyone eyeing Portugal’s property market in the year ahead.