Published on and written by Cyril Jarnias
Moving to Madeira, investing in a vacation home overlooking the Atlantic, or preparing for retirement in the sun: for many foreigners, the island has become a top target. Mild climate, political stability, a high‑performing healthcare system, strong safety, a well‑established expat community, and a still competitive real estate market compared to other European destinations: everything combines to attract retirees, remote workers, investors, and families.
Buying real estate in Madeira, beyond its appeal, is subject to strict rules. Careful preparation is crucial, including understanding Portuguese legal specifics, the tax system unique to this autonomous region, financing options, and anticipating hidden costs.
This article provides a complete breakdown—yet accessible—of the property purchase process for foreigners in Madeira, based on current data and rules, without unnecessary jargon.
A Market Open to Foreigners, with No Nationality Restrictions
The starting point is simple: Portuguese law makes no distinction between a Portuguese buyer and a foreign buyer when acquiring real estate. The Portuguese Constitution and several international treaties enshrine a principle of non‑discrimination regarding property ownership. Madeira, even as an autonomous region, applies these national rules.
In short, regardless of your passport or residency status, you can buy a house, apartment, or land in Madeira, even if you are a complete non‑resident. The only limitations relate to:
Enhanced controls may apply to capital transfers from countries under international sanctions. Additionally, certain protected areas (natural spaces, agricultural zones, maritime domain) require specific administrative authorizations, applied equally to Portuguese and foreign nationals.
It is important to understand, however, that being a property owner in Madeira does not automatically grant a long‑term residence right. To stay beyond the 90‑day tourist visit (or 183 days for tax purposes), you need a separate residence basis: D7 visa (passive income), D8 visa (digital nomad), other standard residence permits, or former programs like the Golden Visa through other types of investments. Property purchase and residence permit are therefore two separate matters.
Understanding the Madeira Real Estate Market Before Buying
Madeira is described as an attractive but strained market: high demand from expats, investors, and tourists, limited supply, and steady price increases, especially in the most sought‑after areas.
Available data shows:
– A market in high demand, with significant appreciation potential.
– Apartments from around €200,000 and houses from around €250,000, with averages significantly higher in premium areas.
– An average asking price of about €3,760/m² for houses island‑wide.
– Rents and prices per square meter are growing strongly, driven by international appeal and the rise of remote work.
Funchal concentrates most of the island’s economic and real estate activity. Its neighborhoods have distinct profiles: Sé (city center), Zona Velha (historic old town), São Martinho / Lido (tourist area), Monte (residential hills with panoramic views), São Gonçalo, and Santa Maria Maior. This diversity illustrates the range of opportunities, from the dense urban core to elevated residential environments.
Prices for a T2 (two‑bedroom) illustrate these differences fairly well:
| Funchal Area | Property Type | Indicative Starting Price |
|---|---|---|
| São Martinho / Lido | T2 Apartment | ≈ €300,000 |
| São Martinho / Lido | T2 House | ≈ €400,000 |
| São Gonçalo / Santa Maria Maior | T2 Apartment | ≈ €280,000 |
| São Gonçalo / Santa Maria Maior | T2 House | ≈ €400,000 |
The west of the island (Ponta do Sol, Calheta, Ribeira Brava), the Câmara de Lobos area, or Caniço offer often more affordable or more authentic alternatives, with good rental potential.
In this context, rushing is rarely a good idea. The challenge is to understand not only the purchase price, but also the tax system, holding costs, resale prospects, and the reality of the cost of living.
Step 1: Get a NIF – The Key to Everything
The golden ticket for any financial operation in Portugal is the NIF, Número de Identificação Fiscal, i.e., your tax identification number. It is essential for:
– Buying real estate.
– Opening a Portuguese bank account.
– Signing up for electricity, water, and internet contracts.
– Taking out a mortgage.
– Declaring and paying property‑related taxes (IMT, IMI, etc.).
Obtaining one is in principle simple:
To get a Portuguese tax identification number (NIF), several options are available. You can go in person to a Finanças (tax) office with your passport and proof of address. It is also common to use an intermediary, such as a lawyer or a tax representative, or to use specialized online services – the latter two options are very popular with non‑residents. For nationals from outside the European Union, the law often requires the mandatory appointment of a tax representative residing in Portugal to obtain a NIF.
The NIF itself does not make you a Portuguese tax resident. It is simply an identifier, used for all procedures related to your property.
Step 2: Open a Portuguese Bank Account
Even if you pay for your property cash via international transfers, a local bank account is still practically essential:
– To pay IMT (transfer tax), stamp duty, and annual IMI.
– To pay utility bills (electricity, water, internet).
– To set up a direct debit if you have a mortgage.
– To receive rental income if you put the property up for rent.
Several banking institutions in Portugal are known for being open and offering services tailored to non‑resident clients.
Major Portuguese bank offering services to non‑residents with often English‑speaking contacts.
Important banking institution that willingly works with a non‑resident clientele.
Part of the major banks known for welcoming international clients.
Offers banking services adapted for non‑residents in Portugal.
Portuguese public bank open to non‑resident clients.
Bankinter, Banco CTT, and UCI (for credit) are also alternatives for non‑residents.
Opening an account typically requires: a valid ID, proof of address, and a minimum initial deposit.
– Your NIF.
– Passport or ID card.
– Proof of address in your home country (utility bill, etc.).
– Proof of income (pay slips, tax returns).
Some banks allow remote account opening (process takes 3 to 4 weeks), others require physical presence or a video verification.
Step 3: Get the Right Professionals on Your Side
Buying in another country, in a different language, requires relying on a few key players.
First, a lawyer specializing in real estate, independent of the agency and the seller, is highly recommended. Their role is central:
– Obtain and analyze the legal documentation of the property.
– Check the chain of title and the absence of liens, mortgages, or disputes.
– Confirm the existence of a habitation permit and urban planning compliance.
– Draft or review the promissory contract (CPCV) and the final deed (Escritura).
– Represent you by power of attorney if you cannot be present.
Lawyer fees vary, typically between €1,000 and €3,000, or around 1% of the price for complex cases. Costs dedicated to due diligence (€600 to €1,000) are often billed separately.
Typical commission paid by the seller to the real estate agent in Madeira, expressed as a percentage of the sale price.
– Duly licensed agencies (AMI number issued by IMPIC).
– Professionals accustomed to foreign and English‑speaking clients.
– Transparent contacts regarding prices, defects, and market constraints.
A notary also intervenes at the signing of the authentic deed. They are a neutral public officer, whose job is to verify identities, the regularity of the deed, and the payment of taxes. Notary and registration fees typically range between €500 and €1,500.
Step 4: Set a Realistic Budget Beyond the Listed Price
One classic pitfall is to think only in terms of the listed price without factoring in taxes and ancillary costs. But in Madeira, as in all of Portugal, the buyer must plan for a significant “extra cost”.
The main additional expense lines are:
– IMT, Imposto Municipal sobre as Transmissões Onerosas de Imóveis, the transfer tax, calculated on a progressive basis.
– Stamp duty (Imposto do Selo), a flat 0.8% of the price.
– Notary fees and registration costs at the land registry.
– Lawyer fees.
– Possible translation and apostille costs for foreign documents.
– The cost of a mortgage, if financing (possible 0.6% tax on the loan amount, interest, arrangement fees).
In general, it is recommended to budget between 6% and 11% of the sale price to cover all taxes and fees, with the percentage closer to 10‑11% for more expensive properties.
A concrete example from a real case illustrates this logic: for a house bought for about €302,500, the ancillary costs broke down as follows:
| Cost Item | Approximate Amount |
|---|---|
| IMT (transfer tax) | €7,191 |
| Stamp duty (0.8%) | €2,120 |
| Land registry registration | €250 |
| Notarial deed | €325 |
| Lawyer fees | €2,650 |
| Total fees & taxes | ≈ €12,500 |
The IMT rate was reduced because the property was declared as a primary residence, which has a significant impact on taxation.
Step 5: Deciphering Acquisition Taxes (IMT and Stamp Duty)
IMT is the major one‑time tax applied when buying. It is paid by the buyer, based on the higher of the sale price and the tax value of the property (valor patrimonial tributário). In Madeira, as on the mainland, it is calculated in brackets and depends on:
– The type of property (residential, land, commercial).
– Whether it is a primary or secondary residence.
– Its location (Madeira has rates close to but sometimes specific to the region).
For a primary residence in Madeira, a recent indicative bracket is as follows:
| Value Bracket (Primary Residence) | Marginal Rate |
|---|---|
| Up to €115,509 | 0% |
| €115,510 – €158,004 | 2% |
| €158,005 – €215,435 | 5% |
| €215,436 – €359,016 | 7% |
| €359,017 – €688,544 | 8% |
| Above €688,545 | 6% (special rate) |
The exact calculation is not simply applying the rate of the top bracket: there is a formula with a deduction amount specific to each bracket. Your lawyer or accountant can provide the details for your case.
For secondary residences and investment properties, the tax brackets are more penalizing. Land and non‑residential properties are generally taxed at a flat rate of 6.5%. Buyers residing in so‑called ‘blacklist’ jurisdictions may be subject to an aggravated rate.
Stamp duty, much simpler, corresponds to 0.8% of the price or tax value, and must be paid before the deed is signed.
Step 6: Financing the Purchase – Mortgages for Non‑Residents
Contrary to what one might think, Portuguese banks willingly lend to foreigners, including completely non‑resident ones. They are used to dealing with buyers from Europe, the UK, the US, or elsewhere.
The main lines of financing are as follows:
For a non‑resident, banks typically finance 60% to 75% of the purchase price or the appraisal value (whichever is lower), requiring a down payment of 25% to 40% plus purchase costs. The maximum loan term is around 30 years. Interest rates, slightly higher than for residents (around 3.5% to 4.2%), are often variable, indexed to Euribor plus a bank margin. Fixed or mixed rate options are also available.
Banks also require a healthy financial profile:
To obtain credit, your total monthly payments (all loans together) should generally not exceed 30% to 35% of your net monthly income, with an absolute maximum of 50%. Accepted income may come from abroad (salaries, pensions, rents, etc.), but must be supported by proof (pay slips, tax returns, financial statements). The application must also include your bank statements for the last 3 to 6 months, a bank reference letter, and sometimes a credit report from your home country.
The loan application process takes between 8 and 12 weeks for a non‑resident, with a possible pre‑approval in 1 to 2 weeks. Hence the advantage of starting the financing steps even before signing a promissory contract.
Step 7: Searching, Viewing, and Making an Offer
Once the budget is clear (maximum price + 6‑10% fees + possible borrowing capacity), the actual search begins. Many buyers start online, but in Madeira, as elsewhere, not all properties are visible on portals.
This is where a competent local agent provides real value:
– They know the micro‑markets (price differences between central Funchal, São Martinho, Monte, Calheta, etc.).
– They know if a building suffers from nuisances (road, bar, landslides) or if a neighborhood is truly quiet.
– They can organize a “marathon viewing” over a few days to optimize your stay on the island.
Negotiation is part of the game, especially in segments where supply exceeds demand. But in Madeira, for highly sought‑after properties (sea‑view houses, central Funchal, well‑calibrated investment products), margins can be thin and some properties sell at or above asking price.
Madeira real estate market expert
The offer is usually made through a written document prepared by the agency, specifying:
– The proposed price.
– The deadline for signing the promissory contract (CPCV) and the final deed.
– Any special conditions (obtaining a loan, renovations, furniture included, etc.).
Once accepted, you enter the contractual phase.
Step 8: The Promissory Contract (CPCV) and Deposit
In practice, nearly all transactions go through a Contrato de Promessa de Compra e Venda (CPCV). This promissory contract, signed by buyer and seller, is legally very binding.
It specifies in particular:
– The identity of the parties.
– The description of the property (cadastral reference, registration number).
– The total sale price.
– Payment terms.
– The deposit amount (usually 10% to 30% of the price).
– The deadline for signing the final deed.
– Penalties if either party withdraws.
The deposit is paid upon signing the CPCV, usually a few days after the agreement. Portuguese practice strongly protects the seller: if the buyer backs out without a valid reason, they lose the deposit. If the seller backs out, they usually must refund double the deposit.
Hence the importance, at the time of the CPCV:
– To have already obtained a preliminary agreement from your bank if you are financing.
– To have had the main checks done by your lawyer.
– To include a clear suspensive clause in case of loan refusal (otherwise you take a considerable risk).
At this stage, the property is effectively taken off the market.
Step 9: Legal and Technical Due Diligence
Between the CPCV and the final deed, the lawyer conducts a series of systematic checks. The goal is to confirm that:
Before any commitment, it is crucial to confirm that the seller is the undisputed legal owner, that the property is free of any mortgage, seizure, tax debt, or condominium debt (or that their settlement is provided for in the deed), and that its characteristics match the official documents. Also ensure the existence of a use/habitation license (except for certain older properties), the availability of an energy certificate, that the condominium has no significant debt and that the seller is up to date with contributions, and finally that all municipal taxes are paid.
At the same time, the bank appoints an expert to establish a market value for the property, which determines the loan amount. This appraisal, typically costing between €300 and €600, is paid by the buyer.
If major renovations are planned, it may be wise to hire an architect or engineer for a structural survey, especially on older houses or sloping land, which are common on Madeira.
Step 10: The Deed of Sale (Escritura) and Registration
Once due diligence is complete, financing is secured, and taxes are ready to be paid, the date for the final deed can be set – the Escritura Pública. It is signed:
– At a notary’s office.
– In some cases, at a registration office (Conservatória) or via the “Casa Pronta” service, a one‑stop shop modernized by the SIMPLEX reform.
Before the signing, the buyer must:
– Pay the IMT and stamp duty, with proof of payment to be presented to the notary.
– Ensure the bank has transferred the funds (or that their own transfer has arrived in the notary’s or seller’s account).
During the deed, the notary:
– Verifies identities, NIFs, and legal capacity of the parties.
– Reads the deed (in Portuguese) which recaps the main elements of the sale.
– Has all parties or their representatives (by power of attorney) sign.
Once the Escritura is signed, the property transfer is effective. It remains to:
– Register the change of ownership in the Land Registry (Conservatória do Registo Predial).
– Update the registration with the tax authority for IMI calculation.
– Transfer the electricity, water, and internet contracts to the new owner’s name.
The time to get everything up to date is generally around two weeks.
Taxes After Purchase: IMI, AIMI, and Resale
Beyond acquisition costs, owning a property in Madeira involves recurring taxes.
IMI, Imposto Municipal sobre Imóveis, is an annual tax calculated on the property’s tax value, the VPT. In Madeira, rates for residential urban properties generally range between 0.3% and 0.45%. The municipality sets the exact rate each year.
Concretely, for an apartment with a tax value of €200,000, the annual IMI will typically be between €600 and €900. Payment can be made in one, two, or three installments depending on the amount:
– One installment in May for amounts under €100.
– Two installments (May and November) between €100 and €500.
– Three installments (May, August, and November) above €500.
The Additional Municipal Property Tax (AIMI) is an extra tax that applies to owners of significant residential real estate assets. For individuals, it only taxes the portion exceeding €600,000 per person (€1.2 million for a couple). Rates range from 0.7% to 1% depending on total value. Note that a much stricter regime, with a rate of 7.5%, applies to companies established in so‑called ‘blacklist’ jurisdictions.
Upon resale, the issue of capital gains arises. The mechanism is as follows:
Gross capital gains are calculated by subtracting the adjusted acquisition price and deductible expenses (IMT, stamp duty, notary fees, commissions, renovations with invoices, etc.) from the sale price. Since 2023, only 50% of the net capital gain is included in taxable income, subject to progressive IRS rates. Note: Madeira applies slightly lower tax brackets than mainland Portugal.
For non‑residents, the law has been aligned following decisions by the Constitutional Court and the Court of Justice of the EU that deemed the previous regime (28% tax on 100% of the gain) discriminatory. In practice, the tax authority calculates an effective rate considering your worldwide income, then applies it to half of the Portuguese capital gain.
Tax residents may, in some cases, be exempt or benefit from a deferral if they reinvest the proceeds from the sale of their primary residence into a new primary residence within a specified time frame (24 months before, 36 months after the sale), whether in Portugal or another EU/EEA country. Specific rules also exist for those over 65 who reinvest in a retirement product.
Properties acquired before January 1, 1989 are exempt from capital gains tax.
Rental, Rental Income, and Taxation
Many foreigners buy in Madeira with the idea of renting out their property, either long‑term or short‑term. The island benefits from a significant tourist flow, which can translate into gross yields of 5% to 10% of the price in the tightest areas.
From a tax perspective:
Non‑residents are taxed at a flat rate of 28% on rental income, after deducting allowable expenses (management fees, maintenance, insurance). Tax residents can choose either this same flat rate of 28% or include rental income in their overall income, subject to progressive tax rates.
Rules are more complex for properties registered as Alojamento Local (tourist rental like Airbnb) and the resale of such properties: part of the capital gain may be treated as business income (Category B) and not benefit from the 50% exemption. A cessation of activity three years before the sale is sometimes necessary to return to the standard regime.
Again, personalized tax advice is essential if the goal is clearly rental investment.
Cost of Living, Yield, and Daily Reality
Buying in Madeira is not just comparing prices per square meter. It is also incorporating the overall cost of living and the level of rents if seeking profitability.
Available data indicates: current market trends are favorable for continued growth.
The cost of living in Portugal is on average 37% lower than in the United States.
For an investor, this means that gross yields are attractive but access to a well‑located property is becoming expensive, and upward price pressure could continue, with all the risks associated with tight markets: scarcity of supply, competition among buyers, and possible saturation of certain tourist segments.
Buying Remotely: The Power of Attorney as a Key Tool
Many foreign buyers cannot travel to Madeira multiple times. The good news is that the entire process can, in theory, be done remotely, thanks to a Procuração (power of attorney) granted to your lawyer or representative.
This power of attorney must:
To be valid, a power of attorney for a real estate transaction in Portugal must: be drafted in precise terms listing the powers granted (signing the CPCV, representing before the tax authorities, signing the deed, etc.); be signed before a notary in your home country; be legalized with a Hague apostille; if necessary, be accompanied by a certified translation into Portuguese; and finally, be registered in Portugal to be used.
Once this mandate is in place, your lawyer can sign all documents on your behalf, pay taxes from your local account, and finalize the purchase. You receive scans of the documents and the originals later.
It is this possibility that allows investors to acquire a property in Madeira while residing full‑time in another country, sometimes only traveling once to choose the property, or even relying on virtual tours.
Residence, Golden Visa, and Other Statuses: Where Are We Now?
For a long time, one of the major drivers of foreign investment in Portugal was the residence‑by‑investment program, better known as the Golden Visa. Direct real estate investment was one of the most popular routes, including in Madeira, which benefited from more flexible conditions than Lisbon or Porto for certain periods.
Since October 2023, this door is closed: buying real estate, even in Madeira, no longer qualifies for a Golden Visa. The program still exists, but now focuses on other routes:
– Eligible investment funds (minimum €500,000).
– Business creation or capitalization and job creation.
– Scientific research funding.
– Support for culture and heritage, from €250,000.
For a foreigner wishing to acquire property in Madeira and obtain a right of residence, there are alternatives to the usual residence program. For example, investment in public interest projects or business creation can open paths to a residence permit, in addition to or outside of a classic real estate purchase.
– The D7 visa (passive income), suitable for retirees or people with stable income from abroad.
– The D8 visa (digital nomad), for remote workers with a certain income level.
– Standard work visas, student statuses, etc.
But in all cases, real estate purchase is an element that can strengthen an application (proof of ties, etc.), not a sufficient reason in itself.
In Summary: A Clear Procedure, but a Demanding Environment
Buying a property in Madeira as a foreigner is, legally speaking, relatively simple: no quotas, no nationality restrictions, a protective and modernized framework (SIMPLEX reform, “Casa Pronta” service), and banks used to non‑residents. The main steps are well signposted:
1. Obtain a NIF. 2. Open a bank account. 3. Get a lawyer and, ideally, a reliable agent. 4. Set a budget including taxes and fees (6 to 11% on top of the price). 5. Find the property, negotiate, and sign a CPCV with a deposit. 6. Let the lawyer handle legal due diligence and the bank the appraisal. 7. Sign the deed at the notary, pay IMT, stamp duty, and register the property. 8. Then manage IMI, possibly AIMI, and the taxation of rents or capital gains upon resale.
The complexity comes less from the procedure itself than from the combination of factors:
– A tight market, with rising prices and rents.
– A tax system that varies according to the type of property, use (primary residence or not), your tax residency status, and potential use of tourist rental or a corporate structure.
– Banking procedures that can be lengthy for non‑residents.
– The need to secure the transaction remotely, with foreign documents to be translated, certified, and apostilled.
With serious preparation, competent professional guidance, and a clear understanding of the numbers, buying in Madeira can nevertheless prove to be a solid operation: whether to live there, spend several months a year, or as a pillar of a long‑term European investment strategy.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
