If you’re in the market for property in Madeira, either as an investment property, for your retirement or as an avenue to acquiring Portuguese Residency and Citizenship, then you need to be familiar with the purchase and legal procedures in Portugal. In our guide, we’ll be walking you through, step-by-step, so you can be informed and confident that all the necessary requirements have been taken towards living your dream life in your new Madeira home.
Just like in any developed European country, the process of buying a home or property in Madeira is secure and relatively straightforward.
Where should you settle in Madeira?
Firstly, take some time to research different areas on the Island and decide on the location that would best suit you. Madeira offers a varied selection of areas, from the vibrant and busy main city of Funchal to quieter areas along the south coast like Prazeres, Calheta and Ponta do Pargo. On the north coast, you can find traditional villages with outstanding surrounding views. Santo da Serra is home to a unique farmers market, while Porto Moniz is famous for its natural swimming pools that are an attractive summer destination for tourists and locals.
Many people choose to rent a home in different areas of Madeira before choosing a place to settle permanently. After a couple of months, you really get a feel for the area, have a chance to meet your neighbours and can make an informed decision on if it’s right for you.
What about Real Estate Agents?
Once you’re settled on an area, it’s time to begin your search. Firstly, find a trusted real estate agent who can assist you with the search for your dream home, and navigate the bureaucracy involved with the purchase. At Madeira Estate, our friendly and professional team can work with you and on your behalf to find your perfect property and offer advice on what to do next.
Real Estate Agencies in Portugal and Madeira are licensed. Their AMI License Number and Certificate are required to be on display and visible in their offices and are to be renewed every three years. As a potential buyer, you should always check the license number and request a copy of the insurance cover receipt.
How does the negotiation work?
After you have viewed your properties and made a decision, it’s time to negotiate the price with the seller. Negotiation is an important part of the process and allows you to exert leverage and get the best deal possible for both the buyer and seller. Here are our five tips on negotiating.
1. Keep your visits to the property low.
If you can avoid it, don’t visit the property more than twice. Whilst it’s important to know and understand the property you want to buy, showing too much interest can work in the seller’s favour.
2. Make an offer but be sensible and respectful.
Make sure you know the market, the asking price for comparable properties in the area, and take advice from your real estate agent on the discount you can request. By offering a figure well below the asking price, you are likely to offend the owner and lose out on the property.
3. Be prepared. Always have a plan B.
Show your interest, but don’t put yourself in a desperate position. Always have an alternative option just in case the negotiations don’t go your way.
4. Be flexible with the terms of the contract.
For many sellers, reaching an agreement on the delivery of the property and signing the contract may be more important than the asking price. It can be advantageous for you to pay attention to the needs of the seller in order to reach an agreement.
5. Have your finances in order.
Most importantly, make sure you have the facilities to pay the initial deposit and proof that the remaining amount can be settled when signing the deed in the presence of the notary. This will give the seller confidence in the agreement and see that the contract is signed in good faith.
Once the price of the property has been negotiated, your real estate agent will work through the general conditions of the deal. This may include any extras that will be included or remain in the property, and refurbishment or repairs that are required before the handover, date of the down-payment and the signing of the deed.
Legal Representation
Apart from a trusted Real Estate agent, it’s also important to have legal representation to protect your interests in Madeira. Your legal representative can work on your behalf to:
- Apply for your Portuguese fiscal number (NIF)
- Apply for all the legal documents relating to the property in question
- Prepare in advance the conditions of the Promissory Contract
- Schedule the date for the final deed in agreement with all parties involved
What is the Promissory Contract?
The Promissory Contract is a legally binding contract signed by both parties in the presence of their legal representatives and a Notary. Once signed, if the seller withdraws from the sale, they are obligated to pay the buyer twice the amount of the deposit. If the buyer fails to complete the sale, then they forfeit the deposit. Also known as a ‘Promise to Pay’, the Promissory Contract is in place to protect the interests of both the buyer and the seller.
Property Taxes, IMT and IMI
IMT, Property Transfer Tax as the name implies is levied whenever ownership of a property is transferred. This tax is paid by the purchaser before the final deed is signed, as proof of payment is needed to be shown to the notary at the time of the property exchange.
IMI, Immovable Property Tax (Imposto Municipal Sobre Imóveis) is a tax levied on the rateable value of the property. This takes several criteria into account, such as the properties’ age, size, location, and commodities. This is a fixed annual payment to the local municipality.
Stamp Duty
You are required to pay Stamp Duty when purchasing property in Portugal and Madeira. Compared to most other European countries, Stamp Duty in Portugal is one of the lowest taxes levied against your property. Stamp Duty is calculated at a rate of 0.8% of the purchase price. Like IMT, you are required to pay your Stamp Duty at the local tax office before you sign the final deed.
The below table outlines the costs associated with purchasing a home for your primary residence, including Notary and Land Registry fees, Stamp Duty and Legal Representation.
| Purchase price | €175,000 | €275,000 | €350,000 | €500,000 | €750,000 | €1,000,000 | €2,000,000 |
| €126,403 – €172,348 5% less €5,640.23 | – | – | – | – | – | – | – |
| €172,348 – €287,213 7% less €9,087.19 | €3,162.81 | €10,162.81 | – | – | – | – | – |
| €287,213 – €574,323 8% less €11,959.32 | – | – | €16,040.68 | €28,040.68 | – | – | – |
| Above €574,323 flat rate of 6% | – | – | – | – | €45,000 | €60,000 | €120,000 |
| Stamp duty 0.8% | €1,400 | €2,200 | €2,800 | €4,000 | €6,000 | €8,000 | €16,000 |
| Lawyer fees 1.25% | €2,187.50 | €3,437.50 | €4,375 | €6,250 | €9,375 | €12,500 | €25,000 |
| Notary & Land registry | €1,500 | €1,500 | €1,500 | €1,500 | €1,500 | €1,500 | €1,500 |
| Total | €8,250.31 | €17,300.31 | €24,715.68 | €39,790.68 | €61,875 | €82,000 | €162,500 |
| % of purchase price | 4.71% | 6.29% | 7.06% | 7.96% | 8.25% | 8.20% | 8.13% |
If you are considering buying a home in Madeira, then reach out to the Madeira Estate team. Our Real Estate Agents can work with you to find your dream property, either a family home, commercial premises, or investment property.
If you want more information about Madeira’s Golden Visa, then visit our partners at Madeira Company. Specialist Tax and Business Consultants who can help you with everything you need to gain your Portuguese residency through investment.
