Purchasing Property on Madeira Island
Why Madeira?
Portugal has been a member of the European Union since 1986, and is currently among the countries with the highest human development indexes in the world.
Madeira
Madeira is a small island (50 km long) located 900 km south-west of Portugal and 600 km off the North African coast.
For over 200 years, Europe’s elite have been drawn to the archipelago of Madeira, enjoying the reliable, year-round fine weather and dramatically beautiful landscapes. The waters surrounding the island are warm and the winding coastline provides many opportunities to enjoy them. Savvy second home purchasers are aware that Madeira, which can be easily reached in around three hours via direct flights from the UK, Ireland and mainland Europe, is an ideal alternative to long haul destinations for sun seekers, offering year round rental opportunity as well as a superb second home location.
For those considering an investment in a home on the island, consider the advantages:
• Sub-tropical climate – warm & pleasant & permitting outdoor activities almost all year round
• Natural beauty – dramatic scenery, lush & colourful, known as the “Garden of the Atlantic”
• Ease of access – within 3 hours flight time from most European cities, direct flights from over 40 destinations in Europe
• Protected environment – 70% of the island is protected parkland & forest, and Madeira’s strategic location in the middle of the Atlantic ensures the pure quality of the air
• Activities – wide range of sports & leisure activities
• Tourist infrastructure – long known as a quality tourist destination, modern investment in the road infrastructures has opened up the north and south-west coasts and allowed for the development of the most diverse leisure activities
• Quality of life – a friendly, safe, peaceful & clean place to visit and to live in
• Genuine hospitality – the Portuguese are a gracious and friendly people, welcoming all visitors. Most people can communicate well in English, with German and French also spoken in the tourism industry
Purchasing
Madeira is a destination that people “fall in love with” and return to time after time; it is their “bolthole” from the hectic lifestyle they lead in their home country, or their winter residence to escape the chills of northern Europe.
Whatever your budget, Madeira has something to offer, and ImoPalheiro makes it our job to hand-pick selected properties which we know will be appealing to and suit the tastes and discerning requirements of non-residents who decide to make the Island their home, or at least a more permanent part of their lives.
Requirements
Buying property in Madeira is permissible to all nationalities.
European nationals can buy here without any need for a residence permit, as long as they spend less than 183 days per year on the island.
For further specific information, please contact the Portuguese consulate in your country of residence.
Procedure
Once we have helped you locate the perfect property, we encourage you to submit your written offer to the seller. We will negotiate terms & conditions on your behalf, and once agreement is reached, will advise you on legal and fiscal representation to prepare you for the second step of the Promissory Contract of Purchase and Sale (Contrato Promessa de Compra e venda). This is a legally binding document signed by both parties and with a down payment of usually between 10% and 25% of the sales price.
The final deed of sale or completion (Escruitura) will usually follow within 30 – 90 days, depending on the status of the property and the specific needs of both parties.
This is usually celebrated before a public notary, but can also be made at a solicitor’s office or at the “Casa Pronta”. The IMT tax, stamp duty tax and notary & land registration fees are paid at this time.
Fiscal number
To purchase a property in Portugal, you require a Portuguese fiscal number (Número de contribuente), issued by the local tax office. This is easy to obtain and often taken care of on your behalf by your legal representative.
Portuguese Residency
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.
Portuguese will
If you own a property in Madeira and in order to facilitate inheritance procedures, it is advisable to have a Portuguese Will drawn up in Madeira.
PROPERTY PURCHASE TAXES
Property Purchase Tax (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 €688 544 (six hundred and eighty- eight thousand and five hundred and forty-four Euros). The purchase of land (urban or
agricultural) only is subject to a flat rate of 6.5% tax – irrespective of the sales value.
Stamp duty
(Imposto de selo)
This is paid also on completion – 0.8% of the sales price.
Notarial & Registration fees
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 approx. €1.000 unless you are taking a mortgage with any of the local Portuguese banks, in which case, this tax will be slightly higher.
OTHER TAXES
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 0.4% to 0.8% of the rateable value depending on the area/region. These ratable values are periodically reassessed.
Capital Gains tax
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 25% 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.
Mortgage facilities
The Portuguese banking system provides a range of financing solutions targeted at non-residents.
We advise you to be aware of your financial possibilities before beginning your property search, and are pleased to recommend the brokerage below in the UK, who will make a qualified assessment on your behalf, so that you can begin your property search with the confidence of being financially qualified.
