Understanding Property Taxes in Tavira and the Wider Algarve

Tavira, located in the Eastern Algarve, is a popular choice for property buyers However, before purchasing property in Tavira, it is essential to understand the taxes involved. 

Please note that tax rates and regulations can change, so it’s advised to seek updated professional advice to ensure compliance with the latest laws.

Property Transfer Tax (IMT - Imposto Municipal sobre Transmissões Onerosas de Imóveis)

IMT is a one-time tax paid upon purchasing a property. The amount varies depending on the type, location and purchase price. Residential properties have a progressive tax rate ranging from 0% to 8%, while rural land and second homes attract higher rates. The following factors influence IMT:

• Property price: The tax rate increases with the purchase price.
• Property type: Primary residences enjoy lower tax rates compared to second homes.
• Location: Properties in the Autonomous Regions (Azores and Madeira) benefit from reduced rates.

For example, a primary residence valued at €300,000 would have a different tax calculation than a second home at the same price. Buyers should use an IMT calculator or consult a professional to determine the exact amount.

IMT rates vary across the country, and properties in Tavira, being on the mainland, will follow the rates for the Algarve region. For a primary residence, the tax rate typically starts at 0% and rises gradually up to 8% depending on the value of the property.

Stamp Duty (Imposto do Selo)

Stamp duty is another one-time payment made at the time of purchase. The standard rate is 0.8% of the purchase price, applied uniformly across all property transactions. It is an obligatory cost that must be factored into the overall budget.

Ongoing Property Taxes

Annual Municipal Property Tax (IMI - Imposto Municipal sobre Imóveis)

Once a property is acquired, owners must pay IMI, an annual property tax calculated based on the property’s taxable value (Valor Patrimonial Tributário or VPT). The rates vary:

• Urban properties: 0.3% to 0.45%
• Rural properties: 0.8%
• Higher rates may apply if a property is owned by a company based in a blacklisted tax jurisdiction.

Some exemptions exist, such as for low-income families and newly built properties (subject to conditions). Buyers should verify the VPT with the tax authorities to estimate their annual IMI payments.

Capital Gains Tax on Future Sales

Eligible deductions include:

• Real estate agent fees
• Notary/legal costs
• Renovation/improvement work (if invoiced properly)
• Property purchase taxes and fees

Note: If you bought the property before 1989, you’re typically exempt from CGT due to the rules in place at that time.

Non-Residents

For individuals who are non-residents the tax on the capital gain is 28%.

EU/EEA Non-Residents / Residents

If you are from an EU or EEA country, you can opt to be taxed as a Portuguese resident, which means:

Only 50% of the net capital gain is taxable, but...

This 50% is added to your overall income and taxed at Portugal’s progressive income tax rates (up to 48%).This is often more beneficial than paying the 28% flat rate — but it depends on your other income and tax residency status.

Tax Benefits for Foreign Buyers

No More Non-Habitual Resident (NHR) Regime - Overview of IFICI (NHR 2.0)

In 2024, Portugal introduced a new incentive regime aimed at attracting specific types of professionals, researchers and workers in high-value industries. Key features of the new regime (as of May 2025) include:

Open to individuals who become tax residents in Portugal and have not been tax residents in the country in the five years preceding their relocation. 

Targeted Professions: Aims to attract highly qualified professionals in sectors such as:

• Scientific research and higher education
• Technology and innovation
• Start-up enterprises
  Export-oriented industries
• Research and development roles
  Positions recognised by Portuguese economic development agencies like AICEP or IAPMEI Portugal PathwaysVialto Partners
  
  

Tax Benefits:

• A flat 20% income tax rate on qualifying Portuguese-source income.
• Exemptions on certain foreign-source income, subject to specific conditions.
• The benefits are granted for a period of 10 consecutive years. The Portugal News
  
  

Exclusions: Unlike the previous NHR regime, IFICI does not provide tax benefits for foreign pension income, dividends, or capital gains.

Thinking of buying a property in Tavira, Portugal? Get expert advice to navigate taxes and legal requirements seamlessly.

For non-residents selling property in Portugal, Capital Gains Tax (CGT) applies — but the rules differ slightly from residents.