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“AIMI Will Undermine Real Estate, One of the ‘Pillars of the Economy, ‘” Investors Warn

19 August 2017

Real estate developers and investors had already warned of the dangers of the new tax during negotiations that led up to the approval of the IMI surcharge. They have thus joined in on criticisms that have appeared together with the property tax’s first settlement notes.

In a statement, APPII, the Portuguese Association of Real Estate Developers and Investors, reveals that this measure is seriously affecting the confidence of Portuguese and foreign investors in Portugal. “Taxing, in this unjustifiable and excessive manner (with so many of the tax charges, which are an additional surcharge to another tax, being in the thousands of euros), taxing residential real estate valued above 600,000 euros is the same as inviting all those who previously invested, for example under the Golden Visa Program (where the minimum investment required for the acquisition of real estate is 500,000 euros) and the Non-Resident Program, to leave Portugal.  Those investors that decide to leave will leave with the impression that Portugal cannot be trusted, and that foreign investors are not welcome,” the statement said.

They believe that the measure undermines one of the two “pillars of the economy”, real estate (along with tourism), “which could only have very serious consequences for the whole economy.”

The developers also point out that this measure is very worrying for any real estate development company in the country, whose main activity is the purchase of land or real estate (including housing) for development, which is now subject to AIMI – the Municipal Tax on Real Estate surcharge. “We fear that many of these real estate developers and construction companies, which own this type of property, which is under development but not yet sold, will be unable to afford this surcharge and may even have to file for insolvency,” they warn.

Another of APPII’s concerns regards SMEs and the impact they have on to urban rehabilitation and on rentals, “because not even the residential buildings that these companies are now starting to develop, rehabilitating a large amount of Portuguese real estate for the rental market, are excluded from this surcharge. Although the measure provides that the AIMI surcharge can later be deducted from these company’s income taxes, the truth is that most of the Portuguese business community – largely made up of SMEs – are still trying to survive after emerging from the profound crisis that shook everyone, and still have very thin profit margins. This additional cost, which is in addition to existing taxes and the IMI, will completely eliminate whatever small profit margins that the SMEs had been able to claw back, decreasing their already scarce capital.”

Families and the middle class will also be negatively affected by the new tax. The real estate developers and investors association believes that, especially in a country of landowners, “because of public policies of the last decades that have encouraged the Portuguese to buy homes and or even second homes, it is easy to find Portuguese nationals who own at least one house of their own and that, furthermore, when looking for safe investments (as in the case of real estate) invested all their additional savings in the acquisition of a second home or real estate for income, and that these investments, taken together, will subject the owners to the new tax.”

Original Story: O Jornal Econômico – Fernanda Pedro

Translation: Richard Turner