Madeira's tax story is usually told from the resident's side, where it's generous. Most international buyers won't be residents. Their picture is simpler, and in places better than they expect.
What transfer tax does a non-resident pay in Madeira?
Portugal's property transfer tax, IMT, applies in the autonomous regions with bands set at 1.25 times the mainland's. For a second home in Madeira the rate is a flat 6 per cent between EUR 792,414 and EUR 1,438,566, and a flat 7.5 per cent above that. A flat 7.5 per cent rate for non-residents now applies nationally, and Madeira applies it on the same terms. Above EUR 1,438,566, then, a non-resident pays the same 7.5 per cent they would have paid before the change.
| Buyer and price | Rate |
|---|---|
| EUR 792,414 to EUR 1,438,566 | 6 per cent flat |
| Above EUR 1,438,566 | 7.5 per cent flat |
| Non-resident buyer | 7.5 per cent flat |
What does it cost to hold a Madeira home?
All 11 of Madeira's municipalities charge the minimum municipal property tax rate, IMI, of 0.30 per cent in 2026. For a second home that's the main recurring tax, and it's the lowest rate the law allows.
Letting is a separate question in Funchal. Since June 2026 the city has barred new short-term rental registrations in apartment buildings, with exceptions for buildings rehabilitated or built for tourism. If letting is part of the plan, check the rules for the specific address before you buy.
Do Madeira's lower income tax rates apply to you?
From 2026 Madeira applies the maximum 30 per cent reduction to all nine national income-tax bands, which brings the top marginal rate to 33.6 per cent against 48 per cent on the mainland, before any solidarity surcharge. That's a real advantage, but only for Madeira tax residents. A non-resident with a second home pays the flat non-resident rates instead.
What do UK, US, German and Austrian buyers pay at home?
For most buyers the bigger tax questions sit at home. A UK resident is taxed on worldwide gains, with residential property at 24 per cent, or 18 per cent in the basic band, and a credit for Portuguese tax paid. Portuguese IMT and stamp duty count as costs of acquisition for UK capital gains tax. Inheritance tax reaches worldwide assets at 40 per cent above GBP 325,000, and since 6 April 2025 the test is long-term UK residence, 10 of the last 20 tax years, rather than domicile. How residence for tax purposes is decided in the first place is covered in tax residency explained.
Americans are taxed on citizenship wherever they live, so the Madeira home sits inside their US return. The transfer taxes paid on purchase go into the property's basis. There's no estate or gift tax treaty between the US and Portugal.
German residents get an unusually clean result on rent: Madeira rental income is exempt in Germany and, because the property is in another EU state, doesn't push up the German rate either. German inheritance tax still reaches worldwide assets where the deceased or the heir lives in Germany. Austrian buyers have had no inheritance or gift tax at home since August 2008.
| Home country | What to know |
|---|---|
| UK | Gains taxed at 24 per cent (18 per cent in the basic band), with credit for Portuguese tax; inheritance tax at 40 per cent above GBP 325,000 for long-term residents |
| US | Taxed on citizenship; transfer taxes go into the property's basis; no US-Portugal estate or gift tax treaty |
| Germany | Madeira rent is exempt and doesn't raise the German rate; inheritance tax reaches worldwide assets |
| Austria | No inheritance or gift tax since August 2008 |
Why does the will matter more than the tax?
Portugal exempts close family from its 10 per cent stamp duty on inheritance, so passing on a Madeira home costs them little in tax. The bigger risk is forced heirship. Under the EU Succession Regulation you can choose the law of your nationality in a will. Without one, the default rules can bring Portuguese forced heirship to bear on the Madeira home. Make the will when you buy, not later.
How easy is Madeira to reach?
Madeira's airport handled 5.4 million passengers in 2025, up 12.2 per cent and the first year above 5 million, and United flies non-stop from Newark in season. For the buying process step by step, read the Madeira buyer's guide, and for homes on the market, see luxury property in Madeira.
Questions buyers ask
What is the property transfer tax in Madeira for non-residents?
A flat 7.5 per cent. For a second home above EUR 1,438,566, that's the same rate a non-resident paid before the 2026 change.
How much is IMI property tax in Madeira?
All 11 Madeira municipalities charge the minimum rate of 0.30 per cent in 2026.
Do foreigners get Madeira's lower income tax rates?
Only Madeira tax residents do. The 30 per cent regional reduction brings the top rate to 33.6 per cent, against 48 per cent on the mainland, but non-residents pay the flat non-resident rates.
Can you do holiday lets in Funchal?
Not in apartment buildings. Since June 2026 Funchal bars new short-term rental registrations in apartment buildings, with exceptions for buildings rehabilitated or built for tourism, so check the specific address.
Do UK buyers pay inheritance tax on a Madeira home?
UK inheritance tax reaches worldwide assets at 40 per cent above GBP 325,000 for long-term UK residents, meaning 10 of the last 20 tax years. Portugal exempts close family from its 10 per cent stamp duty on inheritance.
Do you need a will for a Madeira property?
It's the single most useful step. Under the EU Succession Regulation a will can choose the law of your nationality; without one, Portuguese forced heirship can apply to the home.
Source: legislation.gov.uk: TCGA 1992, section 38 (allowable costs)
Source: IRS Publication 551: basis of assets
