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Taxes and Real Estate: Forever Hand in Hand

29 December 2017

The year 2017 was packed with developments relating to taxes on the real estate sector. The same theme was the subject of extensive news reporting the year before as well. At the centre of the debates was the Municipal Property Tax surcharge (AIMI), which began to be charged in September at a rate of 0.7% on the total taxable value of property (VPT), including homes and land for construction, between €600,000 and €1 million and 1% for VPT in excess of €1 million. In the case of married persons, including common-law marriages, the exemption doubles to 1.2 million euros.

Even after the all of the controversy, data published in November revealed that the AIMI earned less than half of the Finance Ministry’s predictions. The tax yielded just 50 million euros compared to the Portuguese government’s estimates of 130 million euros.

The biggest problem with the tax related to the fact that couples and beneficiaries of undivided inheritances had a deadline – May 31 – to deliver a statement that would allow them to share the VPT and avoid paying the AIMI, by increasing their combined exemption to 1.2 million euros. But many couples were caught by surprise. Even so, nearly eight thousand taxpayers managed to avoid having to pay the tax. Taxpayers who missed the deadline for declaring joint ownership were given another chance to avoid paying the AIMI.

The uncertainty generated an avalanche of claims related to the settlement of the tax.  Couples who lodged complaints were permitted to delay payment until their questions had been resolved.

IMI (and IMT) in the eye of the hurricane

IMI, like every year, caused a lot of copy to be written. Early in the year, Idealista wrote that the municipalities were going to receive 79 million euros of IMI and IMT in arrears.

Later, in June, we revealed that the Portuguese state had raised more than nine million euros from 2012’s IMI, which was charged in 2016.  One month later we reported that the IMI was filling the coffers of Lisbon, Cascais and Sintra. Brisk real estate sales also brought in higher than expected revenues for the IMT.

The government updated the IMI, passing new amendments to the tax in mid-2017. The 2018 State Budget (OE2018) also brought a series of changes. For example, municipalities gained the power to set their IMI rates, property owners were granted the possibility to reduce their IMI payments, and improvements to home energy efficiency in Lisbon were also granted tax rebates.

Original Story: Idealista

Translation: Richard Turner