Updated February 2026 · 12 min read · Written by Mark McLoughlin
So you've decided the Algarve is the place. Maybe you've already spent a couple of weeks here and found yourself scrolling through property listings on the flight home. Or perhaps you've been watching the market for a while, waiting for the right moment. Either way, you're not alone — the Algarve has been pulling in international buyers for decades, and the appeal shows no sign of fading.
But buying a property in Portugal works differently from what most British, Irish, American, or Northern European buyers are used to. There are different legal steps, different taxes, and a few pitfalls that catch people out when they haven't done their homework. This guide walks you through everything you need to know in 2026 — the full process, the costs, the taxes, and the things that have changed recently.
If you're still exploring your options, take a look at our full range of Algarve properties for sale, or browse by area — from the Golden Triangle to Lagos, Tavira, and everywhere in between.
Step One: Get a Lawyer Before You Do Anything Else
Getting Your NIF (Fiscal Number)
The Buying Process: Step by Step
Making an Offer
The Promissory Contract (Contrato Promessa de Compra e Venda)
The promissory contract is the first legally binding stage. Both buyer and seller sign it, setting out the agreed price, completion date, and all key terms and conditions.
At this point you pay a deposit — typically 10% of the purchase price, though it can be higher by mutual agreement. This deposit is serious: if you pull out without legal justification, you lose it. If the seller backs out, they must return double the deposit to you. That mutual commitment is what gives the promissory contract its teeth.
Property Surveys
If you're buying with a mortgage, the lender will carry out their own valuation — but this is not a structural survey. For older properties especially, it's worth commissioning an independent structural assessment. Discovering a problem before you commit is far less painful than discovering it afterwards.
The Final Deed (Escritura de Compra e Venda)
The escritura is the completion of the purchase. Both parties — or their legally appointed representatives — appear before a Notary, the balance of the purchase price is transferred, and ownership is officially recorded. Before this happens, you must provide proof that property transfer tax (IMT) has been paid.
After the escritura is signed, your lawyer registers the change of ownership with the Land Registry and submits all necessary documents to the local council.
The Costs: What to Budget For
This is where buyers often get a surprise. On top of the purchase price, buying property in Portugal involves a range of taxes and fees. In 2026, you should budget for 7% to 10% on top of the purchase price — the lower end for straightforward cash purchases, the higher end for mortgaged or higher-value secondary properties.
IMT — Property Transfer Tax
IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is the main purchase tax, paid before the deed is signed.
Important 2026 update: The 2026 State Budget has proposed a flat 7.5% IMT rate for non-residents purchasing residential property in Portugal. At the time of writing this is awaiting final parliamentary confirmation — check the current position with your lawyer at the point of purchase.
For buyers who will be tax-resident in Portugal, the sliding scale below applies. Thresholds have been updated for 2026:
| Purchase Price | Rate | Deduction |
|---|---|---|
| Up to €106,346 | 0% | — |
| €106,346 – €145,728 | 2% | €2,126.92 |
| €145,728 – €198,768 | 5% | €6,498.44 |
| €198,768 – €329,611 | 7% | €10,473.97 |
| €329,611 – €659,220 | 8% | €13,769.07 |
| €659,220 – €1,000,000 | 6% flat | — |
| Over €1,000,000 | 7.5% flat | — |
Under 35? You could pay zero IMT. Since 2024, buyers aged 35 or under purchasing their first primary residence in Portugal are fully exempt from both IMT and stamp duty, provided the property value doesn't exceed €330,539. This applies to non-Portuguese nationals too, not just Portuguese citizens.
Stamp Duty (Imposto de Selo)
Stamp duty is charged at 0.8% of the purchase price. If you're taking out a mortgage, an additional stamp duty of 0.6% applies to the mortgage amount itself.
Notary and Land Registry Fees
Expect to pay around €500 to €800 for notary fees and land registry registration combined, depending on the complexity of the transaction.
Annual Property Tax (IMI)
Once you own the property, you'll pay an annual municipal property tax called IMI (Imposto Municipal sobre Imóveis). In the Algarve, rates typically sit between 0.3% and 0.45% for urban properties, calculated on the property's registered tax value — which is often lower than the market value.
Wealth Surcharge (AIMI)
If the registered tax value of your Portuguese property holdings exceeds €600,000 per person (or €1.2 million for a couple filing jointly), an additional surcharge called AIMI applies. The rate is 0.7% on the value between €600,000 and €1 million, and 1% on anything above that. Worth factoring in if you're buying at the higher end of the market.
Capital Gains Tax
If you sell your Algarve property in the future, capital gains tax may apply on the profit.
For tax residents, 50% of the net gain is added to your taxable income for the year and taxed at the applicable progressive rate. If you sell your main residence and reinvest the full proceeds into a new primary residence within Portugal — or elsewhere in the EU/EEA — within two years, the gain is exempt. There are nuances here, so confirm the position with your tax adviser for your specific circumstances.
For non-residents, capital gains are taxed at a flat 25% on the full profit. This is a meaningful difference from the resident position, and worth bearing in mind when evaluating the financial case for establishing residency in Portugal.
Inheritance and Estate Planning
Portugal's approach to inheritance is straightforward compared to many countries. Between spouses, children, parents, and grandchildren there is no traditional inheritance tax — only a 0.8% stamp duty on the transfer of assets. For anyone outside the direct family line inheriting Portuguese property, a 10% stamp duty applies.
For UK nationals, things got a little simpler from April 2025: once you've been outside the UK for more than ten years, UK inheritance tax only applies to UK-situated assets. Combined with Portugal's favourable regime, it's possible to structure your estate efficiently — though this is an area where specialist advice makes a significant difference.
It's strongly advisable to have a Portuguese Will (Testamento) drawn up alongside your domestic will. It makes the inheritance process for your Portuguese property considerably smoother for whoever inherits. Your property lawyer can advise on this and point you towards the right specialist.
Residency, Visas and Tax Status in 2026
This is an area that has changed significantly in recent years, and it's particularly relevant for buyers from outside the EU.
EU/EEA Citizens
EU and EEA citizens have the right to live and work in Portugal freely. If you intend to stay for more than three months, you should register for residency at your local council (Câmara Municipal).
Non-EU Buyers: Visa Options
The D7 Passive Income Visa is designed for those with sufficient passive income — pensions, rental income, investment returns — to support themselves without working in Portugal. It's the most popular route for retirees and those with portfolio income, and has seen a significant surge in American applicants in recent years.
The Golden Visa remains available, though since October 2023 it no longer allows residential property as a qualifying investment. Fund investments, cultural donations, and job creation remain as options. After five years of legal residency, Golden Visa holders can apply for Portuguese citizenship. Note that holding a Golden Visa doesn't automatically make you a tax resident — that depends on where you spend your time.
The Digital Nomad Visa (D8) is available to remote workers employed by companies based outside Portugal.
For a full breakdown of each route, see our Portugal visa guide.
The NHR Tax Regime — What's Changed
For many years, Portugal's Non-Habitual Resident (NHR) scheme was a major draw for international buyers — offering a flat 20% income tax rate and exemptions on many foreign income sources for a ten-year period. The original NHR scheme closed to new applicants in early 2024.
Its replacement — known as IFICI or NHR 2.0 — is considerably more restrictive. It targets highly qualified professionals in specific fields such as science, technology, healthcare, and innovation. It is not designed for retirees or those with passive income. If you were already on the NHR scheme before it closed, your existing status continues for the full ten-year term.
The message for 2026 buyers is simple: if favourable tax treatment was a significant factor in your decision to purchase in Portugal, speak to a specialist tax adviser early. The landscape has changed considerably from even a few years ago.
Offshore Ownership
Owning Portuguese property through an offshore company structure has become considerably less attractive than it once was. Legislation introduced in recent years has closed many of the previous advantages, and the administrative burden has increased significantly. In most cases, buying as an individual is now the simpler and more cost-effective route. If you're considering an offshore structure for specific reasons, get specialist legal advice before proceeding.
Declaring the True Purchase Price
It is now a legal requirement — and strongly in your interest — to declare the true purchase price of a property. Historically, some transactions involved underdeclaring the price to reduce IMT liability. This carries real legal and financial risk and is actively discouraged. The one flexibility that remains is the option to allocate up to 10% of the purchase price separately for furniture and fittings, which is not subject to IMT.
Mortgages
Portugal is an attractive market for mortgage lending, with both Portuguese banks and international lenders active here. Non-residents can typically borrow up to 70% of the lower of the purchase price or the lender's valuation, though terms vary by lender and applicant profile.
Our full guide to Portuguese mortgages covers current rates, what documentation you'll need, and how the application process works from start to finish.
Choosing Where to Buy in the Algarve
The Algarve offers genuine variety — from the internationally recognised prestige of the Golden Triangle to the quieter charm of the Eastern Algarve and the dramatic Atlantic coastline of the West. For buyers in the luxury villa segment, Quinta do Lago, Vale do Lobo, and Vilamoura remain among Europe's most sought-after addresses. For something with a different feel, Tavira in the east and Lagos in the west consistently attract buyers looking for authenticity alongside quality.
Talk to Us
We've been working in the Algarve property market for over 20 years and have helped buyers from across the world navigate the purchase process. If you'd like to talk through your options — whether you're at the early research stage or ready to make a move — get in touch with the team. No pressure, no obligation.
The information in this guide is provided for general guidance only and reflects our understanding of rules and regulations as of February 2026. Tax laws and regulations can and do change, and individual circumstances vary significantly. Always seek qualified legal and tax advice before committing to a property purchase in Portugal. Gatehouse International Algarve accepts no responsibility for decisions made solely on the basis of this guide.