A couple from California I’ve been showing villas to around Lagos this spring sent me a panicked email yesterday. Subject line: “Portugal just doubled the tax for foreign buyers?? Is this true?”
The headlines have been brutal. The reality, when you sit down with a calculator, is far less dramatic.
Here’s exactly what changed, and what it actually costs you on a €1M villa in Lagos.
What took effect on 21 May 2026
Portugal’s new Decreto-Lei n.º 97/2026 was published in Diário da República on Wednesday 20 May, and came into force the following day. The headline change for American buyers: a flat 7.5% IMT (the property transfer tax) on residential property bought by anyone who isn’t a Portuguese tax resident at the time of purchase. No exemptions, no progressive scale, no deductions.
This replaces the previous system, where non-residents paid the same progressive IMT scale as residents. That worked out to roughly 5% to 6% effective at the price points most American buyers were looking at.
The €1M Lagos villa, non-resident vs. resident
Let me show you the actual math on a €1M villa in Lagos. I’ll hold every other cost identical so you can see precisely where the new law bites.
As a non-resident (the new flat rate):
- IMT: €1,000,000 × 7.5% = €75,000
- Stamp duty (Imposto do Selo): €8,000
- Notary, legal, registration: roughly €10,000
- Total transaction costs: about €93,000
As a Portuguese tax resident (or non-resident on the refund pathway, see below):
- IMT: €1,000,000 at the 6% single-rate band = €60,000
- Stamp duty: €8,000
- Notary, legal, registration: roughly €10,000
- Total transaction costs: about €78,000
The new law costs an American non-resident an extra €15,000 on a €1M Lagos villa. That’s the real number. Not a doubling. Not catastrophic. But material, and worth structuring around.
The two refund pathways
The decree-law is harsher than it sounds in one specific way: you pay the full 7.5% at the escritura, no exceptions, no upfront discount. It’s friendlier than it sounds in another: you can reclaim the difference if you do one of two things in the years after purchase.
- Become a Portuguese tax resident within 24 months of the purchase. This is the route I’d expect most American buyers genuinely planning to live here to take. Set up residency, file your first IRS return as a PT tax resident, and you reclaim the €15,000 delta.
- Commit the property to long-term letting at moderate rents for at least 36 months in the first 5 years. This route exists, but the moderate-rent ceiling (currently €2,300 per month in 2026) is well below what a €1M Lagos villa would yield on the open market. It’s rarely useful for pure investors. It’s more useful for buyers planning to relocate eventually but needing to rent the place out for the first few years.
Either way, the mechanic is the same. You pay €75,000 at the escritura. You reclaim €15,000 once you’ve met the condition. The cash-flow hit is real (you need the full amount on closing day), but the long-term cost lands at the resident rate.
The dollar angle
The IMT change is the easy part of this story. The harder one to talk about is currency, and this is where the math actually surprises American buyers.
EUR/USD is sitting at 1.1622 as I write this on 21 May 2026. The dollar has firmed against the euro through April and May, down from the 1.18+ range we saw late last year.
On a €1M villa, that movement alone is worth roughly:
- Late 2025 (EUR/USD around 1.18): €1M = $1,180,000
- Today (EUR/USD 1.1622): €1M = $1,162,200
- You’re saving roughly $17,800 just on where the FX sits, versus where it sat six months ago.
That’s almost exactly the dollar cost of the new IMT bump. €15,000 of extra tax converts to about $17,400 at today’s rate. So if you were already shopping Lagos late last year, the dollar move since then has essentially absorbed the entire IMT hit. You’re net flat in dollar terms compared to buying the same villa in November 2025.
This isn’t an argument to rush. It’s an argument to stop reading the panic headlines and run your own numbers.
What I’d tell an American buyer walking into Lagos this week
Three things.
First, if you’re planning to actually live here, full-time or part-time on a D7 or D8 visa, the refund pathway makes this whole change a wash. Plan the residency timeline before you sign the CPCV (the promissory contract). The 24-month clock starts at the escritura.
Second, if you’re a pure investor with no intention of moving, the cost has genuinely gone up by roughly 1.5% of the purchase price. That’s not nothing, but it doesn’t change the investment case for a well-located Lagos property where annual yields plus capital growth typically run multiples of that.
Third, watch the FX. The numbers above use today’s rate. A dollar move of 2 to 3% either way will swing your total cost by more than the IMT change itself.
If you’re sitting on offers or actively shopping right now, the structure of how you buy (and when you trigger residency) matters more than the headline tax rate. I walk American buyers through this on every property I show.
If you want a clean view of what a specific Lagos property will cost you end to end (IMT, stamp duty, legals, in both euros and dollars at today’s rate), fill out the Buyer Typeform and I’ll send you a one-page costed breakdown within 24 hours.
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