CPCV with transfer of possession of the property: when is IMT due?

When buying or selling a property in Portugal, we generally expect possession to be transferred upon execution of the deed. However, did you know that possession can be transferred as early as the signing of the Promissory Agreement (the "CPCV")?

In such circumstances, this is referred to as the "tradição" of the property. In practical terms, it means that the parties have agreed to bring forward the effects of the definitive sale, with possession of the property being transferred to the promissory buyer, who will then become its owner upon completion of the deed.

This possibility is expressly provided for under the applicable legal framework, but it also has tax implications that should be taken into consideration from the outset.

Under the Portuguese Municipal Property Transfer Tax (IMT) Code, the transfer of possession of a property to the promissory buyer constitutes a taxable event for IMT purposes. Therefore, as a general rule, IMT becomes payable by the promissory buyer upon signing the CPCV, rather than upon execution of the deed.

The IMT Code provides that, in such cases, the tax must be paid within 30 days of the date on which possession of the property is transferred.

However, the law provides for an exception to this rule if the property is being acquired exclusively for the buyer's own permanent residence or that of their household, provided that the agreement does not allow the buyer to transfer their contractual position to a third party, in particular through an assignment-of-contractual-position clause or a similar arrangement, under the conditions laid down by law.

If these requirements are met, the taxable event is not deemed to arise upon the signing of the CPCV, but only later, upon execution of the deed.

In other words, where this exception applies, even if possession of the property is transferred under the CPCV, IMT will only become payable upon completion of the deed.

These matters should be carefully considered when the transaction is first being structured. VPA has a dedicated team that can assist and advise you throughout the entire process, helping to ensure that your real estate transaction meets your expectations and that all resulting tax obligations are duly complied with within the applicable deadlines.