Madeira’s property taxes are heavier on the way in than many buyers expect and lighter once you own. A non-resident pays about 8.3% of the price in transfer taxes, and that number moved in May 2026. After that, the annual bill is modest: every municipality on the island charges the minimum property-tax rate, and Portugal has no general wealth tax. This guide takes each tax in the order you meet it, from the purchase to the day the property passes on, with worked figures at prime prices.
Transfer taxes, non-resident
IMI in every municipality
AIMI on property only
Portuguese tax law, 2026
Last updated: October 2026
By: Alexander Thornbury
What do you pay when you buy?
Two taxes, both paid before the deed is signed. IMT, the property transfer tax, is charged at a flat 7.5% for non-residents buying a home, from the first euro and with none of the usual exemptions or reductions, though part can be refunded in two cases. Stamp duty adds 0.8%. Both are charged on the higher of the price and the VPT, the tax office’s own valuation. That makes about 8.3% in transfer taxes, before the lawyer, the notary and the land registry. The flat non-resident rate came in with Decree-Law 97/2026 on 25 May 2026. The test is tax residence, not nationality, so a foreign national who is already tax-resident in Portugal pays the ordinary rates.
Part of that IMT can come back. If you become tax-resident in Portugal within two years of the purchase, or let the property as a home at a moderate rent within six months and keep it let for at least 36 months of the first five years, the tax office refunds the difference between the 7.5% and the ordinary rate. You apply within six months of becoming resident or signing the lease. One more rule is worth knowing before you choose a buying structure: a buyer domiciled in a low-tax jurisdiction on Portugal’s official list pays IMT at 10%. Our step-by-step buying guide shows where each payment falls in the timetable.
| Illustrative purchase price in Madeira | Non-resident IMT (7.5%) | Resident, second home | Stamp duty (0.8%) |
|---|---|---|---|
| EUR 1,000,000 | EUR 75,000 | EUR 60,000 (6% flat) | EUR 8,000 |
| EUR 1,500,000 | EUR 112,500 | EUR 112,500 (7.5% flat) | EUR 12,000 |
| EUR 2,000,000 | EUR 150,000 | EUR 150,000 (7.5% flat) | EUR 16,000 |
| EUR 2,500,000 | EUR 187,500 | EUR 187,500 (7.5% flat) | EUR 20,000 |
Illustrative arithmetic on the 2026 rates, assuming the price exceeds the VPT. Legal, notary and registration costs are extra.
How does the Madeira IMT table work?
Madeira and the Azores use the national IMT rates, but every bracket limit is 25% higher than on the mainland. For a second home bought by a Portuguese tax resident in 2026, that means progressive bands up to EUR 792,414, then a flat 6% on the whole price up to EUR 1,438,566, then a flat 7.5% on the whole price above it. On the mainland the same flat 7.5% starts at EUR 1,150,853. The brackets rose 2% for 2026 and are reset most years in the State Budget.
The practical reading for a prime buyer is simple. Above EUR 1,438,566, Madeira already charged a flat 7.5% on second homes before the non-resident rule arrived, so at those prices residence makes no difference to IMT. Below it, as the table shows, a non-resident now pays more than a resident buying the same house. That is the band where the refund routes are worth planning for, particularly for anyone who intends to move to the island within two years.
What do you pay each year?
IMI, the municipal property tax, is charged on the VPT, not the price. Rates run from 0.3% to 0.45% across Portugal, set by each council, and all 11 of Madeira’s municipalities charge the minimum 0.3% in 2026. The owner registered on 1 January pays for that year. Because the VPT is an administrative value that usually sits below market price, the IMI on a prime Madeira home is often modest. Ask for the caderneta predial, the property’s tax record, and you can read the VPT before you sign.
Portugal has no general wealth tax. The one wealth-type charge is AIMI, an additional IMI on residential property. It applies only where the combined VPT of your Portuguese residential property exceeds EUR 600,000 per person, or EUR 1.2M for a married couple or partners who opt for joint taxation. The excess is taxed at 0.7% up to EUR 1M, 1% from EUR 1M to EUR 2M, and 1.5% above that. It is assessed in June and paid in September. A single owner with a VPT of EUR 900,000, for example, would pay AIMI of EUR 2,100 a year on the EUR 300,000 excess (illustrative).
| Tax | Who pays | Rate in Madeira, 2026 |
|---|---|---|
| IMI | Every owner, yearly | 0.3% of VPT, all 11 municipalities |
| AIMI | Owners above EUR 600,000 of residential VPT | 0.7% to 1.5% on the excess |
| Rental income | Non-resident landlords | 25% flat on residential rent |
| Capital gains | Non-resident sellers | 50% of the gain at progressive rates |
| Stamp duty on death | Heirs outside close family | 10%; spouse, partners, children and parents exempt |
How is rental income taxed?
A non-resident pays a flat 25% on rent from a residential letting in Portugal, and 28% on non-residential lettings. A 10% rate now exists for homes let long-term at moderate rents, but that is a policy tool for affordable housing, not a model for a prime villa. Your home country may tax the same rent too, with credit for the Portuguese tax, as the UK and the US do; Germany, Austria and Switzerland exempt it instead.
Holiday letting is a separate question, and a local one. Since November 2024 each municipality has set its own rules for alojamento local, the licensed short-let regime. Funchal’s regulation of June 2026 bars new registrations in apartment buildings, with exceptions for buildings rehabilitated or built for tourism, so check the position for the specific address before you price any rental income into the purchase. A non-resident running a holiday let also needs a VAT representative in Portugal.
What is due when you sell?
Since 2023, a non-resident is taxed on half of the gain, at Portugal’s progressive income-tax rates, with worldwide income declared to set the rate but not itself taxed. The old flat 28% on the whole gain has gone. Acquisition costs and qualifying improvement works reduce the gain, and an inflation adjustment applies once you have owned the property for more than 24 months. For a high earner, the result is around a quarter of the gain at the top of the scale, before any solidarity surcharge. Model it with the actual figures rather than a rule of thumb.
Your home country will usually have a say as well. UK and US residents, for instance, are taxed on worldwide gains with credit for the Portuguese tax, while Germany and Austria exempt the gain under their treaties and Switzerland leaves foreign property out of its tax base. Our corridor guides set out each position, for buyers from the UK, the US and Germany among others.
What happens on death or a gift?
Portugal has no inheritance tax as such. Portuguese assets passing on death carry a 10% stamp duty, but spouses, partners, children, grandchildren, parents and grandparents are exempt, so most family successions pay nothing in Portugal. A lifetime gift of Portuguese property to the same close relatives still carries 0.8% stamp duty. Your home country’s inheritance tax, if it has one, applies on top and is a separate calculation.
The real succession issue is legal, not fiscal. Portugal’s forced-heirship rules reserve part of the estate for close family: two-thirds where a spouse and children survive, and between a half and two-thirds for children alone. A foreign national can choose the law of their nationality in a will under the EU Succession Regulation, which works even for nationals of countries outside the EU. Do it expressly. Without a choice, the default rules can bring Portuguese forced heirship to bear on the Madeira property.
Does Madeira’s lower income tax help you?
Only if you live there. From 2026 Madeira cuts every national income-tax band by 30%, which puts the top rate at 33.6% against 48% on the mainland. That applies to Madeira tax residents. A non-resident with a second home pays the flat non-resident rates on Portuguese income and gains, wherever the property sits. And becoming resident has a price: Portugal then taxes your worldwide income.
The regimes that once made Portugal a magnet for wealthy movers have narrowed too. The NHR closed to newcomers in 2024. Its successor, IFICI, offers a 20% rate on qualifying employment and self-employment income for 10 years, but only for people working in listed research, innovation and specialist activities, and not for those who were Portuguese-resident in the previous five years. Our Madeira residency guide covers the routes, and our international buyer’s guide to Madeira puts the tax in the wider context. If you are comparing systems, our Madeira, Algarve and Mallorca comparison sets the Portuguese and Spanish rules side by side.
Key takeaways
- Non-residents pay about 8.3% to buy: 7.5% IMT from the first euro since 25 May 2026, plus 0.8% stamp duty.
- Madeira’s IMT brackets are 25% higher than the mainland’s, and above EUR 1,438,566 a second home already paid a flat 7.5%.
- Part of the IMT is refundable if you become resident within two years or let at a moderate rent for 36 of the first 60 months.
- Annual tax is light: IMI at 0.3% of VPT island-wide; AIMI only above EUR 600,000 of residential VPT per person.
- Non-residents are taxed on half of any gain at progressive rates, and 25% on residential rent.
- Close family inherit free of stamp duty, but a will choosing your national law is the guard against forced heirship.
Frequently asked questions
What is IMT in Madeira?
IMT is Portugal’s municipal tax on property transfers, paid by the buyer before the deed. Madeira uses the national rates with bracket limits 25% higher than the mainland. Non-residents buying a home pay a flat 7.5% from the first euro since 25 May 2026.
Who counts as a non-resident for the 7.5% IMT rate?
Anyone who is not a Portuguese tax resident under the IRS Code. The test is tax residence, not nationality, so a foreign national already resident in Portugal pays the ordinary rates. Former Portuguese residents may fall outside the rule; check your position with a lawyer.
Can I get any of the 7.5% IMT back?
Yes, in two cases. If you become tax-resident in Portugal within two years of buying, or let the home at a moderate rent within six months and keep it let for at least 36 months in the first five years, the tax office refunds the difference from the ordinary rate. Apply within six months.
How much stamp duty do I pay on a Madeira purchase?
0.8% of the higher of the price and the VPT, on top of IMT. A gift of property to a close relative also carries 0.8%. Stamp duty on inheritance is 10%, but spouses, partners, children and parents are exempt.
What is the IMI rate in Madeira?
0.3% of the VPT, the tax office’s valuation, in every one of Madeira’s 11 municipalities in 2026. That is the legal minimum; mainland councils can charge up to 0.45%. The owner registered on 1 January pays for the year.
Will I pay AIMI on a Madeira villa?
Only if the combined VPT of your Portuguese residential property exceeds EUR 600,000, or EUR 1.2M for a couple taxed jointly. The excess is taxed at 0.7% up to EUR 1M, 1% from EUR 1M to EUR 2M and 1.5% above. Because VPT is usually below the price, many owners pay little or none.
Is there a wealth tax in Portugal?
No general wealth tax. AIMI, charged on the VPT of residential property, is the only wealth-type tax, and it reaches Portuguese property only. Shares, savings and property abroad are not taxed on their value.
How is rental income from a Madeira property taxed?
A non-resident pays a flat 25% on residential rental income and 28% on non-residential. Holiday lets need a licence under municipal rules, and Funchal no longer accepts new ones in apartment buildings, so check the position for the address.
What capital gains tax does a non-resident pay in Madeira?
Half of the gain is taxed at Portugal’s progressive rates, with worldwide income declared to set the rate. Acquisition costs and improvement works are deductible, and an inflation adjustment applies after 24 months. The old flat 28% ended in 2023.
Is there inheritance tax on property in Madeira?
Not as such. A 10% stamp duty applies to Portuguese assets passing on death, with spouses, partners, descendants and ascendants exempt. Forced heirship can still apply, so make a will that chooses the law of your nationality.
Do Madeira’s lower income-tax rates apply to second-home owners?
No. The 30% regional reduction, which takes the top rate to 33.6%, applies to Madeira tax residents only. A non-resident owner pays the flat non-resident rates, and becoming resident brings Portuguese tax on worldwide income.
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)
- 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 – Decree-Law 76/2024 (holiday lets)
- 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)
Figures current at October 2026. IMT brackets are reset most years in the State Budget, and Portuguese property tax changed in 2023 and 2026. Confirm your position with a Portuguese tax adviser before you buy or sell.
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.