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

Municipal property tax

• 1. Tax Basis

  The IMI is levied on the taxable patrimonial value (VPT) of rustic and urban buildings, located in Portuguese territory. It is due by the owner, usufructuary or surface owner of the building on December 31 of the year to which it relates.

• 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 rates foreseen for urban buildings are tripled in cases where they have been vacant for more than a year or in ruins.

• 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.

• 4. Exemptions

  There is a large list of exemptions that includes, amongst others:
  
  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, for a period of 3 years, to individuals which obtained a taxable income, in the year prior to the acquisition/construction, lower than € 153,300 and the VPT does not exceed € 125,00.
  
  4.2 Urban property subject to rehabilitation
  
  Urban buildings or autonomous fractions completed more than 30 years ago or located in urban rehabilitation areas, if they meet certain cumulative conditions, are exempt from IMI, for a period of three years from the year, inclusive, of the completion of the rehabilitation works, and may be renewed, at the request of the owner, for another five years in the case of properties allocated to lease for permanent housing or to own and permanent residence.

• 5. Additional to the IMI (AIMI)

  AIMI is due by individuals and corporations, as well as by structures or collective entities 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 AIMI, as well as "residential" urban buildings in the context of the Rental Support Program.
  
  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 VPT of all the urban properties.
  
  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 Authority in June of each year, being the respective payment made in September.
  
  In the sphere of individual holders (PIT), the AIMI is deductible to the fraction of the tax corresponding to the net income generated by real estate subject to AIMI, in the case of aggregation; or deductible from the tax, in the case of application of the 28% withholding tax to property income, in other cases. The tax deduction is also applicable to taxable people holding Category B income obtained within the scope of rental or lodging activities.
  
  In the sphere of holders of legal entities (CIT), taxpayers have the option of deducting the AIMI paid, limited to the fraction of the collection corresponding to the income generated by real estate subject to AIMI, within the scope of rental or lodging activities. This option for the tax deduction prejudices the deduction of AIMI in the determination of taxable income under CIT.