Almost all British buyers who write to us before finalising the purchase of a villa in the Algarve arrive with the same figure in mind – the progressive IMT rate they’ve read about in some guide – and almost all are in for a surprise when they see the actual bill. In our experience of assisting foreign property owners in Albufeira, Vilamoura and Carvoeiro, the gap between what they expect to pay and what they actually pay usually comes down to a detail that changed in 2026 and which almost nobody mentions, so it’s worth making this clear before you sign anything.
The 2026 change that blows the non-resident buyer’s budget
Until recently, the IMT – the tax levied on the transfer of property – was calculated using a progressive scale in brackets, meaning that a property worth, say, 400,000 euros would incur a significantly lower tax than the percentage applied to the full amount. This is the table that continues to circulate in guidebooks and which almost everyone accepts as correct. From 2026, under current regulations, a non-resident buyer purchasing a property in Portugal will be subject to a flat rate of 7.5 per cent, without the progressive scale and without the automatic reductions that do apply to residents. On that €400,000, the difference between what you expected to pay and what you actually pay runs into the thousands.
There are legal loopholes, but it’s worth knowing about them in advance, because the flat rate does not apply to anyone who becomes a tax resident in Portugal within two years of the purchase, nor to anyone who uses the property for long-term letting under the specified conditions. Bear in mind, however, that this second option does not apply to holiday lettings, so if your plan is to operate as an ‘Alojamento Local’, expect to pay 7.5 per cent unless becoming a tax resident is part of your plans. On top of this IMT comes the Imposto do Selo, at 0.8% of the purchase price, or of the taxable property value if this is higher, which is paid alongside the IMT before signing the deed, as the notary will not sign without these two documents.
The actual closing costs, beyond the main tax
Once you’ve paid the IMT and the Imposto do Selo, the remaining costs are more predictable, but it’s best to budget for them from the offer stage rather than finding out about them at the notary’s office. An independent Portuguese solicitor – whom we always recommend to overseas buyers – typically charges between 1% and 2% of the purchase price, depending on the complexity of the transaction. Land registry fees and administrative procedures at the tax office and the land registry office amount to between 500 and 1,000 euros, whilst the notary’s fees are charged separately and are modest by comparison. All in all, a non-resident buying a second home in the Algarve in 2026 should expect to pay 10% to 11% of the purchase price in closing costs, almost all of which is accounted for by the 7.5% IMT. One detail that surprises many holidaymakers who later become homeowners is that the IMT is not simply calculated on the price you negotiated, but on the higher of that price and the property’s taxable value; consequently, a high taxable value can inflate your bill even if you’ve got a good deal.
A British couple we advised last winter had agreed a price based on the old scale and had to revise their maximum bid when they saw the 7.5 per cent rate; they didn’t lose the house but did have to adjust the purchase, which is why we insist on doing the full calculation before putting an offer on the table, rather than afterwards.
None of this makes the Algarve a bad place to buy; it simply means you need to adjust the figure you’re working with. The 2026 rules are clear once you understand them, and the real problem arises for those who sign without having looked at them. We work through these figures with the buyer before they make an offer and put them in touch with a solicitor and an accountancy firm so that the 7.5 per cent doesn’t come as a surprise. If you’re looking at a property and want to know the actual cost before deciding, just give us the property reference and we’ll work it out for you.
The Monte Rentals team
Built by owners, for owners. We are an international team managing short-term rentals across the central Algarve, including Armação de Pêra, Albufeira, Olhos de Água, Vilamoura, Quarteira, Boliqueime, Porches, Loulé, Pera and Almancil, with hands-on experience navigating Portuguese regulation, local suppliers and the operational layer that breaks at scale. More about us.
