Investor's Guide - Fiscal System - Main Taxes in Portugal

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Fiscal System 

 

5. Municipal Property Tax ("IMI")

 

Municipal

Property Tax

Imposto Municipal sobre Imóveis (IMI)

Entry into Force

1 January 2003 (substituted the old Municipal Property Tax – Contribuição Autárquica)

Tax Rates

·       Rural properties: 0.8%; 

·       Urban properties: 0.3% to 0.45% 

·       Properties held by entities resident in blacklisted jurisdictions: 7.5%

Exemptions

·       Urban property used as a permanent place of residence

·       Property for touristic use

·       Urban property subject to rehabilitation

Payment

·       Amounts up to € 100 – 1 instalment in May; 

·       Amounts from € 100 to € 500 inclusive – 2 instalments in May and November; 

·       Amounts exceeding € 500 – 3 instalments in May, August and November.

 

5.1 Tax basis

 

Municipal Property Tax ("IMI")IMI is computed over the property tax value (VPT) of urban and rural real estates located in the Portuguese territory. 

 

The VPT is determined by the Portuguese Tax Authority based on the information given by the taxpayer and by the application of different ratios which depend on the type of the property, its localization, state of conservation and facilities. In last 10 years, urban properties were subject to a general review with effects on 31 December 2012.

 

Is due by the landlord, the usufructuary or the holder of the surface right of the real estate on 31 December of the year that it concerns.

 

5.2 Rates

 

Applicable rates are the following: 

·      Rural properties: 0.8%; 

·      Urban properties: 0.3% to 0.45%; 

·      Properties held by entities resident in blacklisted jurisdictions: 7.5%.

 

Each municipality determines, on an annual basis, the applicable IMI rate within the mentioned ranges. Municipalities, by resolution of the municipal assembly, can fix a reduced rate to buildings for permanent residence of the owner, based on the number of dependents therein living. The reduction rate may be up to 20% in the case of one dependent, 40% in the case of two, and 70% in the case of three dependents. The tax rates applicable on urban properties are triplicated when they are empty or tumbledown for more than one year.

 

5.3 Payment

 

IMI is paid in the following year that it concerns, in one, two or three instalments depending on the amount to be paid: 

·      Amounts up to € 100 – 1 instalment in May; 

·      Amounts from € 100 to € 500 inclusive – 2 instalments in May and November; 

·      Amounts exceeding € 500 – 3 instalments in May, August and November.

 

5.4 Exemptions 

 

There is a list of exemptions that includes, amongst others:

 

5.4.1 Urban property used as a permanent place of residence (owned or rented)

 

This exemption should be requested within 60 days from the end of six months deadline following the acquisition of the property or its construction or renovation. Applies to individuals which obtained a taxable income, in the year prior to the acquisition/construction, lower than € 153,300. Is valid for three years and is applicable to urban properties with a VPT lower than € 125,000. This exemption is not applicable when taxpayer is resident in a tax heaven (listed by the Portuguese tax authorities). It can only be granted twice per taxpayer or family unit.

 

5.4.2 Urban property subject to rehabilitation

 

The exemption applies to urban properties subject of urban rehabilitation, located in urban rehabilitation areas or urban properties built more than 30 years ago, for a period of 3, renewable for a period of 5 years, counted from the date of (ii) issuance of the municipality’s license or (ii) completion of the rehabilitation works, which are intended for lease for permanent abode or main permanent abode.

 

5.4.3 Property with low VPT

 

The exemption applies to individuals or their household whose gross income in the year preceding the acquisition, does not exceed 2.3 times the annual value of the IAS (Social Support Index) and the overall Tax Registration Value of all rural and urban properties owned by the household does not exceed 10 times the annual value of IAS. This exemption also applies to properties which use is granted by construction and housing cooperatives and residents'associations to their associates.

 

5.5 Additional to the IMI (“AIMI”)

 

There is AIMI is due by individuals and corporations, as well as by structures or collective bodies without autonomous legal personality and undivided inheritances, that are owners, usufructuaries or have the surface right of urban properties located in Portugal.

 

Urban properties classified as "trade, industry, or services" and "others" are excluded from AIMIThere is AIMI is due by individuals and corporations, as well as by structures or collective bodies without autonomous legal personality and undivided inheritances, that are owners, usufructuaries or have the surface right of urban properties located in Portugal.   .

 

The taxable basis corresponds to the sum of the VPT of all the urban properties held by each taxpayer, reported as at 1 January of each year.

 

In case of individuals and undivided inheritances a deduction of € 600,000 to the taxable basis is foreseen. Married or living in non-marital partnership taxpayers, who opt to submit a joint tax return, have the right to deduct € 1,200,000 to the sum of the TRV of all the urban properties.

 

Properties that benefited from IMI exemption in the previous year are excluded from the taxable basis.

 

The applicable rates, after deductions provided, are as follows:

·      0,7% for individuals and undivided inheritances;

·      0,4% for corporations; and

·      7,5% for urban properties owned by entities located in tax havens.

 

In case of individuals, (i) to the taxable amount of more than € 1,000,000 and equal or lower than € 2,000,000 (or the double for married or living in non-marital) a marginal rate of 1% applies, and (ii) to the taxable amount that exceeds € 2,000,000 (or the double for married or living in non-marital), a marginal rate of 1.5% applies.

In the case of urban properties owned by corporations, for the personal use of the shareholders, members of the board or of any administrative bodies, management or supervision, are applicable the rates considered for individuals.

 

AIMI is assessed by the Portuguese Tax Authorities in June of each year, being the respective payment made in September.

 

AIMI is deductible to the fraction of the tax corresponding to the net income generated by properties subject to AIMI, in the case of global income taxation; or deductible to the tax, in the case of application of the withholding tax of 28% to the property income, in all other cases. The deduction is also applicable to the taxpayers that obtain Category B income (Business and professional income) related to lease or accommodation activities.

 

Taxpayers have the option of deduct the AIMI paid, limited to the fraction of the tax corresponding to the income generated by properties subject to AIMI, in the scope of lease or accommodation activities. This deduction option (deduction to the CIT fraction) jeopardizes the deduction of AIMI in the determination of CIT taxable income.

 

 

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