New Tax Announcements for 2017 (update 07.12.2016)
It is true that property taxation has been changed, but for the majority of properties in this area, where values are high, the annual tax is actually reduced.
Based on the patrimonial value of your property here is the new situation:
The good news is that everyone's IMI (rates) in the Loule council has been reduced from 0.38% to 0.3% payable on the total patrimonial value. This will be noticeable 2017 when we all start paying our 2016 IMI.
Then, the new additional tax which applies to properties licensed for habitation only and not for properties licensed for anything else such as services, tourism, commercial or other such as plots. Properties in Monte da Quinta and Dunas Douradas Beach Club for example are exempt from the new tax which is as follows:
If an individual has property or properties with a total (combined) patrimonial value of between Euro 600.000 to 1m, there is a new tax of 0.7%.
For properties with a patrimonial value of over 1m, owners will pay 0.7% on 400.000 (value between 600.000 and 1m) and then 1% on the patrimonial value over and above Euro 1m. (up until now, owners with a patrimonial value of over 1m have paid an additional 1.0% IS tax on the total patrimonial value, so this new tax is a reduction).
What is really good news, for all properties held in whitelisted companies like Delaware, Malta, UK etc, there is a flat rate of additional IMI of 0.4%. No more mansion tax.
Black listed companies like Gibraltar and other Tax havens, remain penalised at 7.5%
Updated Aug 2016
Property tax laws in Portugal have gone through several significant changes during recent years.
Here is a summary of the taxes applicable to buying, owning, selling or inheriting properties in Portugal.
The VPT, or ratable value of properties, is the value attributed by the tax authorities to properties for tax purposes and is the base used to calculate property taxes or in certain cases to determine the minimum taxes applicable to property transactions. The VPT of properties for habitation and plots of landfor construction is updated every three years based on factors corresponding to 75% of the currency devaluation coefficients fixed annually by the government and for income tax purposes this can also be revalued at the request of the owner within three years from the last revaluation. This is an opportunity to rectify any mistakes found.
IMT Property Purchase Tax – Paid on the acquisition of a property, this tax is payable by the purchaser prior to completion of the transaction. On properties for habitation the rate varies according to the purchase price of the property and can go up to 6%. On rustic land (land on which one cannot build) the rate applicable is 5% and on plots of land for building or other types of properties the applicable rate is 6.5%. The minimum amount on which the IMT can be paid is the VPT even if the sales price is lower.
Stamp duty, notary and registration fees
These have to be paid by the purchaser prior to signing the notarial deed and the registration of the property into the buyer's name. The stamp duty on the purchase is 0.8% of the sales price. The minimum amount on which the stamp duty can be paid is the VPT even if the sales price is lower. Notary and registration fees will not exceed EUR 1,000.
IMI Annual Property Tax – Payable yearly in arrears in two or three instalments depending on the value. This tax is based on the VPT and can vary between 0.3% and 0.5%. Within this limit the rate is fixed annually by the council of the area where the property is located. In the Council of Loulé the rate applicable for 2016 is 0.38%. The IMI for rustic properties remains at 0.8%.
IS Stamp Tax – To increase tax revenue and meet the impositions of international entities controlling Portugal's economic restructuring, the Portuguese government introduced in 2012 an annual tax on residential properties and plots of land for building with a VPT of over EUR 1 million. This tax increases the total annual property tax to a maximum of 1.5% of its ratable value, which though high, is still substantially lower than other European countries like Spain, Greece and France. The payments of this tax are to be made within the same time limits of the payment of the IMI and based on the same VPT used to calculate the IMI.
Capital Gains Tax – On the sale of a property there is currently a capital gains tax to pay at a rate of 28% for non-resident individuals and 25% for companies (non-residents). This tax is calculated on the difference between the sales price and either the purchase or construction price of the property, if applicable, index linked or its first ratable value index linked whichever is the highest. It is important when building a property to make sure that you receive proper invoices
from the builders of the amounts paid so that you have the possibility to offset these costs against capital gains tax payable when the property is sold. There are other costs that you can use to offset against this tax such as invoices of certain refurbishments made to the property in the past 12 years, taxes, notary and registration fees paid at the time of acquisition of the property, and the real estate agent fee. If the property you are selling is your main residence and if you reinvest the proceeds of the sale within 36 months in the acquisition, construction or refurbishment of another property designated as your main residence, within the EU territory or in a territory belonging to the European economic area with whom Portugal has agreements for the exchange of information in tax matters, you can avoid the payment of this capital gains tax
Inheritance Tax – Between close relatives there is no inheritance tax in Portugal. i.e. parents/children and spouses although on gifts you have to calculate a 0.8% stamp duty based on the VPT. Any other situations of inheritance or gift will be subject to stamp duty at a rate of 10% of the VPT.
* Please note that property taxation increases if the company owning the property is domiciled in a 'blacklisted jurisdiction'.
Please note this is general information and for specific advice you should contact a lawyer or tax advisor.