In Portugal, almost 651 thousand taxpayers were exempt from paying Municipal Property Tax (IMI) in 2024, an exemption justified by low income and reduced asset value of assets. Based on these criteria, the IMI exemption covered 650,907 taxpayers, 2,059,105 rural buildings and 616,980 urban buildingsaccording to information provided by the Ministry of Finance. According to DV/DN, the low heritage value of rustic properties is due to the lack of revaluationbut also the existence of numerous smallholdings in the country, especially in the North and Center regions.
The rustic buildingsa concept that includes lands for agricultural, forestry and livestock activities, but also those that do not have buildings, are no longer assessed for taxation purposes “for at least 50 years”points out a tax expert. Only when they change ownership, whether through inheritance, donation or sale, is their market value (VPT) updated. In these cases, there is an exponential increase, which can be 100% greater, explains the same expert. I.e, When the Tax and Customs Authority moves forward with the (long-promised) revaluation of rural buildings, owners may be faced with significant increases in IMI.
Currently, says the IMI Code, Rural properties and urban properties (or part thereof) intended for the taxpayer’s or family’s own permanent home are exempt from this tax, if the total gross family income does not exceed 2.3 times the value of 14 IAS (Social Support Index) and the global tax asset value of their properties does not exceed 10 times the value of 14 IAS.
In a simpler interpretation, and based on the IAS of 2024, the IPTU exemption was applied to taxpayers (individuals or families) with gross income of up to R$16,398.1 and assets with a taxable value of up to R$71,296.4. For reference, in 2023, the IAS was 480.43 euros. The annual update of the IAS is based on inflation and growth in Gross Domestic Product. This year, it is R$537.13.
According to information provided by the Ministry of Finance, In 2024, 9,158,147 rural buildings and 7,049,118 urban buildings were subject to IMI liquidation. In terms of AIMI – additional tax to IPTU for properties worth more than R$600 thousand, also known as Mortágua tax – 93,516 taxpayers were taxedof which 77,967 legal entities (in the case of companies, foundations, among other entities), based on a universe of 570,961 buildings (not necessarily built properties). 132,488 homes remained exempt for a period of three years. This temporary exemption is granted to families whose total gross income does not exceed 153,300 euros per year and the tax asset value of the house does not exceed 125,000 euros, and also when the property is intended for rental. The exemption can be extended for another two years.
Source of revenue
In 2024, IPTU collection generated revenue for municipalities of 1500.3 million euros, a drop of 0.3% or four million euros compared to the 1504.3 million recorded in 2023. The Municipal Tax on Onerous Transfers (IMT) reached 1,728.5 million euros, maintaining the growth trend seen since 2014 (only interrupted in 2020, the year of the Covid pandemic), with an increase of 0.8% or 14.1 million euros when compared to 2023.
According to the Financial Yearbook of Portuguese Municipalities 2024, the IMT accounted for 42.7% of total municipal direct taxes, while the IMI represented 37%. In large municipalities, the IMT corresponded on average to 45.1% of direct taxes (the IMI, 33%), in medium-sized municipalities to 40.3% (the IMI, 41.5%) and in small municipalities to 36.9% (the IMI, 44.1%).
Last month, the Organization for Economic Cooperation and Development (OECD) proposed reducing taxes on real estate transactions (ITBI) and gradually increasing IPTUamong other fiscal measures, to help grow the housing market in Portugal. These proposals emerged as part of a study on the Portuguese economy, in which the OECD devoted a chapter to the crisis in access to housing, presenting a set of possible solutions to mitigate the problem.
“Reducing transaction taxes and, at the same time, strengthening recurring property taxes, as part of a broader reform package, would help make the real estate market more efficient and could provide room for investment or reduce other taxes,” says the study. For the OECD, house values are outdated for IMI and AIMI purposes, after the exponential rise in prices in recent years. The tax base of these two taxes is based “on cadastral values, which were last revised in 2015”, although they are updated every three years based on inflation and local coefficients. But this “adjustment process seems insufficient”, he says.
The OECD has proposed annual valuations based on recent sales or rental data, combined with property-specific data to compare with similar assets, in order to strengthen property taxation. In the report, he considers that this increase in taxes on property owners “should be done gradually” and “transitional measures should be implemented to protect taxpayers from significant increases”.
Leave a Reply