Madeira is a small, rising island market where the rules changed twice in 2026, and most buyer guides have not caught up. Prices in Funchal rose 23% in the year to the first quarter of 2026, faster than Portugal as a whole, while the number of sales across the region fell by almost a quarter. Since May, non-resident buyers pay a flat 7.5% transfer tax on homes. Property has not bought residency since 2023. This guide is written for international buyers looking at homes from EUR 2M. It sets out what a prime purchase in Madeira really costs, what you owe each year and on exit, and where those buyers are looking.
EU, euro and Schengen
Prime homes, Madeira and Porto Santo
Every figure cited to primary sources
Non-resident transfer tax covered
Last updated: October 2026
By: Alexander Thornbury
What kind of market is Madeira?
A small, supply-tight one, and fully European. Madeira is an Autonomous Region of Portugal, so it sits inside the EU, the euro and the Schengen area, and Portuguese law governs every purchase. The market concentrates on the sunny south coast. Funchal, the capital, is the deepest part of it, with Caniço and Santa Cruz to the east and Câmara de Lobos, Ponta do Sol and Calheta to the west. Porto Santo, the sister island with the long sandy beach, is a separate and much quieter market. Our guide to Madeira’s prime areas takes each in turn.
The official numbers show the direction of travel. INE, Portugal’s statistics office, put the median price of homes sold in the region at EUR 2,863 per square metre in the first quarter of 2026. Buyers whose tax home is abroad paid a median EUR 3,295. In Funchal the median reached EUR 3,601, up 23% on a year earlier, the sharpest acceleration of any large Portuguese municipality. Treat these as medians across all housing, though. A prime villa with sea views trades far above them, and no official series tracks the top end. Fewer sales at higher prices usually points to tight supply.
What does it cost to buy?
For a non-resident, budget about 8.3% of the price in transfer taxes: a flat 7.5% IMT, Portugal’s property transfer tax, plus 0.8% stamp duty, both charged on the higher of the price and the tax office’s valuation. On a EUR 2M villa that comes to EUR 166,000. Legal and registration costs come on top. The 7.5% rate for non-residents arrived with Decree-Law 97/2026 in May 2026, and it applies from the first euro, with none of the usual exemptions or reductions, although part can be refunded in two cases.
Here is the detail most guides miss. For prime buyers in Madeira it changes very little. The region’s IMT brackets are 25% higher than the mainland’s, and even before May a second home above EUR 1,438,566 paid a flat 7.5% on the whole price. Above that level, a non-resident pays exactly what they would have paid before. The new rule bites lower down, where the progressive bands and a flat 6% band used to apply. Part of the tax is refunded if you become tax-resident in Portugal within two years of buying, or let the home at a moderate rent for at least 36 months of the first five years. Our Madeira property tax guide works through the numbers, and our step-by-step buying guide covers when each payment falls due.
| Madeira, buying a home (2026) | IMT |
|---|---|
| Non-resident buyer, any price | 7.5% flat from the first euro |
| Portuguese resident, second home up to EUR 792,414 | Progressive bands |
| Portuguese resident, EUR 792,414 to EUR 1,438,566 | 6% flat on the whole price |
| Portuguese resident, above EUR 1,438,566 | 7.5% flat on the whole price |
| Every buyer: stamp duty | 0.8%, on top of IMT |
What do you pay to own it each year?
Less than in most of southern Europe. IMI, the municipal property tax, is charged on the tax office’s valuation of the property, the VPT, not on the price you paid. Every one of Madeira’s 11 municipalities charges the legal minimum of 0.3% in 2026. Portugal has no general wealth tax either. The single wealth-type charge is AIMI, an additional IMI that applies only where the combined VPT of your Portuguese residential property exceeds EUR 600,000 per person, or EUR 1.2M for a couple taxed jointly, at rates from 0.7% to 1.5% on the excess.
Because the VPT is an administrative value that usually sits below the market price, many buyers find their AIMI smaller than they feared, or nil. Get the VPT from the property’s tax record, the caderneta predial, before you sign, and model the figure rather than guessing. Running costs outside tax deserve their own line in the budget too: estate fees on a managed development, insurance, and the upkeep of a terraced garden on a steep plot.
How are a sale and an inheritance taxed?
On a sale, a non-resident is taxed on half the gain at Portugal’s progressive income-tax rates, with worldwide income declared only to set the rate. The old flat 28% option went in 2023. For a high earner, that works out at around a quarter of the gain at the top of the scale, before any solidarity surcharge and after acquisition costs and qualifying works are deducted and an inflation adjustment is applied to homes held for more than two years. What your home country does next depends on its treaty: the UK and the US tax the gain too, with credit for the Portuguese tax, while Germany, Austria and Switzerland leave it to Portugal.
Succession is lighter than most buyers expect, with one catch. Portugal has no inheritance tax as such: a 10% stamp duty applies to Portuguese assets passing on death, but spouses, partners, children, grandchildren and parents are exempt. The catch is forced heirship. Portuguese law reserves up to two-thirds of an estate for children and the spouse, and a will cannot simply override it. A foreign national can choose the law of their nationality in a will under the EU Succession Regulation. Make that choice explicitly, because without it the default rules can bring Portuguese forced heirship to bear on the Madeira property.
| What the region changes | Madeira | Mainland Portugal |
|---|---|---|
| IMT bracket limits | 25% higher | Base table |
| Flat 7.5% IMT, second homes | Above EUR 1,438,566 | Above EUR 1,150,853 |
| Non-resident IMT on homes | 7.5% flat | 7.5% flat |
| IMI rate | 0.3% in all 11 municipalities | 0.3% to 0.45%, set locally |
| Top income-tax rate, residents | 33.6% | 48% |
Can you get residency by buying?
No. Portugal removed property from its golden visa on 7 October 2023, and that includes funds that invest in real estate. Buying in Madeira gives you no right to live there. EU and Swiss citizens need no visa at all. British, American and other non-EU buyers can spend 90 days in any 180 in the Schengen area, and need a visa to stay longer, most often the D7 for people with regular passive income. The main golden-visa route left is a EUR 500,000 investment in a qualifying Portuguese fund, which is not property. Our Madeira residency guide compares the routes.
Two points matter for anyone who does move. Tax residence is not only a 183-day count: a home kept in conditions that suggest you mean to live in it habitually can make you resident with fewer days. And Madeira residents pay income tax at regional rates 30% below the mainland in every band from 2026, which puts the top rate at 33.6% against 48%. That benefit is for residents only. The old NHR regime that drew many movers closed to newcomers in 2024, and its successor, IFICI, is aimed at people working in research, innovation and specialist roles, not at retirees or investors.
Where do international buyers buy?
Mostly on the south coast, where the sun is. Funchal holds the deepest stock, from the hotel zone and São Martinho in the west to the hills of Monte above the city. East of the centre sits the Palheiro estate, with Palheiro Golf at its heart, and Caniço and Garajau sit close to the airport. To the west, Câmara de Lobos, Ponta do Sol and Calheta trade city life for light and space, and Ponta do Sol’s digital-nomad village, launched in 2021, drew remote workers from abroad to the coast. Porto Santo, with its beach and a Seve Ballesteros golf course, is the quiet alternative.
The rules that matter most change with where you come from. We cover them corridor by corridor for buyers from the UK, the US, Ukraine, Germany, Austria and Switzerland. Each sets out the home-country tax, the travel and visa position, and the succession point that applies.
How do you get there, and what should you check?
Getting there has become much easier. Madeira’s airport handled 5.4 million passengers in 2025, its first year above 5 million, and United has flown a seasonal non-stop service from Newark since June 2025. Direct flights also run from the UK, Germany, Austria and Switzerland. If you are still weighing the island against the mainland or the Mediterranean, our comparison of Madeira, the Algarve and Mallorca sets the three side by side.
Due diligence deserves more care here than on a flat coast. Madeira is steep volcanic terrain. A wildfire in August 2024 burned more than 5,000 hectares in the mountains above the south coast, and the flash floods of February 2010 showed how fast heavy rain can move down the slopes above Funchal. Put slope stability, access roads and fire exposure into the survey brief and the insurance quote. If you plan to let, check the municipal rules before you buy: since June 2026 Funchal has barred new holiday-let registrations in apartment buildings, with exceptions for buildings rehabilitated or built for tourism, so confirm the position for the specific property.
Key takeaways
- Madeira is EU, euro and Schengen, and Portuguese law governs the purchase. Foreigners buy freely.
- Non-residents pay about 8.3% in transfer taxes: a flat 7.5% IMT since May 2026, plus 0.8% stamp duty.
- At prime prices the May change makes little difference, because above EUR 1,438,566 Madeira already charged a flat 7.5%.
- Annual tax is light: IMI at 0.3% of the VPT everywhere on the island, no wealth tax, and AIMI only above EUR 600,000 of VPT per person.
- Close family inherit free of stamp duty, but forced heirship applies unless your will chooses the law of your nationality.
- Property buys no residency, and the 33.6% top income-tax rate is for Madeira residents only.
Frequently asked questions
Can foreigners buy property in Madeira?
Yes. Portugal places no restrictions on foreign buyers, whether they come from the EU or not. You need a Portuguese tax number (NIF) before you sign, and the purchase follows Portuguese law, with a promissory contract, a deed before a notary and registration at the land registry.
How much tax does a non-resident pay to buy in Madeira?
About 8.3% of the price: IMT at a flat 7.5% for non-residents since May 2026, plus 0.8% stamp duty, both on the higher of the price and the tax office’s valuation. Legal and registration costs come on top. Part of the IMT is refunded if you become tax-resident within two years or let the home at a moderate rent for 36 months of the first five years.
Did the 2026 non-resident IMT rule make Madeira more expensive?
Not at prime price points. Madeira’s IMT brackets are 25% higher than the mainland’s, and a second home above EUR 1,438,566 already paid a flat 7.5% on the whole price before May 2026. The change bites below that level, where lower bands and a flat 6% band used to apply.
What annual taxes apply to a Madeira home?
IMI, the municipal property tax, at 0.3% of the tax office’s valuation (the VPT) in every Madeira municipality in 2026. AIMI is added only where your Portuguese residential VPT exceeds EUR 600,000 per person, or EUR 1.2M for a couple taxed jointly, at 0.7% to 1.5% on the excess.
Does Portugal have a wealth tax?
No general wealth tax. The closest thing is AIMI, which is charged only on the VPT of Portuguese residential property above EUR 600,000 per person. Your other assets, in Portugal or abroad, are not taxed on their value.
How is a capital gain taxed when a non-resident sells?
Half the gain is taxed at Portugal’s progressive income-tax rates, with your worldwide income declared to set the rate. The flat 28% option ended in 2023. Acquisition costs and qualifying works are deductible, and an inflation adjustment applies after two years of ownership. The UK and the US tax the gain as well, with credit for the Portuguese tax; Germany, Austria and Switzerland exempt it.
Is there inheritance tax on a Madeira property?
Portugal has no inheritance tax as such. A 10% stamp duty applies to Portuguese assets passing on death, but spouses, partners, children, grandchildren and parents are exempt. Forced heirship can still apply, so choose the law of your nationality in your will under the EU Succession Regulation.
Does buying property in Madeira give me residency or a golden visa?
No. Property stopped qualifying for Portugal’s golden visa on 7 October 2023, including funds that invest in real estate. The remaining main route is a EUR 500,000 investment in a qualifying Portuguese fund. Non-EU buyers who want to stay longer than 90 days in 180 usually apply for the D7 visa.
Is income tax lower in Madeira than on the mainland?
For Madeira residents, yes. From 2026 the region cuts every national income-tax band by 30%, so the top rate is 33.6% against 48% on the mainland. It does not help a non-resident who keeps Madeira as a second home, and becoming resident brings Portuguese tax on worldwide income.
Can I let a Madeira property as a holiday rental?
Possibly, but check first. Each municipality now sets its own holiday-let rules, and since June 2026 Funchal has barred new registrations in apartment buildings, so check the position for the address. Non-residents pay 25% on residential rental income in Portugal.
How easy is Madeira to reach?
Easier than it was. Madeira’s airport handled 5.4 million passengers in 2025, a record. United flies a seasonal non-stop service from Newark, and direct flights run from the UK, Germany, Austria and Switzerland. Porto Santo has its own airport and a ferry link from Funchal.
Sources
- Portal das Finanças – IMT Code, article 17, including the 7.5% non-resident rate added in 2026
- Diário da República – Decree-Law 97/2026 (IMT for non-residents)
- Autoridade Tributária da Madeira – IMT tables for 2026, including the autonomous-region brackets
- Diário da República – Stamp Duty Code and General Table (0.8% on purchase, 10% on inheritance)
- Portal das Finanças – IMI Code, article 112 (IMI rates)
- Portal das Finanças – IMI Code, article 135-F (AIMI rates)
- Portal das Finanças – IRS Code, article 72 (25% on non-residents’ residential rent)
- Portal das Finanças – IRS Code, article 43 (gains counted at 50%)
- Portal das Finanças – IRS Code, article 16 (tax residence)
- Diário da República – Civil Code on forced heirship
- EUR-Lex – EU Succession Regulation 650/2012
- Diário da República – Law 56/2023 (end of the property golden visa)
- Diário da República – Regional Legislative Decree 8/2025/M (Madeira Regional Budget 2026)
- Jornal Oficial da Região Autónoma da Madeira – Despacho 19/2026, income-tax tables for 2026 with the 30% regional reduction
- Diário da República – Regulamento 787/2026, Funchal’s holiday-let regulation
- INE – house price statistics at local level, first quarter of 2026 (released 17 July 2026)
- ANA Aeroportos de Portugal – Madeira airport passes 5 million passengers in a year for the first time (2025)
Figures current at October 2026. Portuguese property tax and residency rules changed in 2023 and again in 2026 and should be confirmed with a Portuguese lawyer and tax adviser at the point of purchase.
About the author
Alexander Thornbury is a published author who writes on international property, tax and residency for high-net-worth buyers across Europe. His work focuses on the practical mechanics of cross-border purchase: what a buyer actually pays, owes and signs. More at alexanderthornbury.com.