Real Estate Laws and Regulations to Know in Madeira

Published on April 25, 2026 and written by Cyril Jarnias

Buying, renting, or building a property in Madeira is nothing like a real estate “Wild West.” The legal framework is dense, taxes are numerous, and urban planning rules are particularly strict on a mountainous island where every square meter counts. For an investor, a future resident, or an already established owner, understanding this framework is the key to avoiding unpleasant surprises—tax, planning, or legal.

1. Buying a Property in Madeira: Rights, Legal Framework, and Security

In Madeira, an autonomous region of Portugal, the law applicable to real estate is that of Portugal, supplemented by regional decrees on land management and urban planning. Regarding ownership, the basic principle is simple: no discriminatory treatment between Portuguese and foreigners.

No Restrictions for Foreign Buyers

The Portuguese Constitution and several international treaties enshrine the principle of non‑discrimination: a non‑resident, even a non‑EU one, has the same rights as a Portuguese citizen to buy, own, and resell a property, including in Madeira. There are:

– no quotas,

– no prior residency requirement,

– no limitation on the type of property.

The only practical exceptions: buyers from countries subject to international sanctions or banking restrictions, for whom capital transfers may be subject to enhanced scrutiny. Likewise, certain plots in protected natural, agricultural, or maritime areas require additional administrative authorizations, but these constraints apply to everyone, regardless of nationality.

The result is an open market, legally secure, but governed by a web of taxes and formalities that must be anticipated.

Key Players and Documents in a Transaction

The purchase process follows a fairly standard pattern, with a few Portuguese specificities.

The essential parties are:

– the notary (notário), who verifies the authenticity of deeds, the capacity of the parties, collects taxes on behalf of the State, prepares and formalizes the Escritura Pública (final deed);

– the land registry (Conservatória do Registo Predial), where the transfer of ownership is recorded;

– the tax authority (Finanças), for the collection of IMT, IMI, AIMI, and capital gains tax;

– the buyer’s lawyer, highly recommended, who performs due diligence (titles, encumbrances, planning compliance).

On the documentation side, several items are almost always required:

– Caderneta Predial: property tax card (use, area, tax value VPT);

– Certidão de Registo Predial: certificate attesting ownership, mortgages, easements;

– Licença de Utilização / Habitation: use license confirming the building’s compliance with its intended purpose (residential, commercial, etc.);

– Certificado Energético: energy certificate mandatory for any sale or rental;

– plans, and possibly Ficha Técnica de Habitação for constructions after 2004.

Without registration in the land registry, ownership is not enforceable against third parties: a vital point often underestimated by foreigners.

Typical Steps for a Purchase in Madeira

In practice, the acquisition generally follows these steps:

– 2. Promise of Sale (CPCV – Contrato de Promessa de Compra e Venda) Once the offer is accepted, a preliminary contract sets the price, deadlines, conditions precedent, and deposit (sinal) of 10 to 30%.

– If the seller withdraws without a valid reason, they must return double the deposit.

– If the buyer withdraws without a contractual reason, they forfeit the deposit.

3. Payment of taxes on the eve or day of the deed IMT (transfer tax) and Stamp Duty must be paid before or at the final deed.

4. Escritura Pública (final deed) Signed before a notary or via the simplified service “Casa Pronta”, it legally transfers ownership.

5. Registration and tax update The deed is recorded in the land registry, and the property is updated with Finanças, which triggers the annual IMI.

The entire process typically takes 6 to 12 weeks when files are complete.

2. Real Estate Tax Framework in Madeira

Portuguese real estate taxation applies fully to Madeira, with regional specificities on certain income tax rates. Several taxes apply at purchase, during ownership, and upon resale.

2.1. IMT: Property Transfer Tax

IMT (Imposto Municipal sobre Transmissões Onerosas de Imóveis) is levied on every purchase. It is a one-time tax, paid by the buyer, calculated on the higher of:

– the purchase price stated in the deed,

– the tax property value (VPT).

Rates are:

– progressive for housing (primary or secondary residence);

– flat for other categories (rural, commercial, special acquisitions).

In Madeira, the same national structure applies, but with some relief (and an automatic 30% reduction on IMI, see below).

Simplified table of main IMT scenarios in Madeira:

Property type / use	IMT rate (range)	Key remarks
Primary residence (permanent housing)	0% to 7.5% (progressive)	Exemption below a certain threshold (e.g., ~€97,000)
Secondary residence / vacation home	1% to 7.5% (progressive)	Similar brackets but no base exemption
Rural / agricultural property	5% (flat rate)	Calculated on price or VPT, whichever is higher
Commercial property / building land (non‑residential use)	6.5% (flat rate)	Includes many professional investments
Acquisition by a “tax haven” entity	10%	Penalty rate
Luxury housing > €1M	7.5% (flat rate)	“Luxury” classification

Certain situations allow for IMT exemption: acquisitions by real estate companies for resale, investment funds, mergers, urban rehabilitation, or investments deemed “relevant” by the authorities (subject to conditions).

Practical Example

For an apartment at €350,000, used as a secondary residence or investment, available simulations indicate IMT of approximately €20,000 to €24,000. The difference depends on the exact brackets, deductions, and updated scales.

2.2. Stamp Duty (Imposto do Selo)

Stamp duty is a flat-rate tax that adds to IMT:

– 0.8% of the purchase price (or VPT if higher) for the property transfer;

– 0.6% of the loan amount for any mortgage credit;

– 10% for certain gratuitous transfers (gifts, inheritances) outside the direct line, plus an additional 0.8% on the VPT of the real estate.

Example: for a property worth €350,000, the stamp duty on transfer is €2,800 (350,000 × 0.8%), excluding any mortgage.

2.3. IMI: Annual Property Tax

IMI (Imposto Municipal sobre Imóveis) is the equivalent of property tax, due annually by the owner.

– a base construction cost per m² (e.g., €665/m²),

– the gross area,

– location,

– quality and comfort,

– age, via an age coefficient.

Municipalities set their rate within a legal range:

Property type	Typical IMI rate in Madeira	Particularities
Urban property (housing, offices)	0.3% to 0.45%	Funchal: 0.35% for newer properties, 0.8% for older ones before 2003
Rural / agricultural property	0.8% (flat rate)
Vacant, dilapidated, or unoccupied property > 1 year	Up to 6% (or 3x the normal rate)	Anti‑vacancy and speculation measure
Owner in a “blacklist” jurisdiction	7.5%	Penalty rate

In Madeira, an automatic 30% reduction on IMI is applied, making the property tax burden generally lower than on the mainland for a property with the same tax value.

Payment terms are also defined:

– < €100: single payment in May;

– €100 to €500: two installments (May and November);

– > €500: three installments (May, August, November).

The owner may also choose to pay the full amount in May.

Exemptions and Reductions

Several mechanisms exist:

– new permanent homes with VPT ≤ €125,000: exemption for 3 to 6 years, subject to household annual income (< €153,300);

– rehabilitated accommodations: multi‑year exemption in urban rehabilitation zones;

– families with dependent children: flat deductions per child (up to ~€140 per year) decided by the municipality.

Some exemptions require an application to be submitted within 60 days of acquisition: a deadline not to be missed.

Numerical Example

For an urban apartment with a tax value of €350,000:

– at 0.3%, the annual IMI would be €1,050;

– at 0.45%, it would rise to €1,575.

2.4. AIMI: Annual Wealth Tax on Real Estate

AIMI (Adicional ao IMI) is a surcharge on property wealth targeting large residential real estate portfolios.

It applies to the sum of VPTs of:

– urban properties used for residential purposes,

– building land.

The mechanism is as follows:

– exemption for the first €600,000 (per individual);

– for a couple filing jointly, the threshold is doubled to €1,200,000.

Above that:

Profile	Thresholds and rates
Individual	0.7% above €600,000
Individual (> €1M)	1% on bracket €1M – €2M, 1.5% above
Company (not a tax haven)	0.4% on the total
Company using property for executives	0.7% or even 1% depending on amounts
Entity in a “tax haven”	7.5%

In Madeira, since property values are on average lower than in Lisbon or Porto, exposure to AIMI remains limited, but can affect luxury villas along the coast.

2.5. Capital Gains Tax on Real Estate

The sale of a property located in Madeira generates, if there is a gain, a taxable capital gain.

The net capital gain is roughly equal to:

– Selling price

– acquisition value (possibly inflation‑adjusted)

– deductible expenses (notary, registration, certain renovations, agency commissions, etc.)

Typical non‑deductible expenses include IMT paid at purchase and part of legal fees.

Two regimes coexist:

– for tax residents in Portugal: 50% of the net capital gain is added to taxable income and taxed at the progressive IRS rate. In Madeira, the regional scale starts at 8.75% (low income) and can reach approximately 33.6% at the top of the bracket, significantly lower than the maximum rates on the mainland.

– for non‑residents: historically, 100% of the gain was taxed at a flat rate of 28%. Since 2023, following an EU Court of Justice decision and legislative adjustments, non‑residents (including those outside the EU/EEA) are treated like residents: only half of the capital gain is included in the tax base, subject to the progressive rate.

Important Exemptions

Several reliefs are provided for primary residences:

– if the sold property was the household’s primary residence for at least 12 months prior to the sale,

– and the proceeds from the sale are reinvested in another primary residence within the EU/EEA (including Portugal),

– within a period of 36 months after the sale or up to 24 months before (if purchased in advance),

then the capital gain can be fully exempt, provided the full sale price is reinvested. If only part is reinvested, the exemption is proportional.

Other points:

2.6. Rental Income: Standard Rentals and Short‑Term Rentals

Incoming rents are taxable in Portugal, whether the owner is a resident or not.

– For a non‑resident, rental income from Portuguese sources is taxed at a flat rate of 28% (on gross income, in principle, with certain allowed deductions).

– For a resident, two options:

– flat rate of 28% on rents;

– or aggregation with total income, taxed at the progressive IRS rate (up to about 48% nationally, with potential surcharges).

Certain situations benefit from favorable regimes:

– rents from renovated properties in designated rehabilitation areas may be taxed at 5% for residents;

– companies are subject to IRC (corporate income tax: 21% standard, but with preferential regimes in the Madeira International Business Center).

For short‑term tourist rentals (Alojamento Local), taxation follows a business regime (BIC) with specific coefficients; compliance with invoicing and reporting obligations is mandatory.

2.7. Ancillary Purchase Costs

Beyond taxes, several costs must be anticipated:

– lawyer fees: often 0.5% to 1.25% of the price, with typical flat fees of €2,000 to €5,000;

– notary: generally €500 to €1,200 per transaction, more for complex or bilingual documentation;

– land registry and tax registration: around €250 for the acquisition, an additional €250 for registering a mortgage;

– other fees: energy certificate, certified copies, translation/apostilles, etc.

A table of typical costs for some purchase amounts illustrates the order of magnitude (excluding IMT):

Purchase price	Stamp duty (0.8%)	Lawyer (≈1.25%)	Notary + Registry (approx.)	Estimated total excl. IMT
€175,000	€1,400	€2,188	€1,500	≈ €5,100
€350,000	€2,800	€4,375	€1,500	≈ €8,675
€500,000	€4,000	€6,250	€1,500	≈ €11,750
€1,000,000	€8,000	€12,500	€1,500	≈ €22,000

These amounts are in addition to IMT, IMI, and AIMI taxes.

3. Urban Planning, Land, and Construction: What You Need to Know

On a steep island like Madeira, urban planning regulations are at the heart of real estate issues. All projects—individual houses, apartment buildings, tourist projects on rustic land—must comply with strict land‑use rules governed by national law and regional decrees.

3.1. Key Planning Legislation in Madeira

Several regional decrees shape land policy:

– Regional Legislative Decree No. 18/2017/M: bases of public land policy, urban planning, and land management in the Autonomous Region of Madeira;

– Regional Legislative Decree No. 12/95/M: Territorial Planning Plan of the Autonomous Region (POTRAM);

– other texts complete the framework, notably regarding coastal protection, infrastructure, or regional planning.

At the national level, the framework law on territorial management instruments (RJIGT) governs PDM (Planos Diretores Municipais), municipal master plans that apply to each plot.

3.2. Understanding a PDM: Zoning, Constraints, and Regulations

To assess the building potential of a plot in Madeira (e.g., Ponta do Sol, Calheta, Santa Cruz, etc.), consulting the municipal PDM is essential. It is read through three components:

– 1. The zoning plan It classifies each plot using standard colors/patterns:

– yellow/orange: urban land,

– beige/brown: developable zones,

– light green: agricultural zones,

– dark green: forests,

– blue: water domain,

– purple/gray: facilities and infrastructure.

– 3. The regulations For each zone, they detail:

– building indices (COS, height, number of floors),

– permitted or prohibited uses (residential, commercial, tourism, services, agricultural),

– conditions for reconstruction or extension,

– possible requirements for opinions from external services (environment, agriculture, heritage).

The proper method is to: organize efficiently, set clear priorities, and follow an adapted action plan.

– locate the plot on the zoning plan,

– overlay the constraint layers,

– then read the relevant regulation articles corresponding to the zone and soil type.

3.3. Rustic Land and Tourism Projects

In Madeira, the scarcity of developable land, accentuated by the terrain, leads many investors to consider rustic land for tourism projects: rural accommodations, bungalows, small units scattered in nature.

Regulation is, however, very strict:

– a rustic plot’s suitability for a tourism project depends on its classification in the PDM, REN/RAN easements, proximity to sensitive areas (coast, forests, risk zones);

– a preliminary information request (Pedido de Informação Prévia) to the town hall allows early verification of urban feasibility.

In terms of tourism law, projects fall under the Legal Regime for Tourist Activities (RJET), stemming from Decree‑Law No. 39/2008, amended several times (notably by DL 80/2017). It defines forms of rural accommodation, hotel establishments, tourist villages, etc.

Rural tourism projects must:

Concrete examples from the market:

– large plots in Arco da Calheta (over 7,000 m²), with access, water, and electricity, studied to host a tourist bungalow village (e.g., 70 units on two floors);

– rural parcels in Estreito da Calheta, allowing individual houses up to 300 or 400 m², with limited impermeabilization (e.g., 50% of the surface).

Where applicable, general rules must be considered:

– building indices,

– maximum height (often 8.5 m + total height capped at 10 m),

– maximum percentage of impermeable soil (frequently 50% to 60%),

– requirement for suitable access for emergency vehicles and fire trucks,

– connections to networks (water, electricity, sewage), or approved alternative solutions.

3.4. Recent Reforms on Land Reclassification

Faced with the housing crisis, the Portuguese legislature adopted Decree‑Law 117/2024, which amends the regime for territorial management instruments (RJIGT) to facilitate, on an exceptional and temporary basis (4 years), the reclassification of rural land into urban land for housing use.

Main conditions:

– at least 70% of the built floor area must be allocated to public housing, affordable rental, or cost‑controlled housing;

– general infrastructure (roads, water, electricity) must exist or be guaranteed;

– the reclassification must be compatible with the local housing strategy;

– urban coherence must be respected (continuity with existing urban areas).

The law excludes, however, land located:

Although the measure is national, its effects will be particularly observed in Madeira, where the lack of available land is one of the major bottlenecks in housing policy.

3.5. Building Permits, Renovation, and Heritage

Construction and renovation works are subject to the national framework (RJUE, legal regime for urbanization and construction), with three main categories:

– Licença de Obras (full permit): for any new construction, extension, intervention on structure, foundations, or volume;

– Comunicação Prévia: streamlined procedure for significant works without major structural changes (internal reconfigurations, network replacement, etc.);

– Obras Isentas: minor maintenance and decoration works with no impact on use or facade (interior painting, changing coverings, etc.).

For old and historic buildings, caution is required:

– a building built before 1951 may, if it has only undergone maintenance work, be sold without a use license, based on an age certificate issued by the municipality, but remains subject to current rules in case of heavy intervention;

– any “classified” building (Imóvel Classificado) or in a protection zone requires an opinion from the DGPC (Directorate‑General for Cultural Heritage) and sometimes the ICNF (nature conservation), with strong restrictions on materials, openings, roofs, etc.

Projects in sensitive areas (coast, natural zones, parks) may require additional opinions from the Portuguese Environment Agency (APA) and extend deadlines by 2 to 4 months.

4. Short‑Term Rentals (Alojamento Local) in Madeira: A Regulated Regime

Madeira is a major tourist destination, and short‑term rentals via platforms like Airbnb are tempting. But this activity is closely regulated under the Alojamento Local (AL) regime.

4.1. The Principle: Mandatory License

Any short‑term rental to tourists requires an AL registration, under penalty of heavy fines. Three main categories:

– Apartamento: self‑contained unit in a building;

– Moradia: detached house;

– Estabelecimento de Hospedagem: guesthouse‑type establishment, individually rented rooms.

In Madeira, this regime is adjusted by regional legislation, which distinguishes AL from classic tourist establishments (hotels, resorts, etc.). Municipalities have increased power to regulate AL implementation, particularly in housing‑stress areas.

4.2. Registration Procedure

Registration is done online via the ePortugal portal, in the Balcão Único Eletrónico area. The file typically includes:

– title deed or rental contract granting the right to operate as AL;

– property habitation license;

– NIF and identification of the owner or representative;

– plans and photos;

– in some cases, condominium authorization.

The municipality generally has: responsibility for municipal affairs, management of public services, organization of local life, and representation of the State at the local level.

– 10 days (20 days for hostels) to oppose the prior declaration. Without a response, the operator may begin activity.

Concurrently, the activity must be declared to Finanças as a hospitality service provision, with a choice of tax regime (simplified or organized accounting). In Madeira, registration with the Regional Tourism Directorate (DRT) and the municipality is also mandatory.

4.3. Safety and Operating Standards

AL properties must meet minimum standards:

– safety equipment: fire extinguishers, fire blankets, sometimes alarms and exit signage;

– hygiene, ventilation, bedding, linen, towels, basic supplies;

– kitchenettes or equipped kitchens, private bathrooms in most configurations;

– display of emergency numbers, house rules, quiet hours (11 p.m.–7 a.m.);

– civil liability and multi‑risk insurance, sometimes explicitly required by municipalities.

Authorities may carry out inspections, announced or unannounced, and check:

– the actual presence of safety equipment,

– compliance with occupancy capacity,

– the validity of the license and tax declarations.

4.4. Municipal Powers and the Case of Funchal

Municipalities now have the ability to define:

– “containment” zones where the AL/housing ratio is deemed too high,

– sustainable growth zones where additional licenses may be granted under conditions,

– temporary moratoriums on certain types of properties (e.g., apartments).

In Funchal, the capital, pressure is particularly high: AL represents over 25% of the city’s accommodation capacity (approximately 3,184 establishments offering 9,000 beds and 6,000 rooms, for a total capacity of about 15,000 people).

The municipality has thus announced a six‑month suspension of new AL licenses for apartments in multi‑unit buildings, in order to:

– slow down the conversion of housing into tourist rentals;

– revise local regulations and target stressed neighborhoods.

Detached houses (moradias) and room rentals in the owner’s primary residence are generally excluded from this suspension. Investors must therefore check on a case‑by‑case basis the regulatory status of the area and property type with the relevant municipality.

From a tax perspective, AL rentals are subject to:

– corresponding income tax (IRS or IRC),

– possibly VAT depending on the chosen regime,

– the municipal tourist tax, where applicable.

5. Inheritance, Gifts, and Real Estate Succession in Madeira

Unlike many European countries, Portugal no longer has a classic inheritance tax since 2004. However, gratuitous transfers are still taxed via stamp duty (Imposto do Selo).

5.1. Stamp Duty on Inheritances and Gifts

For assets located in Portugal, stamp duty applies at a rate of:

– 10% on the net value of the assets transferred (calculated based on market value or VPT);

– plus, for real estate, an additional 0.8% on the VPT.

However, a full exemption is granted to direct‑line heirs:

– spouse or civil partner,

– children and grandchildren,

– parents and grandparents,

– legally recognized adopted children.

Siblings, nephews/nieces, unofficial partners, and friends are subject to the 10% rate. Certain gifts to charitable entities or severely disabled individuals may benefit from exceptions.

5.2. Forced Heirship (Reserva Hereditária) and Choice of Law

Portuguese law imposes the principle of forced heirship (legítima): a non‑negotiable portion, between one‑third and two‑thirds of the estate, automatically goes to certain protected heirs:

– spouse,

– descendants (priority),

– failing that, ascendants.

This mechanism may apply to all assets, even those located abroad, if Portuguese law governs the succession.

However, the EU Succession Regulation (Brussels IV) allows a person of foreign nationality to choose, in their will, the law of their nationality to govern their succession. This choice, if properly drafted, can mitigate or exclude the effects of Portuguese forced heirship on the entire estate.

5.3. Procedures and Deadlines

In the event of death:

Required documents include: identification documents, proof of residence, birth certificates, and bank statements.

– death certificate,

– tax and civil identification of the deceased and heirs,

– detailed list of assets and their value,

– will or deed of gift, if applicable.

There are no administrative fees for this declaration, but payment of stamp duty must follow within deadlines to avoid penalties and interest.

Finally, note that:

– Portugal does not have specific bilateral inheritance tax treaties;

– a resident of another country (e.g., the United Kingdom) may also be subject in addition to inheritance tax in their country of tax domicile.

6. Golden Visa, Investments, and Impact on Real Estate

For years, the Portuguese Golden Visa made Madeira a preferred destination for non‑EU investors seeking to combine real estate purchase with residency. The framework has, however, changed significantly.

6.1. End of the Real Estate Route for the Golden Visa

Introduced in 2012, the residence by investment program allowed:

– purchase of new properties starting at €500,000 (reduced to €280,000 in certain low‑density areas),

– or properties for rehabilitation starting at €350,000.

Recent legislative changes (October 2023) removed the possibility of obtaining a Golden Visa through:

– purchase of residential or commercial properties, including in Madeira,

– or investment funds directly linked to real estate.

– investments in investment or venture capital funds (minimum €500,000), non‑real estate;

– financing scientific research (from €500,000);

– support for culture and heritage (€250,000, or even €200,000 in low‑density areas);

– business and job creation (share capital + jobs).

Madeira remains attractive for these alternative routes, thanks to the International Business Centre (MIBC), which offers a very competitive IRC rate (5% on certain eligible profits until 2028) for duly established and substantiated companies.

6.2. Madeira Real Estate Market After the Reform

Even without the real estate route of the Golden Visa, the Madeira market remains dynamic:

Attractiveness now stems more from:

– quality of life (subtropical climate, safety, relative cost of living),

– regional tax regimes (lower IRS rates than on the mainland, IMI reduction),

– opportunities in rehabilitation and sustainable tourism.

7. Practical Points and Pitfalls to Avoid

Beyond the texts, several reflexes protect the investor or future resident in Madeira.

On the tax front:

– anticipate the total acquisition cost: IMT + stamp duty + lawyer + notary + registry + possible credit fees;

– check the applicable capital gains regime, especially for primary residence and reinvestment projects;

– inquire about AIMI for any cumulative real estate portfolio exceeding €600,000 (or €1.2M for a couple).

On the urban planning front:

For short‑term rentals:

– ensure the area is not under municipal moratorium (like apartments in Funchal);

– obtain an AL license before any listing on platforms;

– comply with tax obligations (income declarations, possible VAT, tourist tax).

Finally, for succession and estate planning:

– account for Portuguese forced heirship if Portuguese law governs the succession;

– if applicable, draft a clear will specifying the chosen national law (under the EU regulation) for the succession;

– examine the combined impact of Portuguese tax systems and the country of residence/domicile.

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With solid legal and technical support, Madeira remains an attractive investment and living destination—provided you play by the rules and know them well enough to use them to your advantage.