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Decrease in Taxation to Save Rental Market

11 September 2017

The Association of Property Owners in Lisbon (ALP) today proposed the “relaxation of the fiscal noose” and the introduction of tax benefits to save the rental market, in the context of negotiations regarding the 2018 Portuguese state budget.

Representing more than ten thousand urban landowners nationwide, ALP presented the Government with a document containing “a package of cross-relief measures and tax benefits on real estate to be included in the 2018 State Budget, including changes to IRS [Individual Income], IMI [Municipal Property Tax] and AIMI [Municipal Property Tax Surcharge].”

Owners talk about a “Breakdown in Confidence”

In the document, the association requests “a full retreat from the disastrous tax policies carried out over the last two years, which have resulted in an unprecedented crisis in housing, with an unsustainable price increases, and the destruction of the Portuguese property rental market, and the breach of the property owners’ trust in the rule of law.”

The ALP’s package is spearheaded by “a very urgent set of measures that should have been implemented even before discussions regarding the State Budget,” based on fiscal benefits and positive tax discrimination to be granted to owners that finalise longer-term contracts.

IMI Tax Relief

For homeowners, the three emergency measures to save the traditional property rental market are: reducing the rental withholding rate (currently set at 28%) by three percentage points for each year of the rental term in contracts with a duration of up to five years; a one-off fee of 10% for contracts of more than 6 years; and the total deduction of the value of the IMI and AIMI, and, in the case of the properties on traditional rentals, a deduction from collections and not income.

In addition to these three emergency measures, homeowners demand “IMI tax relief”, with a flat rate of 0.1% applied nationwide, “an automatic IMI reduction of 30% for all properties placed on the rental market” and the application of the IMI Special Clearance Scheme to all landlords with rents frozen by the changes introduced to the New Urban Lease Scheme (NRAU).

Regarding the AIMI, ALP proposes “the immediate extinction” of the new tax, claiming that this new tax “destroyed the rental market and led to the escalation of prices seen throughout the country.”

Concerning the IRS, the owners’ association argued for an increase in deductions, including the deduction of expenses incurred with kitchens, appliances, furniture, interest and amortizations of loans for renovations on properties placed in the rental market, and the re-implementation of fiscal benefits for the installation of renewable energies and measures to promote energy efficiency, to fulfil the community goals.

Original Story: Diário Imobiliário / LUSA

Translation: Richard Turner