Portugal Calling Young Homeowners: Unlock Your Dream with Tax Exemptions!

Ever dreamt of sipping coffee on a sunny balcony overlooking the sparkling Portuguese coast? Or maybe picture yourself cozying up by a fireplace in a charming Lisbon townhouse? For young adults (aged 35 and under), buying your first home in Portugal just got a whole lot more achievable – thanks to the fantastic Youth First  Home Buying Scheme.

This exciting initiative offers a major financial boost, exempting eligible young buyers from two key taxes: the Municipal Property Transfer Tax (IMT) and Stamp Duty (IS). Let's dive into the details and see how you can unlock your dream Portuguese property!

What is the Youth First Home Buying Scheme?

This government program is a game-changer for young people looking to buy their very first permanent residence in Portugal. By offering exemptions from IMT and IS, it significantly reduces the upfront costs associated with property ownership. This makes buying a home a more realistic and attractive option for young adults who might otherwise struggle with the initial financial burden.

Are You Eligible?

Here's the good news: if you're 35 years old or younger and looking to buy your very first permanent home in Portugal, you could be eligible for the Youth First Home Buying Scheme! Let's break down the specific criteria:

• Age: You must be 35 years old or younger at the time of property purchase.
• First-Time Buyer: This exemption applies only to your first property acquisition intended for permanent residency.
• Property Type: The exemption applies to urban buildings or autonomous fractions within an urban building (think apartments or townhouses) used for your primary and permanent residence.
• Tax Dependency: You cannot be considered a dependent for personal income tax purposes in the year of purchase.
• Previous Property Ownership: You cannot have owned any residential urban property, or a fraction thereof, at the time of the purchase or within the three years prior.

Understanding the Tax Savings: IMT and IS Explained

Let's take a closer look at the two taxes you'll be exempt from:

• IMT (Municipal Property Transfer Tax): This is a tax levied by the municipality on the transfer of ownership of real estate. The IMT rate varies depending on the purchase price of the property, ranging from 0% to 8%.
• IS (Stamp Duty): This is a flat tax levied on the property transfer document. The IS rate is a flat 0.8%.

How Much Can You Save?

The potential savings from the Youth Frist Home Buying Scheme can be significant! The scheme offers a 100% exemption on IMT and IS for property purchases up to €316,722. For properties valued between €316,722 and €633,453, the exemption applies only to the first €316,722, with the remaining amount subject to the standard tax rates.

Here's an example:

Imagine you're purchasing a charming apartment in Faro for €250,000. Without the exemption, you would typically pay:

• IMT: €5,000 (2% of the purchase price)
• IS: €2,000 (the actual Stamp Duty rate is 0.8%, not 4%)

Total Tax Savings: €7,000!

This is a substantial amount of money that you can put towards your down payment, furnishing your new home, or simply enjoying life in Portugal.

Important Notes:

• Couples: If one partner already owns a property or is over 35, the exemption is reduced to 50%.
• Additional Costs: Remember, while the scheme offers substantial savings, other costs like notary fees, property registration taxes, and agency fees will still apply.

Finding the Perfect Portuguese Property

Now that you know about the tax exemptions, let's talk about finding your dream Portuguese property! Portugal offers a diverse range of options, from charming historic towns to bustling coastal cities. Here are some tips to consider:

• Location, Location, Location: Do you prefer the urban excitement of Lisbon or Porto, or the laid-back charm of the Algarve? Consider your lifestyle preferences and daily needs.
• Property Type: Apartments are popular in major cities, while townhouses offer a bit more space. Think about what suits your needs and budget.
• Budgeting: Remember, the purchase price isn't the only cost. Factor in renovation expenses, furniture, and ongoing living expenses.

Getting a Mortgage:

Don't forget about the financing! Many Portuguese banks offer competitive mortgage rates, specifically for first-time homebuyers.

Here are some additional resources to help you navigate the mortgage process:

• Understanding Mortgage Rates in Portugal 
• Your Ultimate Guide to Types of Mortgages (2024)

The Buying Process: Making it Smooth Sailing

Buying a property in Portugal can seem daunting at first, but with the help of a professional real estate agent, the process can be smooth and stress-free. An experienced agent can guide you through each step, ensuring you make informed decisions and find the perfect property for your needs

Seizing the Opportunity: Your Next Steps

With the Youth First Home Buying Scheme and its enticing tax benefits, now is an excellent time for young adults to explore the Portuguese property market. But where do you start?

Finding the Right Real Estate Agent:

A good real estate agent is invaluable in navigating the Portuguese property landscape. At Private Luxury Collection, we have experience working with first-time buyers and knowledge of the Youth First Home Buying Scheme. We can help you find properties that match your criteria, handle the paperwork, and negotiate on your behalf.

Additional Tips for First-Time Buyers:

• Do Your Research: Explore different regions of Portugal to find the perfect fit for your lifestyle.
• Consider Future Plans: Think about your long-term goals. Will you be renting out the property in the future?
• Seek Professional Advice: Consult with a lawyer and tax advisor to understand all legal and financial implications.

Portugal: More Than Just a Property Investment

Investing in a Portuguese property is not just about bricks and mortar. It's about immersing yourself in a rich culture, enjoying stunning beaches, and experiencing a high quality of life. Portugal offers excellent healthcare, education, and a welcoming community.

Frequently Asked Questions About the IMT and IS Exemption

Got questions about the Youth First Home Buying Scheme and its tax exemptions? You’re not alone! Here are some common queries and their answers:

Eligibility and Conditions

• When does the exemption start? The exemption applies to all property purchases made on or after August 1st, 2024 whe the scheme was introduced.
• Can I still benefit if I'm 35 years old? Yes, the age limit is up to and including 35 years old.
• Does the exemption apply retroactively? Unfortunately, no. The exemption only applies to purchases made on or after the start date.
• I inherited part of a property. Can I still benefit? No, if you already own any part of a residential property, you’re not eligible for the exemption.
• I sold part of a property I inherited. Can I benefit now? If more than three years have passed since selling the property and you meet the other criteria, you can be eligible.
• I already own my main residence. Can I use the exemption? No, this exemption is only for your first permanent home.
• My partner already owns a property. Can we still benefit? Yes, but the exemption will only apply to the share purchased by the eligible partner (50%).
• My partner is over 35. Can we still benefit? Similar to the previous question, the exemption will only apply to the share purchased by the eligible partner (50%).

How to Benefit

• What do I need to do to get the exemption? When submitting your IMT declaration, fill in the relevant codes to claim the exemption. This can be done online through the Finance Portal or in person at a Finance Service.
• Does the exemption apply to foreign buyers? Yes, the exemption is available to all eligible buyers, regardless of nationality.
• What if the property costs more than €316,772? If the property price is between €316,772 and €633,453, you’re exempt on the first €316,772. You’ll only pay taxes on the amount exceeding this value.

Remember: While these FAQs cover common questions, it’s always a good idea to consult with a tax advisor or legal professional for personalised advice.

Conclusion

The Youth First Home Buying Scheme presents a golden opportunity for young people to realize their dream of owning a home in Portugal. By understanding the scheme's benefits, exploring your options, and seeking professional guidance, you can embark on an exciting journey towards property ownership in this beautiful country.

Ready to take the next step? Contact our team of experienced real estate agents today for personalised assistance and to learn more about available properties. Let us help you unlock your Portuguese dream!