# Buying property for cash?



## Speago

Hi
Have been reading through this forum for a while, but this is my first post.. I am looking to move to Portugal at the end of the year. I am want to pay cash for a property.
I have noticed a few people have mentioned that this is not possible.
Can anyone confirm if I am able to pay cash or not? As I can't seem to find any info on this. 

Thanks


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## travelling-man

Do you mean cash as in a bag full of the folding stuff or do you mean cash as in a bank transfer from one account to another and with no mortgage?

The former might be a problem but the latter is no problem at all.


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## Speago

Hi
Thanks for clearing that up. Yes! I mean cash in the bank with no mortgage. Thought it was a bit strange but I had read it on quite a few posts with no explanation. I thought I might of been missing something.. 
Thanks for the reply..


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## steve01

Hi, 
virtually all property in Portugal is bought for 'cash', very few loan or mortgage arrangements exist.
all thats required is a paper trail of some kind to verify the payment to the Notaire who does all of the official paperwork.
Normally something like - your bank transfer to your lawyer, their transfer to the seller / sellers lawyer - or if not using a lawyer sight of a cheque / paper record of tranfer of monies to the seller


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## canoeman

So as not to have any issues with money laundering it's far better to have a paper trail of transfers of funds from UK to Portugal whether this is by Bank or Broker.

Don't be tempted to do any under the counter deals or under declare the purchase price on Escritura for less IMT & IS it is a very short term gain as when you sell, transfer etc it comes back to bite you in spades.


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## Speago

Hi
Thanks! That is what I expected.. Maybe it was naïve of me but I didn't expect so many people asking questions about money laundering on a public forum.. 

Thanks for the replys


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## baldilocks

Speago said:


> Hi
> Thanks! That is what I expected.. Maybe it was naïve of me but I didn't expect so many people asking questions about money laundering on a public forum..
> 
> Thanks for the replys


People may not ask about it or about the 'brown envelopes' to avoid tax but they go on. If at all possible, avoid the practices, remember, you are a foreigner and are likely to feel the full weight of the law if you get caught, whereas a local, through friends and family, might get away with all sorts of things that you wouldn't.


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## steve01

its normal - accordingly to my laywer - not to take brown envelopes - but to describe part of the price being paid as furnishings, fixtures and fittings, and to include this in the sale contract (escritura) at a value up to 20% of the property price - potentially saving both purchase taxes and captal gains (if and unlikely at the moment they apply).
but if you're buying short term then certainly take into account Canoemans advice and be aware that it might mean an unreal Capital Gain- hence tax bill'


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## canoeman

When it comes to CGT it's the purchase price stated in the Escritura that is used as the basis for CGT calculation so any under declaration even as furnishings, fixtures and fittings creates a possible higher CGT bill especially for non Resident as they are charged 28% on 100% of any gain with no rollover tax relief

Say you bought property @ 185,000€ IS 1,480€ IMT 3863€
But you under declared @ 165,000€ IS 1,320€ IMT 2610€
Saving 1413€

Say you sell at 185,000€ you have an immediate shortfall of 20,000€ which is impossible to balance as you can only claim certain expenditure which must all be proven so you're saving of 1413€ *is now going to cost you an extra* 4187€ as a non Resident and 2,093€ as a Resident *+ the 20,000€ you paid in a brown paper bag*


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## steve01

There is no brown paper bag in my lawyers example 
But i agree its much easier to bite the bullet when you initially buy.

however your example mixes both methods ans in reality you never lose the 20k - unless you sell at a lower price , the end result is you either pay extra tax on it as profit or in my example , pass it along and the only loser is the Portuguese tax system

When my lawyers description of almost every Portuguese buyer is taken into account and the 20k - in your example is simply passed on to the next buyer et al.

When in Rome !


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## canoeman

If 20% of property value is declared as furnishings, fixtures and fittings then that equates to brown paper bag, Financas would only accept the lesser value as the purchase price

So if you declare vale as 180,000 inclusive of 20% furnishings, fixtures and fittings, the true value of property is 144,000€ and this is value that would be used to calculate IS, IMT and latter on CGT

In my view you lose the 20,000€ or in your thinking the value of furnishings, fixtures and fittings *as a fiqure that can be used* in CGT calculations to offset any CGT, 20,000€ equates to 5,600€ in tax, personally don't believe that your lawyers idea is as widespread as you believe, especially in this day and age, even when in Rome


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## steve01

I lived in Italy, most corrupt people you'll ever meet, they not only under declare ,, you'll be lucky in some cases if they even admit the property exists, and haven't changed the ownership since Julius Caeser, and even luckier if they don't try to change the price at least a dozen times prior to completion, and thats without the ridiculaous buying costs - almost double the ones here..

As i said it was my lawyer who mentioned it, i'd always prefer a straight forward purchase or sale - however you'd have to be a bit dim in this day and age not to seriously consider it if it made a difference to a sale/ no-sale

But thinking about it as many people do buy property abroad with furniture / fixtures / fittings 20% does seem excessive but i can't see anything wrong with putting a sensible value - realistic replacement estimate of the insurance value of items included to offset against tax - you are at the end of the day actually buying things !


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## baldilocks

canoeman said:


> If 20% of property value is declared as furnishings, fixtures and fittings then that equates to brown paper bag, Financas would only accept the lesser value as the purchase price
> 
> So if you declare vale as 180,000 inclusive of 20% furnishings, fixtures and fittings, the true value of property is 144,000€ and this is value that would be used to calculate IS, IMT and latter on CGT
> 
> In my view you lose the 20,000€ or in your thinking the value of furnishings, fixtures and fittings *as a fiqure that can be used* in CGT calculations to offset any CGT, 20,000€ equates to 5,600€ in tax, personally don't believe that your lawyers idea is as widespread as you believe, especially in this day and age, even when in Rome


In this day and age with computers, the tax authorities are much more savvy and would have a fair idea of how much you paid anyway and may well come after you, not only for the unpaid tax but a nice fat fine as well.


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## canoeman

steve01 said:


> But thinking about it as many people do buy property abroad with furniture / fixtures / fittings 20% does seem excessive but i can't see anything wrong with putting a sensible value - realistic replacement estimate of the insurance value of items included to offset against tax - you are at the end of the day actually buying things !


That's the point Financas* will not accept whether realistic or not value for fixture and fittings in purchase price,* it's only the value of the property and land as declared in Escritura and nothing else when it comes to IS, IMT or CGT


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## steve01

Sorry but again you slightly miss the point.
Your agreement (promissary) contract to buy can contain any terms and conditions both parties agree too 
This can include as per this discussion an agreement to purchase fixtures and fittings.
Completion or other Dates, deposits, work to be completed etc etc - in fact anything both parties agree.
You calculate and pay imt and stanp duty on the property price agreed in this contract
The final sale contract - escritura - is drawn up by a Notary and contains the purchase price that tax has already been paid on , plus all of the other terms and conditions - they have the responsibilty of checking that everything is legal, normally any fictures/fittings to be left paid for or otherwise would be specified here.
In fact you could have agreed and paid for the items seperately
An imi tax form is then completed, normally by your lawyer - modela 1 - declaring property price and tax paid - no mention of any other details is on this form and is no concern of the tax office unless they have reason to investigate - which they rarely do

As i said i don't recommend fraud , but also see nothing wrong with realistic figures for fixtures/fitings


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## canoeman

You've clarified the point yourself IS, IMT & CGT are all based on the

" purchase price agreed in this contract"&"The final sale contract - escritura - is drawn up by a Notary and contains the purchase price that tax has already been paid on"

Should you decide to include other values for fixtures and fittings they have absolutely no bearing on any tax issues, but your original suggestion from your lawyer was that property price is under declared by the value of these fixtures and fittings which is equal to a brown bag and creates an incorrect value for IS & IMT and at a later date CGT


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## steve01

Not under declared - correctly adjusted - all my lawyer suggested was that this is common practice - she at no point suggested we break the law

If i advertise my house for sale fully furnished at 200k and both parties agree that the 'for sale' price can be split into 180k taxable value of the house + 20k for all fixtures and fittings.
then these are the figures that would be stated on the contract and only the 180k figure would be declared to the tax regime

The alternative is that theoretically i would be giving away all contents and the new owner would be paying property purchase tax on the value of furniture , kitchen equipment , pool stuff etc
Which is also technically incorrect and illegal.

I'm really not looking for an arguement - we're just looking at the same thing from different points of view - and drifting off topic so can we agree to leave it at that and people can make of it what they will


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## canoeman

Ok but not what you said lawyer stated this is now a clear explanation, re fixtures and fittings like UK anything fixed to the building should form part of property but in Portugal it is often worthwhile making this clear or buyer making certain what is included


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