Tax Benefits for Urban Rehabilitation

16 April 2018

Between reductions to VAT and IRS, several incentives target people who considering property rehabilitation.

A number of incentives and benefits exist for people who intend to rehabilitate their home in city centres. The benefits vary from city to city, and Lisbon and Porto, for example, have structured their own programs.

According to its strategic plan for urban rehabilitation (up to 2024), the Municipality of Lisbon believes that these supports are justified because “there are a large number of buildings and dwellings in Lisbon.”

The Portuguese federal government has also included a number of benefits in its 2018 State Budget, which targets the increased participation of taxpayers in the process.

The State Budget provides for the following tax benefits:

  • Exemption from the municipal property tax (IMI) for a period of three years from the year of completion of the rehabilitation works, which may be renewed at the owner’s request for a further five years. This applies to properties that are used in the long-term rental market or for the owner’s permanent residence;
  • A deduction of up to 30% of IRS charges, up to 500 euros.
  • An exemption from the Municipal Tax on the Real Estate Transfers (IMT) as long as the property owner begins the works within a period of three years of its acquisition;
  • Capital gains from the sale of rehabilitated properties in urban rehabilitation areas are taxed at the rate of 5%.
  • Rehabilitation works carried out in real estate or public spaces located in urban rehabilitation areas benefit from a reduced VAT rate of 6%.

According to the CML’s website, other incentives also exist:

  • Building Income – Taxation at a reduced rate of 5% after completion of the rehabilitation works.
  • IRC – Exemption for income obtained by real estate investment funds, provided that between January 1, 2008, and December 31, 2013, and at least 75% of its assets are real property subject to certified rehabilitation works.

Original Story: Notícias ao Minuto

Photo: iStock

Translation: Richard Turner