After thoughtful consideration (or maybe on impulse, like some of our clients who have fallen immediately in love with the island), you are buying a home in Madeira. As lawyers and accountants, our team understands that investing in property is always a financial effort, and careful planning is required significantly when investing in a foreign country.
Having the above in mind, the following five basic steps list was created to give some guidance and understanding on the process of buying a home in Madeira.
Buying a Home in Madeira? The 5 things you need to know before buying property
1. Hire a lawyer
It may sound cliché, but if you do not live in Madeira nor are acquainted with Portuguese and Madeiran law, a specialized real estate lawyer is able to represent, advise and guide you throughout the entire acquisition (or rental process).
2. Obtain a Portuguese Taxpayer Identification Number
Any expat living in Madeira will confirm that you cannot do anything in Portuguese territory without a Portuguese Taxpayer Identification Number (NIF – Número de Identificação Fiscal).
Before you rush to Loja do Cidadão or a Portuguese Tax and Customs Authority’s branch, you must sit down with a certified accountant, or chartered economist, to better understand the implications and nuances concerning NIF applications.
Obtaining a NIF is quite a fast thing to do, but it is essential to detail your specific circumstances. Therefore, our team members will need to know (in order to advise you better):
- Your plans (are you buying a summer vacation or are you moving to Madeira?);
- Your marital status;
- Current country of residence;
- Do you have children?
Our certified accountants will use the information above to determine your NIF residential status (the potential tax implications arising from it) and the need for other family members to have a NIF.
Last but not least, with the information abovementioned, we will also be able to determine whether or not you will be required, under law, to appoint a Portuguese tax representative. A tax representative appointment is necessary if one resides outside the European Union.
3. Due diligence
Our team of lawyers will conduct legal due diligence on the real estate property that you wish to acquire. Such due diligence includes a survey and analysis of, at least, the following documents: Certidão do Registo Predial do Imóvel; Cardeneta Predial; Plano Director Municipal; Licença de Utilização; Ficha Técnica de Habitação.
The above documentation needs to be analyzed before any agreement is signed to reduce as much as possible the risks related to the property acquisition process.
Technical due diligence by a Chartered Architect or Chartered Civil Engineer is also recommended to be carried out before property acquisition to assure that there are no structural damages to the home you intend to buy and to guarantee that any refurbishment plans that you wish to carry out are permitted by the municipality (or Regional Government) with jurisdiction over the property (or its premisses).
4. Promissory Contract of Purchase and Sale
Portuguese law concerning real estate acquisition has established the common practice of having both parties sign a Promissory Contract of Purchase and Sale (CPCV for short).
The primary purpose of the CPCV is to bind both parties to a future transaction. Under the said contract, each party will establish the terms and conditions for the purchase and sale, committing themselves to the future business under the terms of the contract.
With the CPCV, the buy also commits themselves to the payment of a down payment (usually 10% of the total value of the property), as this is a way not only to formalize the deal and the conditions under which it is done but also to bind both parties as abovementioned. If the seller repents, you are entitled to receive double the deposit paid as a buyer. If you are the one who gives up, you lose the deposit.
5. Public Deed of Purchase and Sale
The final purchase and sale contract is prepared by the lawyers involved in the transaction and signed by the parties (or its legal representatives) before a notary (or other authority authorized under law), who will be the entity that will certify that the transaction takes place as agreed, verifying the payment of the price, certifying the identity of the parties, the documents relating to ownership and the payment of tax obligations.
The buyer will have to pay the Municipal Property Transfer Tax (IMT) with the public deed.
Depending on the specific case of your transaction, the notary (or other authority authorized under law) is also responsible for registering the acquisition on behalf of the new owner with the Portuguese Land Registry.
As mentioned previously, to observe all the specificities of the different stages of the buying and selling process, it is recommended that then parties, both buyer and seller, are duly advised by a lawyer specialized in real estate lawn and by a certified account (especially if you, the buyer, are a foreigner). Should you opt to buy a home in Madeira through a trust, private foundation, or company, be sure to speak with our team, as the process is slightly different from the one described above, and tax analysis should be conducted to assure the efficacy of said structures in this kind of investment/transaction.
This article is provided for general information purposes only and is not intended to be, nor should it be construed as, legal or professional advice of any kind.
Ambrosio Jardim has, since 1998, worked mainly in the areas of commercial law (corporate, mergers and acquisitions, joint ventures, restructuring and planning), national and international tax law and real estate…. Read more