IMI Will Increase Threefold This Year for 8,239 Property Owners

8 May 2018

Lisbon, Vila Real and Coimbra are among the 54 municipalities that are charging a punitive rate on vacant or ruined properties.

Keeping a house empty for more than a year or leaving it in ruins can potentially be an expensive decision. That is what 8,239 property owners realised after they saw a three-fold increase in their IMI rate (in April) for having real estate in such a state.

Any decision to impose a punitive municipal property tax rate is the responsibility of the local city councils, and this year (for the 2017 tax), 54 municipalities implemented such rates, according to data provided by the Tax and Customs Authority in response to an inquiry by DN/Dinheiro Vivo.

“An increase in the tax, which is provided for in Article 112 (3) of the IMI Code (buildings that are empty or in ruins), was announced by 54 municipalities,” the Ministry of Finance stated. Last year, only two dozen municipalities opted for the punitive rate, less than half of the current figure. The municipalities that elected to impose the additional tax include Lisbon, Coimbra, Setúbal, Loures, Vila Nova de Cerveira, Leiria, Lagos and even Vila Real.

The normal tax rate can be set anywhere between 0.3% and 0.45%, and in applicable cases, it can be “tripled in any given year.” For example, it means that the owner of a property located in Vila Real, which has been determined to have been vacant for over a year, is liable to pay an IMI tax rate of 1.185%, three times the normal rate of 395%. So, if the taxable asset value of the house is 50,000 euros, the rate charged would be 592.50 euros instead of 197.5 euros.

More than 8,200 property owners in the 54 municipalities that decided to apply the aggravated tax rate were confronted with similarly elevated tax bills.

Menezes Leitão, the president of the Lisbon Property Owners Association (ALP), was not surprising, adding that his association is seeing ever higher numbers of requests for help and advice. “The cases are many and varied,” he said, mentioning a specific case where whole building was required to pay the punitive IMI rate, even if only one flat within the property was empty. The reason for this was that the property was jointly owned as a condominium, leading the local authority to refer the totality of the property to the authorities.

“Property owners are notified for an initial hearing. Some municipalities are more flexible and make it easier to complain and revisit the case, others are not,” the president of the ALP stressed, noting that the local authorities should be sensitive to cases in which “people have vacant homes for a specific reason.”

The first instalment of IMI (and for some owners the only one) was paid during the month of April, but for many, there will be a new bill in July and another one in November.

Although the possibility of applying a punitive IMI rate on vacant or ruined homes has existed for several years, the process gained new momentum in 2016. The State Budget for that year determined that the telecommunications, electricity, gas and water services companies would be obliged to transmit updated lists of “the existence of low supply contracts or limited consumption” for each building, or fraction thereof, to municipalities. This notification must arrive no later than October 1, in time for municipalities to take a decision and communicate it to the Tax Authority (AT). The AT itself only acts on the information supplied to it by the individual municipalities.

In addition to criticising the punitive tax rate, property owners pointed to ambiguities in the criteria provided by law. In this regard, Menezes Leitão gave the term “low consumption” (of those services) as an example, which has lead to differing interpretations of similar cases. An individual who owns two houses in identical situations in different counties runs the risk of having to pay the punitive rate in one county, but not the other.

The number of taxpayers affected by the punitive IMI rate does not accurately reflect the number of properties that were targeted, as some owners may have more than one building that is empty or in ruins.

Original Story: Diário de Notícias – Lucília Tiago

Translation: Richard Turner