Stamp Tax

Stamp Duty is one of the tax obligations that arise in the context of real estate mediation in Portugal. This tax is levied on a variety of transactions, including the purchase and sale of property. Understanding the mechanics of this tax is essential, both for real estate agents, buyers and sellers. In this article, we will explore in depth what Stamp Duty is, how it is calculated, and its impact on real estate mediation.

What is Stamp Duty?

' Stamp Duty ' (IS) is a tax that is levied on the value of financial transactions and legal documents. In the context of real estate mediation, this tax is generally applied to acts such as purchase and sale contracts, mortgages and other documents related to the transfer of properties.

The 'Stamp Tax' is “the oldest tax in the Portuguese tax system” , having been created on December 24, 1660! In 2000 it was remodeled, eliminating its impact and abolishing the purchase of a physical seal.

Transactions that are not exempt from VAT are not subject to payment of Stamp Duty.

Who is responsible for paying Stamp Duty?

In most cases, the person responsible for paying Stamp Duty is the buyer. However, it is possible that the parties involved in the transaction agree on a different division of payment responsibility.

How is Stamp Duty calculated?

Stamp Tax calculation depends on the type of transaction and the amount involved. In the case of buying and selling properties, the tax is generally calculated as a percentage of the value of the property declared in the Deed of Purchase and Sale. For this type of transactions, the rate is 0.8% and applies to the purchase price of the property:

IS = Deed value or Tax Asset Value (whichever is higher) x 0.8%

In relation to leases and subleases, Stamp Tax corresponds to 10% of the contracted monthly rent.

General Stamp Tax Table (2023)

(relating to Real Estate Transactions)

Stamp duty on housing credit

In addition to paying Stamp Tax in the purchase and sale transaction of a property, there may be a second payment by the buyer.If you take out a home loan, you will have to pay Stamp Tax on the amount financed . This tax will be charged when the financing amount is transferred to the property buyer's bank account.

The Stamp Duty rate varies depending on the term of the loan:

• If the amortization period is longer than five years, the Stamp Tax will be 0.6%;
• If the amortization period is less than five years, the Stamp Tax will be 0.5%;

IS = Value of housing loan x 0.6%

Impact on Real Estate Mediation

For the Real Estate Agent - Knowledge about Stamp Duty is vital for the real estate agent. This professional must be able to inform their clients about the tax obligations associated with the purchase or sale of a property.

For the Buyer and Seller - Stamp Duty can have a significant impact on the total cost of the property transaction. Therefore, it is crucial that both parties are aware of this additional cost.

Special Cases

Luxury Properties

For properties classified as luxury, Stamp Duty rates can be significantly higher. This is a factor to consider especially in transactions involving high-value properties.

Exemptions and Reductions

There are some situations in which it is possible to obtain exemptions from Stamp Duty, subject to meeting certain requirements:

• Interest on loans for purchasing your own home;
• Free transfer (donation) of a property to the spouse, the person in a civil union, descendants and ascendants;
• Acquisitions of properties that constitute a relevant investment within the scope of the Investment Support Tax Regime (RFAI);

Conclusion

Stamp Tax is an unavoidable component in the real estate mediation scenario in Portugal. Having a complete understanding of this tax not only helps real estate agents provide a more complete and informed service, it also allows buyers and sellers to make better financial plans.