Real Estate 2023

Last Updated May 04, 2023


Law and Practice


Morais Leitão, Galvão Teles, Soares da Silva & Associados is a leading full-service law firm in Portugal, with decades of experience. It is well recognised for its expertise and excellence in several branches and sectors of the law, on both a national and international level. The firm combines its unique technical expertise with a distinctive approach, and provides cutting-edge solutions that often challenge some of the most conventional practices. With a team of more than 250 lawyers, Morais Leitão is headquartered in Lisbon and has additional offices in Porto and Funchal; it also recently opened an office in Singapore. Due to its network of associations and alliances with local firms and the creation of the Morais Leitão Legal Circle in 2010, the firm can also offer support through offices in Angola (ALC Advogados), Cabo Verde (VPQ Advogados) and Mozambique (MDR Advogados).

The main source of real estate law is the Portuguese Civil Code.

2022 was a consolidating year for all real estate segments in Portugal. Despite the war in Europe, the increase in inflation and interest rates, and the consequent increase in projects’ financing costs, 2022 was the third best year for the real estate sector in terms of property investment, with a total transaction volume of approximately EUR3.3 billion.

There were several several significant transactions in 2022, including:

  • the sale of a portfolio of tourist assets for approximately EUR850 million (which is a massive transaction considering the size of the market);
  • the largest sale ever made in Portugal of a portfolio of supermarkets; and
  • the sale of the largest real estate hybrid living platform in Portugal, with more than 600 units spread across Lisbon, Cascais, Oporto and Coimbra, over 1,400 units under development and 1,000 units currently under negotiation.

The aforementioned economic factors are expected to continue during 2023, together with the potential recession of some of the strongest European economies, which raises significant challenges for the real estate sector. Therefore, transaction volume is expected to slow down during 2023, and projects that come to market may attract investment using capital originating from more diversified geographies (eg, the Middle East) and with prospects of return in the long term.

Without prejudice to these real and demanding challenges, the main fundamentals of the sector remain in place (solid demand, rents and sale prices rising against scarce demand, increase in ESG-compliant buildings). Portugal managed to achieve the second highest growth in Europe and is maintaining a relatively low unemployment rate, which may help to contain the expected slowdown.

Investor appetite for alternative trends such as student residences is resilient, and interest in senior residences and data centres has grown significantly. The logistics sector is also growing.

Considering these trends, forecasters are optimistic that investment values will soon reach pre-pandemic figures.

From a legal standpoint, considering the focus of the Portuguese government on housing problems, relevant legislative changes are expected to be introduced (see 1.4 Proposals for Reform), aiming to increase the housing available in the market and to simplify environmental and planning licensing procedures.

The Portuguese real estate market is constantly evolving, notably due to the emergence of new technology tools. Blockchain, artificial intelligence and the metaverse are some of the main technologies that will have a significant influence on the real estate market in the coming years.

In Portugal, proptech has already changed the way transactions are conducted. For instance, Portugal’s land registry website allows market players to:

  • promote land registry acts online;
  • make electronic deposits of documents;
  • make payments;
  • make requests;
  • consult the land registry certificates; and
  • notify public entities of the exercise of legal pre-emption rights in the sale of properties.

Since 4 April 2022, it has been possible to use videoconferencing to make authentic acts and finalise terms for the authentication of private documents and acknowledgements (ie, the deed of purchase and sale of property) (see 1.4 Proposals for Reform).

Machine learning projects capable of automatically reading and analysing data and conducting due diligence exercises have been implemented in Portugal, and artificial intelligence capable of identifying suitable investment targets using algorithms and software to manage conditions precedent in large real estate and financing transactions in real time have also been used.

Smart contracting, through blockchain, is also becoming a reality. Real estate leases executed through a website or financing agreements that can automatically release liens when fully repaid are two of the many examples of the potential of this technology.

Simplification of Licensing Procedures

Within the SIMPLEX programme, the Portuguese government is simplifying various administrative activities by eliminating unnecessary licences, authorisations, acts and procedures. This simplification trend began with the environment sector, and will be followed by the land management, territorial planning and industry sectors. Shortly after, the simplification will encompass licensing in commerce, services and tourism, and finally agriculture.

On 10 February 2023, the first package of SIMPLEX was published through Decree-Law No 11/2023, of 10 February, which simplifies environmental licensing and introduces measures to simplify administrative activities in general. Among the relevant changes, a dematerialised, swift and free mechanism for the certification of tacit approvals was created, allowing individuals to prove their rights without the need for the licensing entity.

Programme “Mais Habitação”

A set of measures aiming to promote the housing rights of Portuguese families, notably by increasing the number of houses available in the market, are currently under discussion in the Portuguese Parliament. According to the information available so far, the main measures include the following.

  • Conversion to residential use: the possibility of converting commercial and service buildings into buildings for residential use as well as the construction of new buildings for housing purposes in urban areas classified as areas for equipment, commerce and services purposes.
  • Affordable housing programme:
    1. a line of credit granted by the government;
    2. VAT at a reduced rate of 6% applicable to construction and rehabilitation works;
    3. exemption of municipal property tax for a three-year period;
    4. exemption of property transfer tax; and
    5. exemption of stamp duty for residential lease agreements.
  • Local lodging: the local lodging registration is personal and non-transferable. The existing local lodging licences are valid until 2030 and thereafter may be renewed for successive periods of five years. The issuing of new local lodging registration is suspended (except in areas belonging to the interior of Portugal, Madeira and Azores); the new local lodging licences are valid for five years, and renewable for successive equal periods if such is decided by the relevant Mayor. The condominium assembly may decide to oppose the local lodging activity (except when the condominium constitutive title expressly provides for that use). A personal income tax and corporate income tax exemption is applicable to income resulting from the lease for permanent residential purposes of properties previously used for local lodging.
  • Forced rental: residential properties classified as “vacant” under the terms of the applicable law may be subject to a forced lease by the relevant municipality for subsequent sub-leasing within the scope of public housing programmes.
  • Rent amounts in new lease agreements: the initial rent in new residential lease agreements may not exceed the amount of the rent charged to the previous tenant increased by a coefficient of 1.02, unless the property has had major works, in which case the amount incurred by the landlord may be added to the initial rent, up to an annual limit of 15%.
  • Golden visa programmehas been cancelled for all types of investment (eg, transfer of funds, acquisition of real estate), but the renewal of the existing golden visas remains valid.

Asset Management Regime (AMF)

The new AMF was approved by Decree-law No 27/2023, of 28 April 2023, and will generally come into force on 28 May 2023. It compiles in the same statute the existing General Framework of Collective Investment Undertakings and the Legal Framework for Venture Capital, Social Entrepreneurship and Specialised Investment, which will have a particular impact on real estate funds. The key goals of this comprehensive and transversal review of the existing statutes applicable to the asset management sector are to simplify its regulation, turning it into a more effective and efficient regime capable of increasing the competitiveness of the Portuguese market and safeguarding investors.

Apart from full ownership or freehold, there are other categories of property rights that can be acquired.

  • A surface right (direito de superfície) is the right to construct or maintain (permanently or temporarily) a building on land owned by another person or entity, or to plant and maintain crops on such land. When surface rights terminate, the owner of the land becomes the owner of the building incorporated in the land.
  • A right of use (usufruto) is the right to use (temporarily) the profits and the right to use and manage a property for which the title belongs to another entity.

The main legislation concerning real estate is the Civil Code, which is applicable to the transfer of any type of real estate (residential, industrial, offices, retail or hotels).

The purchase and sale of a property must be executed in writing, through either a public deed or a certified private agreement, and registered with the Property Registry in order to produce effects against third parties.

Title insurance is not common in Portugal. As Property Registry certificates are public, there is a legal presumption that the rights definitively registered in the Property Registry are correct, updated and true.

In answer to the growing demand for and use of online services (significantly boosted by the pandemic), Decree-Law No 126/2021, of 30 December, sets forth the legal regime applicable to authentic acts, terms for the authentication of private documents and acknowledgements (ie, the deed of purchase and sale of property) by videoconference, simplifying such practices for foreign investors. This regime covers acts executed by registrars and justice officials, as well as those executed by notaries, lawyers or solicitors. Provided that the formalities provided for in the Decree-Law are complied with, acts executed by videoconference will be given the same evidential force as acts executed in person.

It is usual for buyers to prepare complete checklists with the required documentation, through their legal and technical advisers. From a legal perspective, the main documents requested and reviewed are as follows:

  • the land registry certificate;
  • the tax registry certificate;
  • the licence of use for buildings;
  • the energy efficiency certificate, if applicable;
  • the building specifications certificate, if applicable;
  • proof of the payment of all taxes and charges related to the property;
  • confirmation of the non-exercise of pre-emption rights; and
  • planning, zoning and environment documentation in the case of land for construction.

Buyers' approach to real estate due diligence has not significatively changed due to the COVID-19 pandemic. However, investors are more cautious regarding certain specific topics, such as force majeure and the revision of price clauses in construction agreements and break clauses in lease agreements.

The typical representations and warranties in real estate transactions regard the following:

  • the capacity of the seller and buyer;
  • ownership of the property;
  • charges and encumbrances;
  • pre-emption rights and other third-party rights;
  • planning and zoning;
  • authorisations and licences;
  • the rental status of the property;
  • litigation;
  • liabilities and taxes;
  • defects and equipment;
  • the environment; and
  • asbestos risks.

Due to the pandemic, investors are asking for specific representations and warranties regarding the following:

  • existing rent-free periods and rent reductions agreed or requested by the lessees;
  • any revision of prices underway in construction works (even where the parties have agreed on lump sum and non-revised prices); and
  • any existing delays in construction works grounded on a change of circumstances or lack of materials.

A time to remedy is usually granted and, if no remedy is possible, an indemnity is paid by the seller to the buyer. In some cases, such an indemnity may be secured by a bank guarantee, a bond or an escrow account for a certain period of time.

In big commercial real estate transactions, it is customary for the seller’s representations and warranties to expire after a certain amount of time, usually after a period ranging between one and three years, except those regarding:

  • fundamental representations and warranties (eg, title and capacity), which usually expire after a period of five to eight years; and
  • tax matters, which usually expire by the end of the applicable statutory period of limitation

It is also usual for there to be a cap on the seller’s liability for a breach of its representations and warranties, ranging between 10% and 20% of the sale and purchase price.

Representation and warranty insurance is increasingly used in Portugal by professional investors, notably in share deals of a significant amount.

Real estate, urban and planning and tax law are the most important areas for an investor to consider when purchasing real estate.

The owner of a polluted property is not liable for such pollution if they were not responsible for the contamination. However, if the owner of the property undertakes certain types of economic activities defined in the law, the competent authority may order the clean-up of the property, regardless of whether or not the owner is responsible for the contamination. In these cases, the owner has the right to claim an indemnity from the entities that were responsible for the pollution.

If the owner of the land is not ordered to carry out clean-up measures, in some situations the licensing of future activities at the property may be conditional upon the decontamination of the property.

The permitted uses of a parcel of real estate shall be assessed through the municipal land use plans, which contain the main regulations concerning the use of the land. There are three types of municipal plans:

  • the municipal director plan (PDM);
  • the urbanisation plan (planos de urbanização); and
  • the detailed plan (planos de pormenor).

The size of a project, the timing for approval and the execution of relevant infrastructure may be subject to an agreement with the relevant municipality.

Several legal regimes establish the possibility of the expropriation/taking of land, and its compulsory sale with fair compensation. The legal regimes to take into account vary according to the title and basis on which such expropriation/taking of land or compulsory sale is made.

The procedure for expropriation is set forth under the Expropriations Code. According to such legal regime, the expropriation may be agreed on, or a litigation procedure will follow if an agreement is not reached, which will be conducted through arbitration. Once a decision is issued, the process will be referred to the courts for a judicial phase.

Expropriation gives rise to the payment of fair compensation (justa indemnização) by the expropriating entity to the expropriated parties.

The procedure for a compulsory sale states that the competent authority may sell the property in a public tender. For such purpose, a resolution of promotion of the sale and the terms to follow are set out in the Expropriations Code.

The purchase and sale of real estate is generally subject to both property transfer tax (IMT) and stamp duty (Imposto do Selo), which are payable by the purchaser. IMT is levied at the following progressive rates, applicable to the contract price or the property’s tax value (valor patrimonial tributário – VPT), whichever is higher:

  • between 0% and 7.5% (depending on the contract price/property’s tax value) for urban property meant for housing purposes;
  • 5% for rural property; and
  • 6.5% for other types of property.

Stamp duty is levied at a rate of 0.8% on the same amount.

IMT may apply at an aggravated 10% rate if the acquirer is an entity that is resident in a blacklisted jurisdiction for tax purposes (as per the list published in Decree No 150/2004 of February 13, as amended), or is controlled by an entity that is resident in a blacklisted territory.

IMT may apply to the sale of shares of a company – namely LDA companies (sociedade por quotas) or SA (sociedade anónima) – only to the extent that the following requirements are fulfilled:

  • the company’s value is derived, directly or indirectly, more than 50% from real estate located in Portugal, by reference to the balance sheet value, or, if higher, to the tax value of the real estate;
  • such real estate assets are not allocated to an agricultural, industrial or commercial activity (not consisting of the buying and selling of real estate); and
  • through that acquisition, by amortisation or any other actions, one of the partners becomes the holder of 75% or more of the share capital of the company, or the number of shareholders is reduced to two members, which are either married to each other or in a registered partnership, and considering that, in both cases, any shares owned by the company (ie, own shares) must be allocated to the shareholders in the proportion of their shareholdings for the purposes of such calculation.

If the above criteria are not fulfilled, IMT should not apply to the sale of shares of a Portuguese resident company.

Under Portuguese law, there are certain IMT exemptions on the purchase and sale of real estate, provided certain conditions are met, such as the acquisition of properties (i) by real estate trading companies for the purpose of resale, (ii) for rehabilitation purposes, and (iii) under company restructuring operations.

There are no restrictions on the ownership of real estate by a non-resident or foreign investor; the treatment is the same. Tax incentives may be grated to tourism and activities declared to be of relevance to tourism under the applicable legislation.

A facility agreement secured by a mortgage is the most common financing and security method for real estate projects in Portugal.

There are no specific restrictions regarding the maturity of a financing, but the maturity date should be determined.

Loan-to-value, interest-cover and debt-service cover ratio are terms customarily agreed on to set a tighter framework for a credit facility.

Security usually associated with real estate financing includes:

  • mortgage of property;
  • assignment of revenues (consignação de rendimentos);
  • pledge of shares/quotas;
  • book debt/receivables/insurances – a pledge or an assignment by way of security can be granted over receivables;
  • pledge of bank accounts;
  • pledge of intellectual property; and
  • personal guarantee (fiança).

As a general rule, no governmental or other consents are required for the provision of security. There are no restrictions on granting security over real estate to foreign lenders, nor on repayments being made to a foreign lender.

Notarial fees and registration fees are due on the granting of security over real estate.

In general, the utilisation of credit by a Portuguese borrower is subject to stamp duty at variable rates according to the loan term, as follows:

  • 0.04% per month if the loan term is shorter than one year;
  • 0.5% if the loan term is equal to or greater than one year and shorter than five years; or
  • 0.6% if the loan term is equal to or greater than five years.

Stamp duty should be calculated on the amount of the loan.

Stamp duty should also be charged on the granting of security, unless the latter may be considered as simultaneous and materially ancillary to a contract specifically taxed for stamp duty purposes (eg, the financing).

When applicable to security, stamp duty rates are the same as set out above for loans, and are calculated based on the secured amount.

The validity of the guarantees provided to secure third-party debt (including any group companies) is subject to an assessment of whether or not the grantor of such a guarantee has a justified corporate interest in doing so. Corporate interest may be assumed from the existence of a group relationship between both companies (so long as both are Portuguese resident companies), but some doctrines argue that such an assumption only exists where the guarantee is granted by the holding company to the subsidiary. In the case of upstream guarantees or guarantees to sister companies, the corporate interest should be demonstrated on other grounds (a confirmation of this in the resolution approving the transaction may be considered sufficient, but please note that at the end of the day corporate interest is a factual matter).

Financial assistance is forbidden under Portuguese law, meaning that companies cannot grant loans or guarantees in order for a third party to acquire their shares.

To initiate enforcement proceedings, a creditor must hold an enforceable title (título executivo) and file an application against a debtor with the appropriate court competent for enforcement.

A mortgagee does not have the right to take possession of a property in the event of default of payment of the secured obligation; it only has the right to a judicial sale of the property and to be paid from the proceeds of such sale.

In a judicial sale, the property will be sold free of any charges and encumbrances.

In relation to mortgages, the normal procedure is the enforcement of the security by means of seizure – ie, the judicial apprehension of an asset given as the guarantee of an obligation.

The seizure gives a creditor the right to be paid from the proceeds of the sale of such assets, with preference over other creditors, provided that there is no prior security in rem over the attached assets.

Under Portuguese law, it is possible for existing secured debt to become subordinated to newly created debt if a subordination agreement is made between parties.

The owner of a polluted property is not liable for such pollution if they were not responsible for the contamination. However, if the owner of the property undertakes certain types of economic activities defined in the law, the competent authority may order the clean-up of the property, regardless of whether or not the owner is responsible for the contamination. In these cases, the owner has the right to claim an indemnity from the entities that were responsible for the pollution.

Pursuant to the Portuguese Insolvency Code, certain common transactions can be terminated by an insolvency administrator without any condition and in relation to which evidence in contrary is not even admitted (unconditional termination). The most obvious applicable cases are as follows:

  • the granting of security in rem by an insolvent company (the granting of mortgages, the pledge of shares or of bank accounts, etc) to secure pre-existing obligations or other obligations that replace the former, within the period of six months preceding the commencement of insolvency proceedings;
  • personal guarantees granted by the insolvent, within the six months before the commencement of insolvency proceedings, in respect of businesses that are not of interest to the insolvent company;
  • the granting of security in rem simultaneously with the creation of secured obligations, within the period of 60 days before the commencement of insolvency proceedings;
  • payments or other acts aiming to discharge debts by the insolvent company whose due date would fall after the date of the commencement of insolvency proceedings, if the act is performed within the six months before the commencement of the insolvency proceedings (or after the commencement of the insolvency proceedings but before the due date); or
  • the reimbursement of shareholders’ loans within the period of one year immediately preceding the commencement of insolvency proceedings.

The key consequence for borrowers will mostly depend on whether the agreement already includes fall-back provisions or if the new benchmark rate that is being developed will apply. The main mechanism that is being adopted to manage that risk is the inclusion of fall-back provisions in the agreement being entered into force.

In Portugal, there are several types of planning and zoning instruments, which vary depending on their purpose and reach.

  • “Programmes” are strategic, high-level instruments that set a broad framework of the main guidelines for the territory. There is a national programme as well as sectorial programmes, special programmes and regional programmes. Governmental entities must uphold the principles and choices defined in the programmes in their decisions, and other territorial instruments must reflect and complement the programmes.
  • “Plans” are detailed and execution-centred instruments that are directly binding for both public entities and private individuals. Plans have a local reach, and they can encompass either one municipality (municipal plans) or two or more neighbouring municipalities (intermunicipal plans).

The permitted uses of a real estate property are defined by the municipal plans, which by law must contain the main regulations concerning the use of the land and mirror all relevant programme guidelines for that territory.

Municipal plans are subdivided into three types:

  • municipal director plans (plano diretor municipal – PDM);
  • urbanisation plans (planos de urbanização); and
  • detailed plans (planos de pormenor).

The size of a project, the timing for approval and the execution of relevant infrastructure may be subject to an agreement with the relevant municipality.

Legal Regime for Construction and Land Development

This is the basic legislation for the construction of new buildings or other works in existing buildings, such as rehabilitation.

This legal regime provides for the following controls.

Prior information

This corresponds to a preliminary analysis of the feasibility of a given construction work. If the prior information is approved by the municipality, which is the competent authority to allow construction works, then a new procedure for construction must follow. Bear in mind that the prior information binds the municipality to approve the construction licence if that request is presented within one year of the approval of the prior information.


This is the default type of control for the construction of buildings or refurbishment works.

Prior communication

This is a statement presented to the municipality by the promoter of the construction works, and is applicable to situations in which the urban parameters for construction are already set out and all of the required opinions have been issued.

Use authorisation

This is a permit for the use of buildings or their parts, and for changes to that use. After construction work takes place, the authorisation for use is the permit that attests that the construction was carried out according to the licensed project or according to the project contained in the prior communication.

Regulation of the development and use of plots of land is carried out by the municipalities in the urban and planning control proceedings. Therefore, municipalities are the competent authorities to conduct the procedure and issue the relevant titles.

During proceedings, municipalities may consult other entities that have legal competence over the matter or location involved.

Applicable legislation includes the Legal Regime for Construction and Land Development (see 4.3 Legislative and Governmental Controls Applicable to Design, Appearance and Method of Construction)and the territorial management instruments – ie, the municipal director plan (PDM), the urbanisation plan (planos de urbanização) and the detailed plan (planos de pormenor); see 4.1 Legislative and Governmental Controls Applicable to Strategic Planning and Zoning.

The process for obtaining entitlements (licences or prior communications) to complete the refurbishment of a building depends on the specific location of the property.

The process to obtain an entitlement generally involves an assessment of the project, at first, which may be followed by public consultation if a project is regarded as having a relevant impact, and then a final decision.

Third parties have the right to participate, as follows.

  • For the prior information procedure, consultations may be carried out and opinions may be requested from external entities, such as the Commission for Co-ordination and Regional Development (Comissão de Coordenação e Desenvolvimento Region – CCDR).
  • For the licensing procedure, municipalities may open public consultations in which third parties may participate.
  • For the prior communication procedure, an investor must submit a prior communication with all of the opinions issued by the competent external entities. Please see 4.3 Regulatory Authorities regarding the provisional legal regime for the simplification of procedures.

Private third parties may also intervene in the procedure, since it is considered public information.

If an application for permission to develop or carry on a designated use is rejected, an applicant may submit an administrative complaint asking the author of the decision to review it, or may submit a hierarchical appeal asking the supervisor to review the decision. Alternatively, they can file a lawsuit challenging the legality of the decision and ask the courts to condemn the administration to adopt a lawful administrative decision. It is also possible to file an injunction in order to seek a preliminary remedy.

The Legal Regime for Construction and Land Development provides for several types of contracts to facilitate the development of a certain project. Typical agreements include concession agreements, urban development agreements and planning agreements.

Planning agreements may be presented to municipalities by any interested parties with the purpose of preparing an urbanisation plan or a detailed plan, or facilitating its alteration, as well as its execution.

Major refurbishment operations carried out by municipalities may also be conducted through partnerships with private entities. In this case, rehabilitation concession agreements and urban refurbishment agreements may be executed.

It is possible for a municipality to carry out coercive works in a property if the owner fails to comply with the municipality’s instructions and deadlines for such works.

The municipality may also carry out inspections and supervision actions in relation to the works performed.

Also, if urban planning operations are carried out irregularly, the municipality may implement the following measures:

  • embargo of works or refurbishment of land;
  • administrative suspension of the licence or authorisation;
  • an order to perform corrections or changes to the works or legalisation of urban operations;
  • an order for the demolition of works;
  • re-establishment of the land in the conditions prior to the works; and/or
  • an order to terminate the use of the building in question.

The main vehicles used to invest in real estate assets are private limited companies (LDA), public limited companies (SA) and Collective Investment Real Estate Undertakings (OIC) (investment funds or investment companies).

Commercial Companies

SA companies

The SA is a company limited by shares, meaning that its capital is divided into shares and that the shareholders’ liability for the company’s debts is limited to the amount of their investment.

The share capital may result from contributions in cash or in kind (labour and the provision of services are not allowed). Shares may be represented by share certificates or kept in book-entry form, having a minimum nominal value of EUR1.

Shares in an SA are freely transferable, except when the company’s articles of association provide for restrictions on their transferability. These restrictions may consist of a pre-emption right in favour of the remaining shareholders. The shares are transferred by the owner’s written declaration addressed to the keeper of the SA’s share registry.

As a general rule, an SA must be incorporated by a minimum of five shareholders, although it is possible to incorporate an SA with a single shareholder when such single shareholder is a company.

LDA companies

The LDA is a company limited by quotas, meaning that its share capital is divided into equity participations (quotas) that cannot be represented by transferable certificates nor kept in book-entry form. Quota holders are jointly and severally liable for paying up the company’s entire quota capital. The share capital may result from contributions in cash or in kind (labour and the provision of services are not allowed). The transfer of quotas is subject to the LDA’s express consent, unless the prospective transferee is another quota holder, or the transferor’s spouse or next of kin. An LDA may be incorporated either by a minimum of two equity holders or by a single equity holder (either an individual or a company).

Collective Investment Real Estate Undertakings

Real estate funds (REFs)

REFs can be open, closed or special. Open-ended funds are incorporated by public subscription, while close-ended funds are incorporated by private subscription. The funds are represented by participation units with the same nominal value and held by the participants. The incorporation of the funds requires the consent of the Securities Commission. The funds have no legal capacity and need to be represented by a managing company. The incorporation of the managing companies requires the authorisation of the Bank of Portugal and the Securities Commission. The participation unities must be deposited with a financial institution that has a head office or branch in Portugal.

Real Estate Companies

Real estate companies need to be public limited companies (SA), and can have a fixed share capital (SICAFI) or variable share capital (SICAVI). Real estate companies can be self-managed or managed by a management company or any other financial institution. The incorporation of a real estate company is subject to the authorisation of the Securities Commission.

Real estate investment and management companies (SIGIs)

SIGIs shall be incorporated as public limited companies, with or without public subscription, and adopt the supervisory model corresponding to a supervisory board and a statutory auditor.

An SA must be incorporated with a minimum share capital of EUR50,000.

LDA companies do not have a minimum amount of capital (the quota holders may freely stipulate the amount of an LDA share capital, with the minimum nominal value of each quota being equal to EUR1).

SIGIs shall have a minimum paid-up share capital of EUR5 million.

SA Companies

The most common management and supervisory structure of SA companies includes a board of directors and an internal auditing board or an internal single auditor.

Two other structures are also admissible:

  • a supervisory board and an executive board of directors (and a certified chartered accountant); or
  • a board of directors comprising an audit commission and a certified chartered accountant.

The management of an SA may be delegated to a single manager if the company’s capital stock is equal to or less than EUR200,000.

Directors are not legally required to be shareholders. Corporate shareholders can be appointed directors, but must appoint an individual to perform such duties. At least one of the members of the internal auditing board or the internal auditor (as applicable) must be a certified chartered accountant. A secretary and a deputy secretary may be appointed in SAs.

The board of directors of an SA is legally required to meet at least once a month, unless the company’s by-laws establish a different period for their meetings. Meetings may take place anywhere that the directors find most convenient, or via electronic means or by videoconference. Minutes of board meetings must be recorded in a book of minutes and signed by all those present.

The annual accounts must be approved by the shareholders at the annual general meeting, and an electronic declaration for tax purposes must be submitted.

LDA Companies

An LDA may be managed either by a single manager or by a managers’ board. The managers must be individuals and are not legally required to be quota holders. An LDA must appoint either an internal auditor or an internal auditing board if it surpasses at least two of the following three thresholds during two consecutive fiscal years:

  • the total amount of the LDA’s assets exceeds EUR1.5 million;
  • the total amount of the LDA’s net sales exceeds EUR3 million; and/or
  • the average number of the LDA’s employees exceeds 50.

At least one of the members of the internal auditing board or the internal auditor (as applicable) must be a certified chartered accountant.

The annual accounts must be approved by the quota holders at the annual general meeting. The submission of an electronic declaration for tax purposes is also required.

Real Estate Funds and Real Estate Companies

Except for self-managed companies, REFs and real estate companies do not have legal capacity and are managed by management companies.

There are no significant annual maintenance and accounting compliance costs for commercial companies, other than the fees due to a company’s accountant and auditor (as agreed between the parties) and the fees charged for the submission of the annual approval of accounts (roughly EUR85). REFs and companies pay fees to:

  • the Securities Commission for incorporation;
  • the management company (except self-managed investment companies);
  • the depositary bank; and
  • advisers.

Lease agreements, contracts for the use of shops in commercial centres, retail parks or outlets and commodatum agreements (ie, a lease agreement free of charge) allow a person, company or other organisation to occupy and use real estate for a limited period of time without buying the property.

Commercial lease agreements can be for commercial purposes, for industrial or professional purposes (namely, for offices), or for logistics purposes.

Rents and some of the lease regimes for commercial leases are freely regulated between the parties. Conversely, there is a mandatory regime for lease agreements for residential purposes.

On account of COVID-19, the Portuguese government enacted legislation that determined the suspension of effects of the termination, revocation, opposition to renewal and expiration of residential and non-residential lease agreements by landlords. The effects of the execution of primary housing mortgages were also suspended. These measures expired on 30 June 2021, so it is once again possible for landlords to evict lessees whose contracts have expired or who are not paying their rents. Also, banks can now proceed with the execution of mortgages.

The typical terms of commercial leases are generally stipulated between the parties.

Length of Lease Term

A lease can have a fixed term or a non-fixed term. The usual choice is a lease agreement with a fixed term of between one and five years (the legal minimum limit is one year and the legal maximum limit is 30 years).

Maintenance and Repair

Regarding the maintenance and repair of occupied real estate, a tenant is entitled to keep a leased area in good condition and to make any ordinary repairs. Structural work costs should be borne by the landlord.

Rent Payments

Rent is usually paid monthly and is due on the first working day of the preceding month.

COVID-19 and Force Majeure

The parties to a lease agreement are free to define which events constitute force majeure, so no single or unique definition can be provided. However, force majeure can be classified as any unforeseeable or unavoidable situation, the effects of which arise independent of the parties’ will or personal circumstances, such as acts of war or subversion, epidemics or pandemics, cyclones, earthquakes, fire, lightning, floods, general or sectoral strikes, or other unavoidable circumstances, in accordance with criteria of reasonability.

The inclusion of COVID-19 provisions has been prominent in large-scale real estate transactions, but less common in lease agreements.

Parties to a lease agreement can freely agree on how rent will be increased for as long as a lease agreement lasts.

Generally, rent is subject to annual increases by the application of a coefficient established every year by the government.

Generally, lease agreements are exempt from VAT, but this exemption may be waived if the necessary conditions are met.

At the beginning of a lease agreement, one monthly rent payment is required, and parties may agree on the payment of up to three monthly rents in advance as a security deposit.

The maintenance and repair of areas used by several tenants – eg, parking lots or gardens (condominium costs) – are generally agreed upon between the parties, with the costs being borne by each tenant in proportion to the area occupied by each of them. Service charges are generally based on the area of the property leased to each tenant in proportion to the area of the whole building. If no provision is made by the parties, the landlord must bear these costs.

Generally, utility bills and telecommunications are borne by each tenant in proportion to the area they occupy. These types of matters are stipulated between the parties.

Only properties that are subject to the horizontal property regime must be covered by a mandatory insurance policy covering the risk of fire. There is no legal provision imposing the costs of any insurance obligation on any of the parties. However, in this type of insurance, the insurance premium is usually paid by a tenant due to contractual undertaking. In a commercial lease agreement, landlords usually impose that the insurance policy undertaken by the tenant must cover damages caused by natural and human causes. Whenever the value of the real estate so justifies, the landlord may request further insurance coverage, such as for damage caused by terrorism or sabotage.

There is no publicly available information on whether payments were made under business interruption insurance policies for rents and other costs in the context of the COVID-19 pandemic, although the reports from the Portuguese insurance regulatory authority did not reference any abnormal or unexpected claim activity in respect of this sub-branch of non-life insurance. However, this type of insurance and/or coverage is not very common in Portugal, and usually concerns only business interruption due to damage to property and not related to external factors, such as a pandemic. Therefore, the coverage of rents and other costs in the context of the pandemic will have depended ultimately on the wording of the insurance policy and on a case-by-case assessment.

A landlord may impose some rules and restrictions on the use of a leased property, such as restrictions concerning alterations made to the property, the assignment or sublease of the property, and the type of use of the leased property. The law foresees that the tenant must use the property by respecting its licence of use.

Generally, the parties agree on the conditions under which the tenant may alter or improve real estate – primarily, it is established that the tenant shall not carry out any works on the leased property without the prior written consent of the landlord. Repair works mean all ordinary repairs, maintenance and works and, in general, any reconditioning or replacements necessary to repair and maintain the property in good conservation status. The tenant is responsible for the execution of the repair work, directly or through third parties, and for the planning, procurement and management thereof. It is common for all works performed by the tenant to become an integral part of the property or, upon a landlord request, to be removed and the property returned in the same condition as it was on the delivery date, save for deterioration caused by normal wear and tear.

The urban lease regime is established in the Portuguese Civil Code in accordance with the provisions approved by Law No 6/2006, of 27 February 2006 (as amended), and applies to both lease agreements for residential purposes and lease agreements for non-residential purposes.

Residential Lease Agreements

In order to benefit from this moratorium, tenants of residential lease agreements must fulfil one of two conditions:

  • the rent must represent a household effort rate higher than 30%; or
  • the tenant must have suffered a shortfall of 20% of their household income in relation to the income of the previous month, the same period of the last year or the month of February 2020.

Non-residential Lease Agreements

With regard to non-residential leases, the following rents may be subject to deferral:

  • rents due during the state of emergency and the month thereinafter;
  • rents due during the months where establishments were forced to close under legal or administrative measures; and
  • rents due in the three months following the imposition of the closure of establishments or the suspension of activity being lifted.

The repayment period of these rents began on 1 January 2021 and ended on 31 December 2022. Repayment was to be made in 24 successive instalments, paid together with the rent of the month at the time.

Closed Establishments

A special regime was enacted for tenants whose establishments were closed in March 2020 and remained closed until 1 January 2021. In these cases, the period for settlement of the rents due in 2020 started on 1 January 2022 and will continue until 31 December 2023. Rents due in 2021 could also have been deferred if requested by the tenant, until 20 January 2021.

Use of Shop Agreements in Shopping Centres

The fixed or minimum monthly rent due from tenants was lowered in proportion to the reduction in monthly invoicing, up to 50% of the value of the monthly turnover, when those establishments had a drop in monthly sales volume compared to the sales volume of the same month in 2019 or, in its absence, to the average sales volume of the last six months prior to the enactment of Presidential Decree No 14-A/2020, of 18 March, which declared the first emergency state in Portugal, or a shorter period, if applicable. This measure expired on 30 June 2021.

Lease agreements (in which the insolvent party is the tenant) are not suspended upon an insolvency declaration. The insolvency administrator may terminate a lease agreement at any time, provided that 60 days' notice is given. Nevertheless, a landlord cannot request the termination of a lease agreement after an insolvency declaration based on a delay in the payment of rent related to the period before the insolvency declaration, or for the economic deterioration of the tenant.

Landlords can protect themselves against a tenant's failure to meet its obligations by requesting some securities, such as a rent deposit, a bank guarantee or a guarantor (fiador).

A tenant is not entitled to occupy a property after the expiration or termination of a commercial lease. In order to prevent default, the landlord may include a contractual clause in which a fine is applicable for each day of delay until the delivery of the property. If the tenant continues to occupy the property, the landlord can proceed with an eviction procedure.

Both the assignment of the leasehold interest and the sublease of all or a portion of the leased premises by the tenant are subject to the authorisation of the landlord.

The events that typically give a landlord and tenant the right to terminate a lease agreement are related to the default of the other party, such as the non-payment of rent or costs and expenses for more than three months, or late payment of more than eight days, more than four times in a row, or four times in a period of 12 months.

In general, lease agreements do not need to follow any particular execution formalities and do not have to be recorded in the Land Record.

Only lease agreements entered into for a period longer than six years must be recorded in the Land Record, in which case a fee of approximately EUR250 is due from the tenant.

In the event of default prior to the date originally agreed, a tenant can be forced to leave (ie, be evicted). A special eviction proceeding with the aim of expediting the eviction of a tenant of a leased property may be used in cases where the lease agreement can be terminated by judicial means, as long as the stamp tax has been paid. This procedure takes place on the Balcão Nacional do Arrendamento. Through this proceeding, in addition to requiring the vacation of the leased property, the landlord may also request the payment of cumulative rents, costs and expenses that are deemed the responsibility of the tenant. This process has been reported as being quicker than the judicial process, although several delays have still been verified. The estimated duration of the process is two years.

If a tenant is opposed to urgent works (namely remodelling or restoration) required by any public authority from the landlord, the law foresees the possibility of the landlord terminating the lease agreement. Within six months, the tenant still has the possibility to cease any opposition by accepting the works, in which case the termination of the lease agreement is no longer valid.

Upon notice being given to the tenant, the landlord is obliged to pay the tenant compensation in an amount corresponding to one year’s rent or, alternatively, to ensure a house is available to the tenant in the same municipality or in a surrounding municipality, in similar conditions of location, rent and expenses.

This process may take approximately six months to one year.

The most common structure used to price construction projects is fixed price, according to which an owner/employer agrees with a contractor on a total and fixed price for the entire project. A detailed description of the works is set forth in the agreement, and any required preparatory and accessory works are deemed to be included in the scope of work. Since the price is fixed and non-revisable, it cannot change due to increases in the costs of workforce, materials, equipment or inflation in general. Any additional works and respective costs must be expressly approved by the owner/employer.

Typically, a constructor is liable towards an employer for any defects of the construction. In fact, it is common to include a guarantee of “fitness for purpose” in the construction agreement, meaning that the contractor will be strictly liable towards the employer for any defect. However, the responsibility of the contractor will be excluded if they are able to prove that the defects are due to an error of design. In this case, the constructor may then request to be reimbursed by the designer for the costs they bore correcting such defects. Pursuant to Portuguese law, the request for the licensing of construction works shall include a declaration from designers stating that they complied with all technical and construction rules in force.

Construction risks on a project may be managed through clauses on limitation of liability. However, it should be noted that liability cannot be completely excluded by the parties. In fact, pursuant to Portuguese law, clauses whereby a creditor waives in advance its rights to compensation by reason of default or late performance by a debtor are deemed null and void. Also, in general, contractual clauses directly or indirectly excluding liability in cases of serious default or wilful misconduct are seen as abusive. Under their contractual autonomy, private parties are allowed to negotiate remedies for breach of contractual obligation, notably through limitation of liability clauses or liquidated damages clauses.

As regards warranty for defects, under the Portuguese Civil Code construction works pertaining to immovable property intended for long-term use are covered by a statutory five-year warranty period. Nevertheless, the Civil Code allows the parties to agree to extend the five-year warranty period based on the principle of freedom of contract, pursuant to which entities are free to agree on the terms of the contracts they enter into. Conversely, it is disputable whether the parties may agree to reduce the statutory five-year warranty period based on their contractual freedom.

Usually, parties agree on a schedule for completing construction works, which includes a final date for completion of the entire project as well as monthly milestones for the completion of each construction stage. The payment of an instalment of the price is linked to each construction milestone, meaning that the employer may withhold the respective payment (or part of it, in proportion to the portion of the works not completed) and/or be entitled to monetary compensation for each day/week of delay if such a milestone is not achieved within the agreed completion date.

For such a purpose, the contractor should prepare monthly progress reports and submit them to the owner. The owner should then inspect the works and, if acceptable, proceed with making the corresponding payment to the contractor.

It is common for owners to seek several forms of security from a contractor, such as contractors’ parent company guarantees and comfort letters, letters of credit, and bank guarantees on first demand. In addition, owners require contractors to have works insurance and insurance against injury to persons and damage to property.

Contractors and/or designers are not permitted to lien or otherwise encumber a property in the event of non-payment. In cases of non-payment, they may execute the guarantees put in place (ie, bank guarantees) or resort to asking the courts for compensation for their damages.

In general, buildings are subject to a municipal licence known as a licence of use (licença de utilização). Without this licence, no property may be sold (except in specific cases provided for by law, under which such properties are exempt from the requirement for a licence of use).

In general, the sale of real estate located in Portugal is subject to property transfer tax and stamp duty, and exempt from VAT, unless the vendor waives the exemption (provided certain requirements are met). If VAT applies to the sale of real estate property, stamp duty should not apply.

Normally, large real estate portfolios may be structured as share deals to mitigate the application of property transfer tax.

Since 1 January 2021, the transfer of more than 75% of the equity of a Portuguese company may trigger IMT. An IMT exemption may apply, depending on the characteristics of the real estate portfolio and its weight on the company’s balance sheet, and depending also on the number of buyers, to be analysed on a case-by-case basis.

Likewise, the acquisition of participation units in privately placed, closed-ended real estate investment funds is subject to IMT, regardless of the location of the management company, and the redemption of participation units or the increase or reduction of the share capital, as a result of which one of the holders, or two holders who are married or in a registered partnership, hold at least 75% of the participation units representative of the investment fund’s patrimony.

Generally, collective investment undertakings are subject to corporate income tax but they benefit from an advantageous regime. Investment income, capital gains and rental income are not included in their taxable income, except when such income is derived from offshore entities. In addition, such entities are exempt from state and municipal surcharges (derrama estadual and derrama municipal).

Furthermore, collective investment undertakings are subject to stamp duty at a 0.0125% rate on their net asset value, payable quarterly.

Municipal property tax is levied annually on the patrimonial value of both urban and rural immovable property, payable by the respective owner or person entitled to the use or fruition on 31 December of any given year. Municipal property tax is usually payable in three instalments, in May, August and November.

The general tax rates vary between 0.3% and 0.45% of the tax value for urban immovable property and are set at 0.8% for rural immovable property. If the taxable person is resident in a blacklisted jurisdiction for tax purposes (as per the list published in Decree No 150/2004 of February 13, as amended), or is an entity that is controlled by an entity resident in a blacklisted territory, an aggravated 7.5% tax rate should apply.

Since 2023, urban buildings or apartments that have been vacant for more than a year, buildings in ruins and urban land for construction that qualifies for residential use according to the Municipal structure plan, if located in urban pressure zones (as defined by law), may be subject to IMI at aggravated rates: the general tax rate may be increased sixfold, and aggravated in subsequent years by 10% annually (up to 12 times the general tax rate of 0.3% to 0.45%). The limit on the aggravated tax rates may be increased to 25% or 50% by the Municipal Assemblies, in certain cases.

Moreover, individuals, companies and structures or collective bodies without autonomous legal personality and undivided inheritances may be liable to Additional Municipal Property Tax (AIMI) if they are owners or usufructuaries, or if they have the surface right over urban properties located in Portugal.

AIMI is calculated on the sum of urban properties that are not classified as “commercial, industrial or for services” or as “others”, with reference to 1 January of each year, multiplied by the applicable rate, as follows:

  • individuals and undivided inheritances: 0.7%;
  • companies: 0.4%; and
  • legal entities resident in a blacklisted jurisdiction: 7.5%.

In the case of individuals, a tax rate of 1% should apply to the taxable amount between EUR1 million and EUR2 million, and a tax rate of 1.5% should apply to the taxable amount that exceeds EUR2 million.

Moreover, as a general rule, individuals and undivided inheritances may benefit from a deduction of EUR600,000 of their taxable base. Taxpayers who are married or in a registered partnership and opt to be jointly taxed for AIMI purposes have the right to a joint deduction amounting to EUR1.2 million, which is applicable to the sum of the VPT of all their qualifying urban properties. In this scenario, the brackets to which the increased marginal rates of 1% and 1.5% are applied are doubled.

Rental Income: Non-residents

Foreign investors, either resident or non-resident, are subject to withholding tax on rental income at a rate of 25% if the lessee is a legal entity or an individual that has organised accounting obligations.

Final taxation of non-resident investors shall apply at a rate of 25% of corporate income tax for legal entities, and at an autonomous rate of 28% for individuals.

Rental Income: Residents

In the case of resident individual taxpayers, tax withheld at a rate of 28% is to be considered as a payment on account of the final tax due (when such income is not taxable according to the rules applicable to individual business income, in which case different rules apply). Certain long-term rental contracts may benefit from reduced tax rates (up to 10% reduced tax rate in the case of rental contracts with a term equal to or greater than 20 years).

Resident individuals may choose to aggregate the aforementioned rental income in their taxable income, in which case such income will be subject to tax at progressive rates of up to 48%. Moreover, a solidarity surtax may apply at a rate of 2.5% on the taxable income exceeding EUR80,000 and at 5% on taxable income exceeding EUR250,000.

For legal entities that are subject to corporate income tax, tax should be withheld on rental income at a 25% tax rate, on account of final tax due.

The general corporate income tax rate amounts to 21% (17% applying to the first EUR50,000 of taxable income in the case of small or medium companies, or companies qualifying as Small Mid Cap). A municipal surcharge of up to 1.5% may apply. A state surcharge may also apply, at the following rates:

  • 3% on taxable profit between EUR1.5 million and EUR7.5 million;
  • 5% on taxable profits between EUR7.5 million and EUR35 million; and
  • 9% on taxable profits in excess of EUR35 million.

Capital Gains: Non-residents

Generally, capital gains realised by non-resident legal entities on the sale of real estate are subject to corporate income tax at a rate of 25%, and non-resident individuals are subject to tax at a rate of 28%. Tax is assessed upon the submission of an annual tax return.

Capital gains realised by non-resident legal entities on the sale of shares of Portuguese companies may be exempt from tax under domestic law, provided that the assets held by the company whose shares are being sold are not composed, by more than 50%, of real estate located in Portugal, or that such entity does not hold, as a controlling entity (as defined in Portuguese corporate law), participations in the share capital of controlled entities whose assets are composed, by more than 50%, of real estate located therein. Certain exemptions may apply in the terms set forth by double tax treaties, if applicable.

Capital Gains: Residents

Capital gains obtained by resident individuals on the sale of real estate are only taxed on 50% of the gain, and subject to the progressive rates mentioned above. Exemptions are available in the case of proceeds derived from the sale of family housing when reinvested for family housing purposes.

Capital gains realised on the sale of real estate by resident entities subject to corporate income tax should be taxed at the general rates and subject to municipal surcharges and state surcharges, in the terms described above. If the capital gain is reinvested in tangible fixed assets, intangible assets or non-consumable biological assets, only 50% of its value is taxed if the reinvestment is made in the taxable period before the sale, in the same tax period as the sale, or in the tax period following the sale.

Capital gains realised by a resident entity on the sale of shares of Portuguese subsidiaries may be exempt from corporate income tax under the participation exemption regime, provided that, namely, the shares have been held for a minimum period of one year before disposal, and that the value of real estate located in Portugal does not represent, directly or indirectly, more than 50% of the company’s assets, unless such assets are allocated to an agricultural, industrial or commercial activity that does not consist of the purchase and sale of real estate.

The ownership of real estate by legal entities allows the recognition of tax-deductible depreciation according to the assets' expected useful life. The acceptable depreciation rates, for corporate income tax purposes, are limited by the applicable tax law.

Several tax benefits are available under IMT and municipal property tax legislation, to be analysed on a case-by-case basis.

Morais Leitão, Galvão Teles, Soares da Silva & Associados

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Trends and Developments


PLMJ is a law firm based in Portugal that combines a full service with bespoke legal craftsmanship. For more than 50 years, the firm has taken an innovative and creative approach to produce tailor-made solutions to effectively defend the interests of its clients. The firm supports its clients in all areas of the law, often with multidisciplinary teams, and always acting as a business partner in the most strategic decision-making processes. With the aim of being close to its clients, the firm created PLMJ Colab, its collaborative network of law firms spread across Portugal and other countries with which it has cultural and strategic ties. PLMJ Colab makes the best use of resources and provides a concerted response to the international challenges of its clients, wherever they are. International collaboration is ensured through firms specialising in the legal systems and local cultures of Angola, China/Macao, Guinea-Bissau, Mozambique, São Tome and Príncipe and Timor-Leste.

The Portuguese Economy at a Glance

Despite challenging global conditions, by the end of 2022 Portugal’s economy had continued to grow. According to the latest European Union estimates, Portugal’s GDP increased by 0.2% (q-o-q) in the final quarter of 2022, after growing by 0.4% in the previous quarter. On an annual basis, growth in 2022 was 6.8% (a 35-year record), up from 5.5% in 2021. The main drivers of this expansion were private consumption, net exports and a strong recovery of the tourism sector after the lifting of the COVID-19 restrictions.

However, according to both the EU and the Portuguese Public Finance Council, Portuguese growth is projected to slow down to 1% (EU forecast) and 1.2% (Portuguese forecast) in 2023. This is based on the assumption that private consumption is expected to come close to stagnation (ie, to 0.4% in volume, compared to 5.7% in 2022) due to high energy costs and food prices. Nonetheless, the recent downturn in wholesale energy prices, improving economic sentiment and a stronger external demand support projections of growth improvement in the second quarter of 2023, reaching a full-year rate of 1.8% in 2024 and 2% in 2025.

Headline inflation rose to 10.2% (y-o-y) in 2022-Q4 as the food and industrial goods price increases prevailed over the slowdown of energy and services prices. However, most estimates predict that peak in inflation was reached in the final quarter of 2022, as the headline inflation rate slowed to 8.6% (y-o-y) in January 2023. This was due, in the main, to a downturn in energy prices, with headline inflation estimated to slow further to 5.4% in 2023 and 2.6% in 2024, according to the EU, or to 5.9% in 2023 and 3.1% in 2024, according to the Portuguese Public Finance Council.

The Portuguese economy continues to be burdened by the geopolitical uncertainty resulting from the war in Ukraine, by inflationary pressure (although this is expected to abate gradually), and by the accelerated rise in interest rates, which are contributing to the erosion of consumer purchasing power and the postponement of investment decisions by businesses. The potential impact of the recent developments concerning banking institutions in the US, Switzerland and Germany also remains to be assessed.

Nonetheless, the acceleration in absorption of European funds associated with the Portuguese Recovery and Resilience Programme (the Portuguese arm of the EU’s Recovery and Resilience Facility), the expected recovery in private consumption, the gradual decrease in inflationary pressures and the stabilisation of interest rates support positive forecasts for the Portuguese economy for the rest of the year.

Outlook for the Real Estate Market

In short, 2022 was a record-breaking year for the Portuguese real estate market, with the total volume of transactions, in both residential and commercial real estate, reaching around EUR34 billion. Residential property accounted for the largest share of the market, with a value of EUR31 billion, while commercial property accounted for EUR3.4 billion, according to estimates by some of the leading real estate consultants operating in Portugal.

In terms of the volume of commercial real estate transactions by sector in 2022, hospitality accounted for around 30% of the total commercial market, totalling EUR1 billion. This included the largest real estate deal of the year, Davidson Kempner’s acquisition of several hospitality assets from Portuguese banks. These assets included 21 hotels, five golf courses, a portfolio of development properties, logistics platforms and a shopping centre. The acquisition was part of “Project Crow” and Davidson Kempner paid around EUR850 million. In fact, in the hospitality sector, the number of overnight stays has almost reached pre-COVID levels, with foreigners accounting for around 40%. In this context, 2023 is expected to be the year of full recovery with occupancy rates above 2019 levels.

Office transactions accounted for around 27% of the total commercial market, amounting to around EUR900 million. The office rental market also registered a positive and steady momentum. High-quality and sustainable assets (with BREEAM and LEED certifications) are one of the main preferences for occupation, as efficient and inspiring workplaces play an increasingly important role for prospective tenants as a talent retention factor.

Despite the slowdown in the rental market towards the end of the year, the volume of demand in 2023 remains high, especially in the prime buildings segment. However, the shortage of supply – which is affecting all segments of the real estate market – may affect the market’s performance this year.

Transactions involving I&L assets accounted for around 20% of the total commercial market, amounting to around EUR615 million. These I&L transactions included two of the largest in Europe. The largest was “Project Connect”, in which Blackstone acquired a portfolio of 20 industrial and logistics assets from Novo Banco for approximately EUR200 million. The second was “Project Linda”, by which Blackstone acquired a portfolio of 15 logistics assets from M7 for close to EUR120 million.

In 2022, the growth of e-commerce underpinned robust demand, with the focus on reducing operating costs driving demand towards more sustainable assets, with greater potential for savings in terms of energy efficiency. The legal restrictions on establishing logistics hubs and the lack of interest of some municipalities in developing this type of project in their areas have contributed to the shortage of supply and the consequent increase in rents. However, the same scarcity of supply has led investors to focus on retrofitting existing properties and on developing new projects from scratch.

Property development, including land for new construction and buildings for refurbishment or upgrading, also played an important role in 2022, with a total volume of transactions of more than EUR400 million. This type of investment is expected to continue to attract attention in 2023 as demand continues to grow.

Continuing with the topic of commercial real estate, the Portuguese alternative real estate market has seen a growing interest in niche markets. These include data centres (due to the robust development of the national fibre optic network), student residences, senior residences and residences with medical support. Several international operators are starting or consolidating their investments in these sectors.

In residential real estate, despite the rise in interest rates, the market remained strong in 2022 and was driven mainly by domestic demand, with international buyers accounting for only around 6% of the 168,000 units sold. This represented an increase of 1.3% (y-o-y) in terms of the number of properties sold and made up the above-mentioned total sales volume of around EUR31 billion. This increase in sales volume of around 10% (y-o-y) was due to a pronounced price increase. In 2023, higher construction costs are expected to continue to lead to a supply shortfall, although legislative proposals aimed at improving the speed of licensing procedures may improve the outlook.

The Portuguese Real Estate Legal Ecosystem

Housing is the hot topic in Portuguese real estate for 2023. The Portuguese government has identified the housing crisis as one of the main pillars for intervention and is allocating a substantial portion of the funds from the Portuguese Recovery and Resilience Programme to tackling this issue.

Creation of the Ministry for Housing

For the first time since the restoration of democracy in Portugal, housing has been given its own ministry within the government. The mission of this new ministry will be to create, conduct, execute, and assess public policy regarding housing, urban rehabilitation, construction, and real estate.

New legislation

So far, 2023 has been exceptionally productive, with new legislative measures aimed at the real estate market, particularly in relation to housing.

Cap on rent updates for 2023

A law was passed in October 2022 that sets a cap of 2% on rent increases in 2023 for lease agreements that are subject to the legal annual update coefficient for rents. This law places strict limits on the situations in which the legal coefficient applies. The legal coefficient results from the variation of the consumer price index and is provided for in the New Urban Leasing Rules/NRAU and if it were to be applied in 2023 to the different types of leases (both urban and rural), the rent increase coefficient would have been of 1.0543 (5.43%).

Conversely, the coefficient of 1.02 (2%) will apply, unless otherwise agreed by the parties. This coefficient of 1.02 also applies to agreements that establish updates pursuant to the legal coefficient established in the NRAU or in the corresponding order published in the Official Gazette with this index.

However, this law has established the application of extraordinary support indexes to calculate the personal or corporate income tax levied on rental income: (i) that falls due and is paid in 2023; (ii) that derives from lease agreements in force before 1 January 2022 in respect of which the applicable stamp duty obligations have been fulfilled; and (iii) that does not relate to agreements subject to updating at a value higher than the one resulting from the 2% cap.

Purchase for resale

As a rule, the purchase of real estate is exempt from property transfer tax (IMT) if (i) the property is bought for resale (which must be expressly stated in the sale and purchase deed), and (ii) the resale occurs within three years of the purchase, although it is expected that this period will be shortened to one year following approval of the “Mais Habitação” programme, which is summarised below.

This exemption is granted either by way of a reimbursement, if and when the resale occurs, or as an upfront exemption, if the purchaser is considered to normally and habitually engage in the purchase of real estate for resale purposes (resale trading status), as confirmed by a certificate issued by the Tax Authority.

As of 1 January 2023, for a company to obtain resale trading status, it must prove it has resold properties acquired for this purpose in the two previous calendar years. Before this, the mere purchase with the intention to resell was also sufficient, and was sufficient to engage in this activity in only the previous calendar year.

Given the additional conditions (in particular, the extended timeframe) that will now be required to obtain resale trading status, investors are likely to reassess how they might use this mechanism and incorporate it into their business plans, with the cost of the IMT that the investor-developer will not be able to recover most likely being reflected in an increase of the sale price of the assets when they are resold.

Exchange agreements

Real estate can be acquired in Portugal by way of an exchange agreement (contrato de permuta), whereby party A sells property X to party B, in exchange for property Y (which is then acquired by party A). Both parties agree on a value for each of the properties for this exchange. The value may either be the same, in which case no money is exchanged, or be different, in which case the party acquiring the more expensive property pays the difference between the property it gives in exchange and the property it receives.

Prior to the 2023 State Budget, which introduced new rules on the matter, the IMT levied on such a transaction was calculated on the greater of the difference between the values assigned to each property by the parties for the purpose of the transaction, or the difference between the respective registered tax values. This made savings in terms of property transfer tax possible.

Under the new rules, the calculation mechanism still applies, but it now requires that neither party to the transaction subsequently sells the property acquired within the following year. Although not explicitly stated, these new rules are most likely aimed at preventing the widespread practice of setting up exchange structures in residential property transfer agreements in order to generate tax savings for the originating party (ie, the main party wishing to acquire a house or flat).

Advanced payment of rent and security

The maximum number of months that can be paid in advance by the tenant under lease agreements has been reduced from three months to two months. In addition, while it is still possible for parties to agree on any form of security that tenants must provide under lease agreements, this security is now limited to a maximum of two months’ rent. Although these measures appear to have been adopted to tackle concerns about residential leases, in practice they also apply to non-residential/commercial leases.

“Mais Habitação” Programme

The highlight for residential property in 2023 is the “Mais Habitação” (More Housing) legislative programme, which underwent public consultation in March 2023. The programme consists of a series of structural measures, including several tax measures, that revolve around what the government has identified as the five main challenges and solutions to the housing crisis. These can be summarised as follows:

  • increasing the supply of properties for housing;
  • simplifying licensing procedures;
  • increasing the supply of homes for the affordable rental market;
  • combating speculation in housing prices and rent; and
  • supporting families in need.

Given the subject matter, some of the measures can be approved and enacted by the government, while others require approval by Parliament.

Of these measures, the government has already approved decree-laws to support tenants who are having difficulty paying the rent on their residence, and a temporary subsidy for interest rates on financing to build or buy permanent residences.

All real estate stakeholders in particular and civil society in general actively discussed the proposed measures during the public consultation period, which ended recently, with the government yielding partially on some of the more controversial measures (such as the “Golden Visa” programme restrictions). In the meantime, the government has already begun work to enact the measures that are within its reach and to prepare discussions of the remaining ones in Parliament.

Regardless of the final outcome of the programme, it is expected to introduce a politically charged structural change to the role of the state in the residential real estate market.


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Law and Practice


Morais Leitão, Galvão Teles, Soares da Silva & Associados is a leading full-service law firm in Portugal, with decades of experience. It is well recognised for its expertise and excellence in several branches and sectors of the law, on both a national and international level. The firm combines its unique technical expertise with a distinctive approach, and provides cutting-edge solutions that often challenge some of the most conventional practices. With a team of more than 250 lawyers, Morais Leitão is headquartered in Lisbon and has additional offices in Porto and Funchal; it also recently opened an office in Singapore. Due to its network of associations and alliances with local firms and the creation of the Morais Leitão Legal Circle in 2010, the firm can also offer support through offices in Angola (ALC Advogados), Cabo Verde (VPQ Advogados) and Mozambique (MDR Advogados).

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PLMJ is a law firm based in Portugal that combines a full service with bespoke legal craftsmanship. For more than 50 years, the firm has taken an innovative and creative approach to produce tailor-made solutions to effectively defend the interests of its clients. The firm supports its clients in all areas of the law, often with multidisciplinary teams, and always acting as a business partner in the most strategic decision-making processes. With the aim of being close to its clients, the firm created PLMJ Colab, its collaborative network of law firms spread across Portugal and other countries with which it has cultural and strategic ties. PLMJ Colab makes the best use of resources and provides a concerted response to the international challenges of its clients, wherever they are. International collaboration is ensured through firms specialising in the legal systems and local cultures of Angola, China/Macao, Guinea-Bissau, Mozambique, São Tome and Príncipe and Timor-Leste.

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