Americans Buying Property in Portugal Now Face a Flat 7.5% Tax
Americans and other non-tax residents who buy a home in Portugal now pay a flat 7.5% IMT property transfer tax on the purchase, with no primary residence exemption or reduction. The rate took effect on May 25, 2026. It comes from Decree-Law 97/2026, published in Portugal’s Diário da República on May 20, 2026, as part of the country’s housing tax package. IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is Portugal’s one-time property transfer tax, paid by the buyer before the deed is signed.
Here is what the flat rate costs an American buyer at each price point:
- A €400,000 home: €30,000 in IMT, before stamp duty, notary, and registration fees.
- A €750,000 home: €56,250 in IMT, before other closing costs.
- A €1,000,000 home: €75,000 in IMT, before other closing costs.
Two routes let you reclaim the difference between the 7.5% and the standard resident rates: becoming a Portuguese tax resident within two years, or letting the property at a moderate rent within six months. Both clocks are already running for anyone who closed after May 25. Here is what changed, what it costs, and how it affects your U.S. return.
IMT Is Portugal’s One-Time Property Transfer Tax
IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis) is the tax the buyer pays when purchasing real estate in Portugal. It is Portugal’s version of a property transfer tax or stamp duty, due once before the deed is signed. It sits alongside the other acquisition costs covered in our guide to buying and selling real estate abroad, and it is not the same as IMI, the annual property ownership tax you pay every year after you own the home.
Historically, IMT was applied on a progressive scale, with the rate determined by the property’s value, whether the home was a main or second residence, and the buyer’s residency status. Primary-residence buyers got reductions and exemptions. The change in Decree-Law 97/2026 removes all of that for non-tax residents and replaces it with a single flat rate.
The 7.5% Rate Is Already in Force
The flat rate came into force on May 25, 2026, five days after the decree was published. A PwC Portugal analysis of the housing package confirms it, and the decree’s own timing rules bear it out: Article 18 defers three other measures to September 1, 2026, the Simplified Affordable Rental Regime and the Investment Contracts for Rental among them, but the IMT change is not on that list. If you have seen the September date attached to this rate, that is the source of the mix-up.
This matters if you have signed a deed in Portugal since late May. There is no grace period left to beat and no progressive-scale window still open. If you closed as a non-resident after May 25, the flat rate has already been applied to your purchase, and your reclaim clock is already ticking.
One quiet piece of good news in the same package: IMT is now payable within 30 days of assessment rather than on the day of the deed.
The Flat Rate Replaces the Progressive Scale and All Primary-Residence Relief
Under the new Article 17 rule, a buyer who is not a tax resident in Portugal pays 7.5% of the taxable value of an urban property or unit used solely for housing, with no exemptions or reductions applied. Where the old bands would have softened the bill for a main and permanent home, the flat rate does not.
| Purchase price | IMT at the flat 7.5% rate | Also due at closing |
|---|---|---|
| €400,000 | €30,000 | Stamp duty, notary, registration, and legal fees |
| €750,000 | €56,250 | Stamp duty, notary, registration, and legal fees |
| €1,000,000 | €75,000 | Stamp duty, notary, registration, and legal fees |
Two Routes Let You Reclaim the Difference
The decree does not lock the money away. Portugal’s Tax and Customs Authority will cancel the difference between the 7.5% paid and what the standard resident rates would have produced, but only on request, and only if you meet one of two conditions.
| Route | What you have to do | The clock |
|---|---|---|
| Become a tax resident | Become a Portuguese tax resident under Article 16 of the IRS Code | Within 2 years of the purchase date |
| Let the property at a moderate rent | Sign a residential lease with rent no higher than €2,300 per month, then keep it rented at least 36 months, continuous or not, in the first five years | Lease signed within 6 months of the purchase date |
Route 1: Become a Portuguese Tax Resident
If you move to Portugal and become tax resident within two years of buying, the Tax Authority recalculates your IMT down to the standard resident rates and refunds the difference. This is the natural fit for anyone relocating rather than buying a second home, though becoming a Portuguese tax resident also changes your wider tax picture, as our Portugal country guide lays out.
Route 2: Let the Property at a Moderate Rent
The second route keeps you a non-resident but puts the home to work. Sign a residential lease at no more than €2,300 per month within six months of purchase, and keep it rented for at least 36 months during the first five years; the same refund applies.
In both cases, the refund request is submitted to the Tax Authority within 6 months of the date you become a resident or the lease is signed. Miss that filing window, and the 7.5% is simply what the home costs you.
What This Means for Americans Buying in Portugal
The Portuguese tax is only half the story. The purchase reaches back into your U.S. return in four ways worth knowing before you sign.
1. IMT Is Not Creditable, But It Lowers Your Future Gain
IMT is a transfer tax, not an income tax, so it does not belong on the foreign tax credit calculation. It is a cost of acquisition, which means it is capitalized into your property’s basis under IRS basis rules. A €30,000 IMT bill raises your basis by €30,000 and reduces the gain you report years from now when you sell. It does not lower this year’s U.S. tax by a dollar.
2. Lock In Your Dollar Basis on the Day of the Deed
The IRS wants your purchase price, IMT, stamp duty, and closing costs converted at the exchange rate in effect on the transaction date. A €400,000 purchase plus €30,000 of IMT at an illustrative rate of $1.10 per euro gives you a U.S. dollar basis near $473,000. Record it once, correctly, and the foreign capital gains math on the eventual sale takes care of itself. Reconstruct it a decade later from memory, and it will cost you.
One catch: if Portugal later refunds part of the IMT, your basis drops by the refunded amount. Reclaim €18,000 through the residency route, and the basis you built at closing has to come down to match. This is the kind of adjustment that quietly goes unmade.
3. A Euro Mortgage Brings Its Own U.S. Reporting
If you borrow in euros and later repay or refinance after the dollar has strengthened, U.S. rules may treat the difference as a taxable currency gain, even if the home itself has not appreciated. The loan account is generally not an FBAR item, but the escrow or offset account your Portuguese bank opens alongside it is, once your foreign accounts cross $10,000 in aggregate at any point in the year. Larger holdings can also pull you into Form 8938 territory.
4. The Rental Reclaim Route Creates a Second Filing Life
Letting the property at €2,300 or less to recover the IMT turns it into foreign rental property on your U.S. return, with rental income, deductible expenses, and depreciation over 30 years for foreign residential property. The Portuguese savings are real. It is not free.
How This Lands for Your Situation
- A retiree buying in the Algarve or Lisbon: the residency route usually fits your plans anyway. Confirm the two-year window with your Portuguese advisor, calendar the six-month refund filing, and see our Portugal retirement visa guide for the residency side.
- Someone who is still deciding whether to move: the flat rate is the price of buying before you commit. It is recoverable, but only if you become a resident within two years. Our guide to moving to Portugal from the U.S. walks through the wider decision.
- A second-home or investment buyer with no plan to move: assume the 7.5% is permanent unless you are willing to accept the €2,300 rent cap and a 36-month letting commitment.
- A U.S. taxpayer buying jointly with a non-U.S. spouse: the ownership split drives who reports what on the U.S. side. Settle it before the deed, not after.
Steps to Take Now
- Pin down your Portuguese tax residency status before the deed date. It is the single fact that sets the rate.
- Decide at purchase which reclaim route, if either, you intend to use. The six-month lease clock starts on the purchase date, not when you get around to it.
- Diarize the refund request. It is due within six months of becoming a resident or signing the lease, and the Tax Authority does not issue it automatically.
- Build your U.S. dollar basis file at closing. Deed, IMT assessment, stamp duty, fees, and the exchange rate you used on each.
- Count your Portuguese accounts. Escrow, deposit, and utility accounts opened for the purchase all feed the $10,000 FBAR aggregate.
- Check whether the purchase changes your U.S. filing picture at all. For most buyers, the answer is that it adds reporting, not tax owed, and knowing which one you are dealing with is worth an hour with an expat tax accountant.
Our team works with Americans buying and selling property abroad every day, and the U.S. side of a Portuguese purchase is a well-worn path.
Buying a Home in Portugal?
The information in this article is for general informational purposes only and does not constitute tax, legal, or financial advice. Tax rules are complex and change frequently. Consult a qualified tax professional regarding your specific situation before taking any action.
