An Austrian buyer looking at homes from EUR 2M brings an advantage to Madeira that buyers from the UK, the US or Germany do not have: no inheritance tax at home. Austria has levied no inheritance or gift tax since August 2008, and Portugal exempts close family from its own stamp duty on inheritance. Add free movement, the euro and no restrictions on buying, and the Madeira purchase is unusually clean. The planning that remains is about the transfer tax, the treaty, and a will that settles which law governs the house.
Free movement, no visa
No exchange-rate risk
Since 1 August 2008
Portuguese and Austrian law
Last updated: October 2026
By: Alexander Thornbury
What makes Madeira straightforward for Austrians?
The things that usually complicate a foreign purchase are missing. As EU citizens, Austrians have free movement: no visa, no 90-day limit, and the option to register as a resident after three months. Austria and Portugal share the euro, so there is no currency exposure between agreeing the price and paying it. Portugal places no restrictions on foreign buyers, so an Austrian buys on the same terms as a Portuguese citizen, through a tax number, a lawyer, a promissory contract and a deed.
That leaves the Portuguese procedure and the Portuguese taxes, both of which are well defined. Our step-by-step buying guide covers the procedure, and our international buyer’s guide to Madeira sets out the market. The rest of this guide covers the points that are specific to an Austrian buyer.
| For an Austrian buyer | The position |
|---|---|
| Right to stay | Free movement; register after three months to reside |
| Currency | None; both countries use the euro |
| Transfer taxes (non-resident) | 7.5% IMT plus 0.8% stamp duty |
| Annual tax in Portugal | IMI at 0.3% of VPT; AIMI above EUR 600,000 of VPT |
| Inheritance | No Austrian inheritance tax; Portugal exempts close family |
What do you pay in Portugal?
An Austrian resident buying a holiday home is a non-resident in Portugal, so the transfer taxes come to about 8.3% of the price: EUR 166,000 on a EUR 2M home, from a flat 7.5% IMT and 0.8% stamp duty. That is almost double the Grunderwerbsteuer and land-register fee on the same purchase in Austria. Each year after that, IMI runs at 0.3% of the tax office’s valuation, and AIMI applies only above EUR 600,000 of it per person. Our Madeira property tax guide sets out each charge.
How is the tax shared with Austria?
In Portugal only, with one condition at home. Under the 1970 treaty, Portugal taxes the Madeira home’s rent and any gain on its sale as the country where it sits: a flat 25% on residential rent for a non-resident, and half of any gain at its progressive rates. Article 23 then obliges Austria, as your country of residence, to exempt that income. Austria keeps the credit method only for dividends, interest and royalties.
The condition is the rate. Austria may count the exempt Portuguese income when it sets the rate on the rest of your income, so a large rent or gain can lift your Austrian rate even though Austria does not tax it. Ask an Austrian Steuerberater to model that before you let or sell, and keep the Portuguese assessments for the Austrian return.
Why does succession look so clean?
Because neither country taxes a close-family inheritance of the house. Austria abolished inheritance and gift tax with effect from 1 August 2008. Portugal has no inheritance tax as such, and its 10% stamp duty on inherited Portuguese assets exempts spouses, partners, children and parents. So a Madeira home passing from an Austrian parent to their children will usually pay no inheritance tax in either country. That is the main difference from a German buyer, whose estate stays inside German inheritance tax, as our guide for German buyers explains. A lifetime gift of the property to close family carries Portuguese stamp duty of 0.8%.
The law of succession is a separate matter from the tax, and it still needs a decision. Portugal has forced-heirship rules that reserve part of an estate for close family. An Austrian national can choose Austrian law to govern their succession in a will under the EU Succession Regulation; without a choice, the law of your habitual residence at death applies, which matters if you later move to Madeira. Make the choice expressly, with a lawyer who knows both systems.
| Event | Portugal | Austria |
|---|---|---|
| Rent | 25% flat for non-residents | Exempt under article 23; may count towards your Austrian rate |
| Sale | Half the gain at progressive rates | Exempt under article 23; may count towards your Austrian rate |
| Death | 10% stamp duty; close family exempt | No inheritance tax since 2008 |
| Gift to family | 0.8% stamp duty on property | No gift tax since 2008 |
What if you move to Madeira?
Moving makes Portugal tax your worldwide income, but at Madeira’s regional rates, which from 2026 sit 30% below the mainland’s in every band: a top rate of 33.6%, against 48% in Lisbon. Move within two years of buying and you can also reclaim the gap between the 7.5% non-resident IMT and the ordinary rate. The move itself is paperwork. As an EU citizen you register your residence after three months.
The tax side deserves planning before you go. Check with an Austrian adviser what giving up Austrian tax residence means for your investments and pension, and when Portugal starts to treat you as resident: after 183 days in a 12-month period, or earlier if your Madeira home looks like your habitual residence. Don’t plan around the old NHR regime: it closed to newcomers in 2024, and IFICI, which replaced it, is limited to listed research, innovation and specialist work. Our Madeira residency guide sets out the Portuguese side.
Getting there, and where to look
Direct services run between Vienna and Funchal, with Austrian Airlines and Wizz Air among the carriers, taking a little under five hours, and connections via German and Swiss hubs widen the choice. Madeira’s airport handled a record 5.4 million passengers in 2025. Schedules are seasonal, so check the current timetable before planning around a direct flight.
With the direct flights seasonal, think about how the house will work out of season. Funchal works all year, with schools and the deepest market. The sunny south-west, around Ponta do Sol and Calheta, suits long summer stays. Letting is a local question: Funchal no longer accepts new holiday lets in apartment buildings, so check any address before you count on rent. Our guide to Madeira’s prime areas compares them. If you are choosing between islands, our comparison of Madeira, the Algarve and Mallorca sets out the differences.
Key takeaways
- Free movement, the euro and no buying restrictions make Madeira an unusually clean purchase for Austrians.
- Transfer taxes are about 8.3% for a non-resident; annual tax is light, with IMI at 0.3% of VPT.
- Portugal taxes the rent and any gain; Austria exempts both under the 1970 treaty, though they may lift your Austrian rate.
- No inheritance tax in either country for close family: Austria abolished it in 2008, and Portugal exempts spouses, children and parents.
- A will choosing Austrian law is still needed to settle forced heirship.
- Moving brings Madeira’s 33.6% top rate and Portuguese tax on worldwide income; plan the Austrian exit first.
Frequently asked questions
Do Austrians need a visa to live in Madeira?
No. Austrians are EU citizens with free movement and can live in Madeira without a visa, registering their residence after three months if they stay.
What taxes does an Austrian buyer pay to buy in Madeira?
About 8.3% as a non-resident, or EUR 166,000 on a EUR 2M home: a flat 7.5% IMT plus 0.8% stamp duty, charged on the higher of the price and the tax office’s valuation. Moving to Portugal within two years brings part of the IMT back.
What does it cost each year to own a Madeira home?
Two charges at most. IMI is 0.3% of the tax office’s valuation everywhere on the island, and AIMI applies only above EUR 600,000 of residential valuation per person, or EUR 1.2M for a couple taxed jointly. There is no general wealth tax.
Is there a double tax treaty between Austria and Portugal?
Yes, signed in Vienna in 1970. Portugal taxes the rent and any gain from a Portuguese property, and Austria exempts both under article 23, though it may count them when setting your Austrian rate.
Does Austria have an inheritance tax?
No. Austria abolished inheritance and gift tax with effect from 1 August 2008.
Will my children pay inheritance tax on a Madeira home?
Usually not, in either country. Austria has no inheritance tax, and Portugal exempts spouses, partners, children and parents from its 10% stamp duty on inherited Portuguese assets.
Can I give a Madeira property to my children during my lifetime?
Yes. Austria has no gift tax, and Portugal charges 0.8% stamp duty on a gift of property to close family. Take legal advice on how the gift fits your succession plan.
Does Portuguese forced heirship apply to Austrian owners?
It can. An Austrian national can choose Austrian law for their succession in a will under the EU Succession Regulation. Without that choice, the law of your habitual residence at death applies.
How is rent from a Madeira property taxed for an Austrian resident?
Portugal charges a non-resident a flat 25% on residential rent. Austria exempts that income under the 1970 treaty, but may count it when setting the rate on your other Austrian income.
Are there direct flights from Vienna to Madeira?
Yes. Direct services run between Vienna and Funchal, with Austrian Airlines and Wizz Air among the carriers, taking a little under five hours. Schedules are seasonal.
What changes if I move to Madeira from Austria?
You become taxable in Portugal on worldwide income, at Madeira’s regional rates 30% below the mainland, with a top rate of 33.6%. Take Austrian advice on leaving Austrian tax residence before you go.
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)
- 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 43 (gains counted at 50%)
- Portal das Finanças – IRS Code, article 16 (tax residence)
- EUR-Lex – EU Succession Regulation 650/2012
- Jornal Oficial da Região Autónoma da Madeira – Despacho 19/2026, income-tax tables for 2026 with the 30% regional reduction
- ANA Aeroportos de Portugal – Madeira airport passes 5 million passengers in a year for the first time (2025)
- Ministério Público – Austria-Portugal double tax treaty of 1970 (Decree-Law 70/71, article 23)
- Bundesministerium für Finanzen (Austria) – inheritance and gift tax abolished from 1 August 2008
- International Bar Association – Austria international estate planning guide
Figures current at October 2026. Austrian and Portuguese tax rules interact in ways that depend on your circumstances; confirm your position with an Austrian adviser and a Portuguese lawyer before you buy or move.
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.