Understanding Real Estate Taxes in Madeira

Madeira, with its stunning landscapes and attractive investment opportunities, is a prime destination for property buyers. Whether you are purchasing a home for personal use or investing in real estate, understanding the tax implications is essential. In this guide, Prime Properties Madeira Real Estate breaks down the key real estate taxes in Madeira to help you navigate the process with confidence.

Key Real Estate Taxes in Madeira

1. Property Transfer Tax (IMT – Imposto Municipal sobre Transmissões Onerosas de Imóveis)

The IMT is a one-time tax paid when purchasing a property in Madeira. The rate varies depending on factors such as property value, location, and whether it is a primary or secondary residence.

• Primary Residence: Progressive rates from 0% to 7.5% (for properties above €1 million).
• Secondary Residence: Progressive rates from 1% to 7.5%.
• Rural or Commercial Properties: Fixed rate of 5%.
• IMT Exemptions: Properties valued under €97,064 (primary residence) are exempt.

IMT must be paid before the property transfer is completed at the notary’s office.

2. Stamp Duty (Imposto do Selo)

A mandatory tax on property transactions, stamp duty is charged at 0.8% of the purchase price or the tax-assessed value—whichever is higher.

3. Municipal Property Tax (IMI – Imposto Municipal sobre Imóveis)

IMI is an annual tax calculated based on the property’s taxable value (VPT). Rates depend on the type and location of the property:

• Urban Properties: 0.3% to 0.45%.
• Rural Properties: 0.8%.
• Vacant or Underused Properties: Up to 6%.

IMI is typically paid in one, two, or three installments, depending on the amount due. Some exemptions apply for lower-income families and properties used as primary residences.

4. Capital Gains Tax (Mais-Valias)

If you sell a property in Madeira, capital gains tax applies to the profit made. For residents, only 50% of the gain is taxed at progressive income tax rates. Non-residents are taxed at a flat rate of 28%. Exemptions are available if the profit is reinvested in another primary residence within Portugal or the EU within 36 months.

5. Rental Income Tax

For individuals, rental income is taxed at a flat rate of 28%, though residents can opt for progressive tax rates. Corporate entities are subject to standard business tax rates.

Why Understanding Taxes is Important for Property Buyers

Being aware of real estate taxes in Madeira helps buyers and investors plan their finances effectively. It also ensures compliance with local regulations and prevents unexpected costs.

At Prime Properties Madeira Real Estate, we provide expert guidance to help you make informed decisions when purchasing or investing in property. Contact us today for personalized assistance in finding your ideal property in Madeira.

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