Portugal’s new non-resident property tax leaves Madeira’s top end unchanged

Portugal’s flat 7.5% transfer tax for non-resident home buyers took effect May 25, 2026, but Black Privé says it does not change costs for the most expensive homes in Madeira. The move matters most below the island’s prime-price threshold, where buyers may pay more upfront but can sometimes reclaim the difference if they later qualify as tax residents.

Why it matters: - Portugal’s new IMT rule targets non-resident buyers, but it leaves Madeira’s luxury end essentially untouched. - The biggest impact is lower in the market, where non-residents now face a higher transfer tax unless they later qualify for a refund. - The change also reinforces a broader split between tax treatment for non-residents and tax treatment for residents in Madeira.

What happened: - Since 25 May 2026, non-resident buyers in Portugal pay IMT, the property transfer tax, at a flat 7.5% from the first euro, with no usual exemptions or reductions. - Black Privé’s analysis says that in Madeira, a second home above EUR 1,438,566 was already taxed at 7.5% before the national change. - The analysis was published on October 6, 2026.

The details: - Madeira and the Azores use the national IMT schedule, but every bracket limit is 25% higher than on the mainland. - For a second home in Madeira in 2026, the flat 7.5% rate starts at EUR 1,438,566, compared with EUR 1,150,853 on the mainland. - A EUR 2 million home in Madeira carries EUR 150,000 in IMT and EUR 16,000 in stamp duty at 0.8%, for a total of EUR 166,000. - Both taxes are charged on the higher of the purchase price or the tax office’s valuation. - Legal and registration costs are additional. - Between EUR 792,414 and EUR 1,438,566, a Portuguese resident buying a second home in Madeira pays a flat 6%, while a non-resident now pays 7.5%. - On a EUR 1 million purchase, that means EUR 75,000 instead of EUR 60,000. - The tax office can refund the difference if the buyer becomes tax-resident in Portugal within two years of the purchase. - A refund is also available if the buyer rents the home within six months, at a rent inside the legal cap, for at least 36 months of the first five years. - The test is tax residence, not nationality, so a foreign national who is already tax-resident in Portugal pays the ordinary rates.

Between the lines: - Black Privé lead property analyst Alexander Thornbury said the rule is framed as a tax on foreign buyers, but in Madeira’s prime segment it changes nothing. - Thornbury said a EUR 2 million villa carried 7.5% before May and still carries 7.5% now. - Thornbury said the real incentive for buyers who move to Madeira is income tax, not transfer tax. - From 2026, Madeira residents pay income tax at regional rates 30% below the mainland in every band, with a top rate of 33.6% versus 48% on the mainland. - Buying property does not grant residency, because Portugal removed real estate from its golden visa program in October 2023. - The market backdrop is still strong: INE said the median price of homes sold in Funchal reached EUR 3,601 per square metre in the first quarter of 2026, up 23% from a year earlier, while sales across the region fell 24%. - Those are median prices across all homes, and prime homes sell above them.

What’s next: - Buyers at the top of Madeira’s market are likely to focus on residency and income-tax planning rather than the transfer tax. - Lower-priced buyers who are willing and able to move to Portugal may seek refunds or use rental rules to recover part of the tax. - Black Privé says its Madeira tax guide and buying guide cover the purchase process, residency and prime areas, alongside guides for several other markets. - Black Privé works with buyers in Madeira from EUR 2 million.

The bottom line: - Portugal’s new non-resident tax raises costs below Madeira’s prime threshold, but it does not change the tax bill for the island’s most expensive homes.