ACQUIRING PROPERTY IN PORTUGAL

1. USING A LAWYER (advogado)

Foreigners acquiring property in Portugal, even if they are experienced in property transactions at home, should be aware that the process is different in Portugal and should take adequate legal advice through a qualified lawyer (in Portuguese - "advogado").

Only an advogado or, in a lesser degree, a "solicitador", are entitled to give legal advice and act as legal attorneys. Estate agents are not licensed nor qualified to give legal advice.

The lawyer will:

- Check that property documents are in order and the vendor has proper title to the property;

- Draw up or obtain all the necessary documents, including power of attorney, promissory contract, completion deed and registration.

A lawyer can be held responsible for his actions and advice and subject to strict scrutiny from the Portuguese Bar (Ordem dos Advogados - web site: <http://www.oa.pt/>).

2. PROMISSORY CONTRACT

Normally a purchase and sale process starts with a promissory contract (in Portuguese - "contrato promessa de compra e venda").

This is a biding agreement through which both parties are bound to complete the purchase and sale within an agreed time frame, for the price and other conditions established in the promissory contract.

Normally a deposit is paid to the vendor on signature of the promissory contract.

The deposit is normally non-refundable if the buyer breaches his/her contractual obligations.

If the vendor fails to fulfil his/her contractual obligations, the buyer can:

a) Ask for the deposit to be returned in double;

b) Deposit the remainder of the price with the competent Portuguese court and ask for a court decision that replaces the declaration of sale from the vendor - this is called specific performance ("execução específica").

3. PROPERTY PURCHASE TAX

Property purchase attracts Property Purchase Tax ("IMT"). The tax is payable by the buyer prior to Completion.

Purchase of villas or apartments attracts tax at a variable rate between 1 and 6% up to 532,700.00€; above that value, the rate of taxation is a fixed 6%.

The purchase of villas or apartments to be used as the owner's permanent home/main residence of a value up to 85,500.00€ is exempt; above that value, the rate of taxation goes up gradually to a fixed 6% on an above 532,700.00€.

Purchase of other urban properties, such as shops, industrial buildings, garages or plots of land for construction is taxed at 6.5%.

Purchase of land not classified for construction is taxed at 5%.

The tax has to be paid prior to signature of completion of purchase and sale.

4. COMPLETION OF PURCHASE AND SALE DEED

The lawyer will organise an appointment with a notary for signature of completion of purchase and sale deed (in Portuguese - "escritura de compra e venda").

This is the formal act of sale that is drawn, signed and kept at a notary.

The price - or the remainder of it - is normally paid prior or on signature of the completion deed, since this is the moment of transfer of ownership.

5. REGISTRATION

After the completion deed is signed, the lawyer will obtain a certificate.

With the certificate, the lawyer will apply for registration of the purchase in the local land registry and tax department.

The land registry is the public record of all properties, respective owners and registered charges or mortgages.

The registration concludes the purchase process.

6. POWER OF ATTORNEY

The lawyer can carry out all of the above in the absence of the buyer if a power of attorney with the necessary powers has been granted. This avoids unnecessary expenses with travel and accommodation.

7. RELATED ISSUES

A non-resident in Portugal must appoint a tax representative domiciled in Portugal. The tax representative is the liaison point between the non-resident and the Portuguese Tax Administration.

***