SAVILLS BUYING GUIDE

00 SAVILLS BUYING GUIDE – LISBON

LISBON IS ONE OF WESTERN EUROPE’S OLDEST CITIES. IT IS BUILT ON SEVEN HILLS THAT PROVIDE VERTIGINOUS VIEWS. STEEP COBBLESTONE STREETS TUMBLE DOWN TO THE TAGUS RIVER

Despite its long history, Lisbon presents a modern face to the world. The population of 550,000 includes international business people and a growing community of tech entrepreneurs, encouraged by an affordable lifestyle and welcoming tax policies

West-facing, waterfront Lisbon combines an Atlantic coastline with a Mediterranean climate: spirit-warming blue skies and year-round temperatures between 15C and 28C. International access is excellent via Lisbon airport, which is just five miles from the city centre. Exceptional surfing beaches are just 30 minutes away.

Lisbon is a small city centred on Baixa and the wide, tree-lined boulevard . Live west of here for easiest access to the coastal towns of Estoril and Cascais and the international schools. Lisbon’s prime residential areas include:

BAIXA Lively Baixa is the heart of downtown North from Avenida da Liberdade, Lisbon. Completely rebuilt in neoclassical heading away from the waterfront, grandeur by the Marquis of Pombal after Avenida Novas developed in the early Lisbon’s 18th-century earthquake, its 20th century and is now a predominantly grand boulevards, dramatic plazas, residential and business area with easy excellent shops and smart hotels access to the airport. This is a flatter include the city’s most important tourist area of the city, with wide boulevards, attractions. Baixa is also a thriving beautiful parks, museums and galleries, commercial area and the perfect place and a large branch of department store to experience Lisbon’s café culture. El Corte Inglés. Architectural styles in Avenidas Novas range from classical buildings to new-build apartments.

02 SAVILLS BUYING GUIDE – LISBON

CHIADO Immediately west of Baixa, on-trend has an artistic heart. Theatres, “THE HILLY art galleries and museums mix with shops NEIGHBOURHOOD and award-winning restaurants and cafés. The convenient location and elegant OF LAPA IS ONE 18th-century ‘Pombaline’ architecture, OF THE MOST combined with traditional Portuguese tiling and cobblestones, make Chiado ESTABLISHED a popular and chic residential choice. AND WEALTHY

PRÍNCIPE REAL RESIDENTIAL Príncipe Real is one of Lisbon’s most AREAS OF desirable residential areas. Beautiful, grand 19th-century buildings face THE CITY” quiet parks and squares. Streets are filled with antique shops and independent boutiques. It is close to and established residential areas of the Lisbon’s best viewing point, Miradouro city. Residents also appreciate easy access de São Pedro de Alcântara, yet retains to the beaches of Estoril and Cascais. an appealing local atmosphere. LAPA Cafés, shops and tree-lined squares define Lapa has attracted nobility for centuries. this neighbourhood – a relaxed, residential Today, its elegant palacios contain the area west of the centre. It is made up of Parliament, the Prime Minister’s official late 19th-century traditional properties, residence and embassies. It is a hilly and is a favourite with young families and neighbourhood west of Chiado and, with older residents, who both appreciate its , makes up one of the most wealthy market and leafy park, Jardim da Parada.

03 SAVILLS BUYING GUIDE – LISBON

“IN A N D B E A T O , T E C H S T A R T - U P S A R E U S I N G PREVIOUSLY- ABANDONED W A R E H O U S E S A N D F A C T O R I E S TO BUILD A CREATIVE HUB”

ALFAMA is filled with charm, from its labyrinthine narrow alleys and steep cobbled paths to the magnificent castle and Sé de Lisboa cathedral. It is one of Lisbon’s oldest neighbourhoods. Tourists ride the yellow number 28 Tram through the area, photographing the pastel- coloured terraced homes, many with exquisite azulejo tiling. Some streets still hark back to Alfama’s grittier past, and young creatives are eagerly moving in.

MARVILA AND In the less touristy east of Lisbon, heading towards Parque das Nações, ESTORIL AND CASCAIS up-and-coming Marvila and Beato are Well-heeled, fashionable and chic, attracting interest for their appeal to these two seafront towns attract the (mostly) youthful entrepreneurs affluent residents. Once quiet fishing relocating to Lisbon. These are two old towns, today this sandy ‘Portuguese but fast-changing areas close to the Riviera’ offers a healthy escape route Tagus River where tech start-ups are from city life. At only 20-40 minutes from using once-abandoned warehouses Lisbon centre, they are a popular choice to build a creative hub of co-workers. for year-round living. They are close to international schools, golf courses, and SANTOS benefit from good restaurants and Ten minutes’ walk from the designer exhilarating surfing beaches. shops on Avenida da Liberdade, and between Lapa and on-trend Chiado, Santos is a central area filled with design shops, artist studios and architectural practices. It is beside the river and close to the train station that takes commuters along the coast to Cascais. Santos offers traditional older homes along with some striking and modern new build properties.

04 SAVILLS BUYING GUIDE – LISBON

01 ARCHITECTURE AND PROPERTY TYPES

Lisbon property ranges from centuries-old buildings to new build apartments. Older housing is being refurbished and updated as residents rediscover the pleasure of city living

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01_POMBALINE ARCHITECTURE 02_ORIGINAL TRAÇA ANTIGA 03_REFURBISHED TRAÇA ANTIGA When rebuilding Lisbon in the late 18th Characterised by high ceilings, elaborate Demand is high for this typical Portuguese, century, the Marquis of Pombal approved plaster mouldings, wooden floors and yet refurbished, style. Developers often a design of grand squares, wide high-gloss tiles, these buildings ooze preserve historic exteriors, but modernise boulevards and neoclassical buildings of traditional charm and character, but rarely interiors, removing much period detail. up to four floors (the first examples of have – or have space for – lifts, garages Communal areas are upgraded and lifts are earthquake-resistant architecture). or storage rooms. These homes can be added. Sound-proofing on these beautiful, Today, the strict road grid and flat-fronted found mainly in Príncipe Real, Chiado, but not always well noise-insulated, buildings are best seen in Baixa. Baixa, Alfama and Avenidas Novas. buildings is also often improved.

05 SAVILLS BUYING GUIDE – LISBON

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04_PLACA BUILDING Built in the mid 20th century, Placa

buildings represent around 40% of 06 Lisbon’s residential property. The exteriors are plainer in design, but make convenient apartments. They are solidly constructed, with concrete floors and walls. All have lifts and many have garages. They can be found in Avenidas Novas, Príncipe Real, Lapa, Campo de Ourique and Belém.

05_NEW BUILDS What a new build apartment lacks in historic charm, it gains in modern-day comfort and superior build quality. New build homes can be found in Amoreiras, , Belém and Restelo along with Avenidas Novas. The waterfront Parque de Nações, six miles east of the centre, was built for Expo 1998. Today, it has Lisbon’s beautiful Azulejo good infrastructure, but is often criticised for emptying out after dark. tiles reflect the sun and bounce light across the city. 06_VILLAS They were brought from Buyers looking for villas with spacious gardens, possibly with a pool, will find Arabia in the 15th century them in the city, but the widest choice is and were used for decoration in the beachfront towns of Cascais and and story-telling. They Estoril. Families appreciate the proximity to international schools and retirees remain a major design enjoy the ocean air and relaxed lifestyle. feature of the capital and Lisbon is close enough to commute to, it is now illegal to destroy as it is only around 25km away. buildings covered in Azulejo

06 SAVILLS BUYING GUIDE – LISBON

LIVING IN THE CITY

Lisbon has a reputation for its affordability and easy-going lifestyle. As ’s largest city, it is also the centre of Portuguese economic and cultural life, and English is widely spoken. In recent years, there has been huge investment in infrastructure, notably along the waterfront

SCHOOLS The range and quality of international schools in and around Lisbon for all ages and academic abilities is a major factor in the city’s appeal for expatriates. However, new arrivals have increased demand, so many have long waiting lists.

A favourite is St Julian’s School in Carcavelos, 14 miles west of central Lisbon and six miles east of Cascais. It is a private co-educational school with 1,100 pupils aged from 3 to 18 covering more than 40 nationalities. It is the only local school to follow the English curriculum up to GCSE, followed by the International Baccalaureate (IB) Diploma Programme, and has a strong reputation for excellence in sport and drama. HEALTH TRANSPORT The Serviço Nacional de Saúde is the Lisbon’s Metro network is modern, but Another choice is the Park International Portuguese equivalent of the UK’s fairly limited in length – it does not reach School, which follows an international National Health Service. It is universal Lapa, for example. Buses, trams and curriculum until the 6th grade, then the and residency-based, although not all funiculars run across the city, including the international curriculum of Cambridge. services are provided free of charge. distinctive yellow trams from the 1930s. Healthcare is well regarded in Portugal There is also the International Preparatory – it was recently ranked 9th in Europe In a city of severe hills, bicycles are not

School (a feeder school for St Julian’s), and 12th in the world*. Hospitals are well- popular (although the cycle path along * World Health Organisation which follows an English syllabus, and the equipped and English is widely spoken. the waterfront from Belém to Baixa is a Carlucci American International School delight), but cars and motorbikes are well of Lisbon, which follows an American Despite this, many expatriates choose to used. Even residents of Cascais and syllabus up to 16, followed by the IB. take out private health insurance as well, Estoril prefer to drive rather than use the which need not be expensive. Typically, regular train service. This reliance on cars Lisbon also has German, Swedish, French a healthy 45-year-old pays €60 a month means that buying a property with space and Spanish international schools. and then €15 per doctor’s appointment. to park can be particularly important.

07 SAVILLS BUYING GUIDE LISBON

BUYING REAL ESTATE IN PORTUGAL

01_OFFER TO PURCHASE 02_LETTER OF INTENT The fi rst step is to If an o er is accepted, a Letter of make an o er. Intent confi rms the general terms of the agreement. A small deposit is paid and the seller will take the property o the market. This document is not legally binding.

6_COMPLETION The Final Deed or O cial Deed of Transfer 03_LEGAL AND of Ownership is signed by both parties on the TECHNICAL SEARCHES agreed date and is witnessed by the notary, The buyer’s lawyer carries out the who ensures all purchase taxes have been necessary legal searches, while the paid. The fi nal payment is made and buyer ensures that the property the notary will register you as the new survey is satisfactory. owner in the Land Registry and inform the Tax Authorities.

04_PROMISSORY CONTRACT This is a legally binding contract that formalises

05_REAL ESTATE the terms and process between buyer TRANSFER TAX (IMT) and seller. There are penalties for breach of AND STAMP DUTY contract on either side. Signatures are made The buyer must pay Real Estate in the presence of a notary or lawyer. Transfer Tax and Stamp Duty The buyer pays a deposit of between prior to completion. 10% and 30% of the purchase price at this stage.

08 SAVILLS BUYING GUIDE LISBON

THE PROCESS IN DETAIL DOCUMENT CHECKLIST PROMISSORY CONTRACT Whether you have arranged a Letter It is important that the following legal Once an o er has been made and of Intent or not, there are a number of documents are verifi ed. These can be accepted, a Promissory Contract is legal procedures to complete ahead handled by your lawyer, who will make typically drawn up between the owner of the Promissory Contract. Technical searches to confi rm that the property and the buyer. This sets out the terms due diligence should also be carried registered conforms to the building of the transaction, such as the identity out, but an o er may be made (or the and plot being sold, and that the vendor of the owner, a detailed description of preliminary agreement may be executed) has clear title of ownership and no one the property and land boundaries, subject to a condition that such else has rights, charges or mortgages registration and tax numbers, purchase investigations will not reveal any over the property. price, deposit and date of completion. material issue or defects. This is often It is usually prepared by the purchaser’s the case where the buyer is generally Fiscal Number lawyer and might include conditions such satisfi ed with the result of a preliminary For a non-resident buyer of property as completion of any building work or due diligence and only a few aspects in Portugal, it is mandatory to have a building permits. The Contract secures need to be investigated or fi nalised. Portuguese Fiscal Number from the local the purchase until the sale is concluded. tax o ce. This Number will be used to Signatures must be authenticated by a open a bank account and will appear on notary or lawyer. At this point, the buyer documents relating to the purchase of pays a deposit, usually between 10% and the property and associated taxes. 30% of the purchase price.

Use Licence Portuguese law protects both parties All properties constructed after 1951 in case one fails to fulfi l any contractual need a Use Licence stating what the obligation. If the buyer fails to complete building can be used for. This also the purchase, they risk losing their confi rms that the property complies deposit. If the owner fails to complete with planning permission and building the sale, they must repay twice the regulations. If the property was in amount of the deposit. The parties existence prior to 1951, a certifi cate may also agree to subject the to state this must also be obtained. Promissory Contract to ‘specifi c performance’ in the event of a default. Technical Habitation Certi cate This requires legal action so that the This is a mandatory document regarding other party fulfi ls the contract (insist properties destined for residential on the sale being completed rather purposes completed after March 2004. than gaining compensation).

Land Registry Certi cate Issued by the Land Registry O ce.

Tax Registry Certi cate Issued by the Tax O ce.

Energy Certi cate This is a legal requirement and serves to certify the energy performance of the property.

09 SAVILLS BUYING GUIDE LISBON

REAL ESTATE TRANSFER COMPLETION CORPORATE OWNERSHIP TAX IMT & STAMP DUTY To complete the sale, the buyer must It is also possible to acquire property Two taxes must be paid before show proof of payment of IMT and Stamp indirectly through an equity stake in completion: the Portuguese Real Estate Duty. All parties involved in the purchase/ an investment vehicle owning such Transfer Tax (IMT) and Stamp Duty. sale must attend, unless the buyer or property – often done to mitigate seller grants power of attorney for tax consequences. IMT: Real Estate Transfer Tax another party to act on their behalf, often their lawyer. ONGOING COSTS OF OWNERSHIP Urban property The balance of the purchase price is paid used exclusively Rural for residential property: and the notary records the transaction IMI: REAL ESTATE TAX purposes: 5% in the o cial record. Once the deed and The IMI tax is based on the rateable up to 6%* all other associated transactions are value of the property as set by the complete, the (new) owner must register Tax Department. The rate varies the acquisition (defi nitively, if the from 0.3% to 0.8% a year. Urban property Property Promissory Contract was signed and not intended purchased registered before) at the Land and exclusively for by a company residential resident in a Property Registry O ce, to ensure the purposes: tax haven: transfer of the ownership and the legal Urban property: Rural property: 0.3% to 0.45% 0.8% 6.5% 10% proof of ownership.

* Progressive rate due on either the tax To develop commercial buildings or carry value of the property (as set by the Tax out large construction projects, usually Department) or the acquisition price, a protocol of agreement between the Property owned whichever is higher. Online calculators Town Hall and the developer is required. by residents in are available; the o cial one is It is advisable to request previous certain o -shore http://apemip.info/info/IMT.cfm confi rmation from the Town Hall, in jurisdictions: order to ensure the successful 7.5% Stamp Duty implementation of the project.

Onerous or free transfers of ownership or parts thereof: 0.8% of the value of the transaction or value of the property, whichever is higher

And

1. When you inherit a property; 2. When a property is a donation from someone (spouses, descending and ascending relatives who inherit a property or who are the benefi ciaries of a donation are exempt) 10% Stamp Duty is payable

10 SAVILLS BUYING GUIDE LISBON

ADDITIONAL IMI (AIMI) RATES: COMPANIES The IMI surcharge (Adicional ao IMI), is due by individuals and companies that On the global sum of the taxable value of own urban real-estate properties located eligible properties (companies are not in Portuguese territory. However, urban entitled to any deduction): 0.4% properties classifi ed as commercial, industrial or service-providing are outside the scope of the AIMI. Due on the global sum of the taxable The AIMI is assessed on the sum of the value of eligible properties, whenever taxable value of the urban properties the company is resident in a tax haven: 7.5% owned by each taxpayer as of January 1 of each year. Exemptions: Urban properties which have RATES: INDIVIDUALS benefi ted from an IMI exemption in the previous year are excluded from the surcharge taxable basis. Up to the value of €600,000: no AIMI

On the value between €600,000 and €1 million (married taxpayers and unmarried cohabiting couples who opt for an aggregated taxation are granted a deduction of €1.2 million): 0.7%

On the value that exceeds €1 million (married taxpayers and unmarried cohabiting couples who opt for an aggregated taxation are granted a deduction of €2 million): 1%

These rates also apply when a property owned by a legal entity is allocated to the personal use of shareholders, members of the corporate bodies, or of any administrative, management or supervisory bodies (or their spouses or relatives in the ascending or descending lines).

11 SAVILLS BUYING GUIDE LISBON

TAX CONSIDERATIONS THE NONHABITUAL Rental income, capital gains, dividends WHEN LIVING IN RESIDENTS TAX REGIME and interest earned in Portugal, are also PORTUGAL IN PORTUGAL subject to the same rules as the ones In September 2009, the Portuguese applicable to Portuguese residents. PERSONAL INCOME Government approved a new regime TAX (IRS) for non-habitual tax residents. Foreign-source income If a resident or non-resident individual Foreign-source employment income receives rental income, the earnings Who can apply? is exempt from Portuguese tax as long may be taxed. It is available to non-resident individuals as it is taxed in the source country who decide to become a resident in under a double taxation treaty or under Portugal, provided they have not been the OECD-model tax convention. In taxed as a Portuguese resident in the fi ve addition, income must not be considered Residents: 28%* Non-Residents: autonomous 28% autonomous years prior to taking up residence. EU, Portugal-sourced under applicable tax rate tax rate EEA and Swiss citizens have an automatic Portuguese law. right to live in Portugal, and individuals of other nationalities must obtain a Self-employment income obtained from residence permit. high added-value activities, royalties, * However, if the taxpayer opts to tax the rental income and capital gains are also rental income together with any remaining What are the quali cation conditions? exempt from Portuguese tax provided taxable income, such income will be liable To qualify, an individual must become a they may be taxed in the source country to the IRS progressive tax rates up to a tax resident in Portugal under Portuguese under a double taxation treaty or under maximum of 48%. In this case, a surtax of domestic legislation. This means they the OECD-model tax convention. In 2.5% or 5% is applied to the part of the must either stay in Portugal for more addition, income must not be considered taxable income that exceeds €80,000 or than 183 days during a 12-month period, Portugal-sourced under applicable €250,000, respectively. If the property or keep a house in Portugal that can Portuguese law. being rented has been subject to eligible be considered their personal and urban rehabilitation works, the applicable permanent address. The regime is Occupational pension income is exempt rate may be reduced to 5%. applicable for a 10-year unbroken from Portuguese tax as long as it is liable period and is not renewable. to tax in the source country under a CORPORATE INCOME double taxation treaty or it is deemed as TAX (IRC) How does taxation work? not being Portuguese-source income If a resident or non-resident company The regime di erentiates between under applicable Portuguese law. receives rental income, the sum of the income derived from a domestic rent, as well as the costs incurred in order source and income derived from to obtain such income, are included in a foreign source. WITH THANKS TO… the taxable result of the company. The conveyancing and tax advice in Domestic-source income this ‘Buying Real Estate in Portugal’ Under the regime’s rules, employment section has been written with the help Residents: the company will be liable and self-employment income derived of CMS Rui Pena & Arnaut, a law fi rm to IRC in Portugal, which is due on its from high value-added activities of that dates back to 1964 and is fi rmly taxable profi t at a 21% rate, plus: (i) a municipal surcharge at a rate of a scientifi c, artistic or technical nature established in the Portuguese market. up to 1.5% levied on the taxable profi t, in Portugal are taxed at a fl at rate of CMS Rui Pena & Arnaut contact: and; (ii) a state surcharge on the part 20%. Income from sources other than Nuno Santos, Lawyer of the taxable profi t exceeding €1.5 these high value-added activities are +351 21 191 00 23 million, at progressive rates up to 9% taxed at the normal rates applicable [email protected] to resident taxpayers.

Non-residents without a permanent establishment in Portugal: 25%

Please note The content of this document should be used only as an introductory guide to the Portuguese tax system. It does not constitute legal advice.

12 OUR LISBON INTERNATIONAL TEAM

Jelena Cvjetkovic Patrícia de Melo e Liz Ricardo Garcia Director, Residential Chief Executive Officer Director, Residential International, Savills Portugal, Savills Portugal, Savills +44 (0)20 7016 3754 +351 21 313 9000 +351 21 313 9000 [email protected] [email protected] [email protected]