When it comes to owning real estate in Portugal, understanding the tax obligations is crucial. One of the critical taxes that property owners need to be aware of is the Municipal Property Tax, also known as IMI (Imposto Municipal sobre Imóveis). IMI is a tax that applies to the property value of real estate located in Portugal. This comprehensive guide will explore everything you need to know about IMI in Portugal, specifically on Madeira Island, including rates, payment options, exemptions, and more.
Understanding IMI in Portugal
IMI is payable by owners, beneficiary owners, or superficiary owners of real estate property in Portugal. The tax applies to all types of properties, including rural, urban, or mixed real estate. Real estate property includes buildings and land, plantations, and other constructions with economic value. Each independent unit within a horizontal property regime is considered a separate property for IMI purposes. The property’s taxable value is determined through an appraisal conducted in accordance with the IMI Code.
IMI Rates
The rates for IMI vary depending on the type of property. For rural real estate, the general rate is 0.8%, while the IBCM rate is 0.16%. The rates for appraised urban real estate range from 0.3% to 0.45% for the general rate and 0.06% to 0.1% for the IBCM rate. However, it’s important to note that real estate owned by entities residing in tax havens is subject to higher rates, with a general rate of 7.5% and an IBCM rate of 1.5%.
IMI Payment Options
In Portugal, IMI can be paid in different instalments depending on the amount owed. As of 2021, the payment options in the Autonomous Region of Madeira are as follows:
- 1 instalment in May for amounts equal to or greater than €50.
- 2 instalments in May and November for amounts ranging between €50 and €100.
- 5 instalments during the months of July, August, September, October, and November for amounts greater than €100.
These payment options allow property owners to manage their tax obligations effectively.
IMT – Real Estate Transfer Tax
In addition to IMI, property owners in Portugal are also subject to the Real Estate Transfer Tax, known as IMT (Imposto Municipal sobre as Transmissões Onerosas de Imóveis). IMT is applicable to the transfer of property rights or partial rights, including real estate property located in Portugal.
Have a look at Portugal Real Estate Capital Gains: What You Need to Know for 2023.
Characteristics of IMT
The purchaser of the real estate property generally pays IMT. The tax obligation arises at the time of transfer of ownership. The value used for calculating IMT is either the value stated in the deed or contract or the taxable value of the property, whichever is greater. The tax settling responsibility generally falls upon the purchaser, who can submit a declaration at any Tax Office.
IMT Rates
The rates for IMT vary depending on the type and value of the property. For urban buildings or independent units used exclusively for own and permanent residence, the rates are determined based on different brackets. The rates range from 0% for properties valued up to €92,407 to 7.5% for properties with a value greater than €1,000,000. The rates for properties not covered by the previous category follow a similar structure, with rates ranging from 1% to 7.5%, depending on the property value.
Stamp Duty
Apart from IMI and IMT, property owners in Portugal must also consider the Stamp Duty tax. The Stamp Duty applies to a wide range of legal acts, contracts, documents, and other situations specified in the General Stamp Duty Table. It covers various transactions such as rental agreements, successions, cheques, and credit securities. The entities pay the tax with an economic interest in the act and is applicable to acts that have occurred within Portuguese territory.
Characteristics of Stamp Duty
Stamp Duty is applicable to a diverse set of legal acts and situations, making it necessary to consult the General Stamp Duty Table for specific details. The tax is shared proportionally among all interested parties when there is more than one. However, transactions subject to VAT and not exempt from it are not subject to Stamp Duty. The tax is also applied to certain documents, acts, or contracts issued or signed outside of Portuguese territory if they are submitted for legal purposes within the country.
Stamp Duty Rates
The rates for Stamp Duty vary depending on the type of transaction. The rates for the acquisition of urban buildings or independent units exclusively used for own and permanent residence range from 0% for properties valued up to €92,407 to 7.5% for properties with a value greater than €1,000,000. The rates for other urban real estate acquisitions and acquisitions at a cost follow a similar structure, with rates ranging from 1% to 6.5% depending on the property value. Acquisitions of rural real estate are subject to a fixed rate of 5% for the general regime or 1% for the IBCM rate. Entities residing in tax havens are subject to a higher rate of 10%.
Conclusion about IMI Tax in Portugal
Navigating the tax obligations related to property ownership in Portugal can be complex, but with a thorough understanding of IMI, IMT, and Stamp Duty, property owners can ensure compliance and avoid any potential issues. Property owners can effectively manage their tax responsibilities by knowing the rates, payment options, and exemptions associated with these taxes. It’s essential to consult with tax professionals and stay updated on any changes to the tax laws to ensure compliance with the regulations in Portugal.
Remember, understanding and fulfilling your tax obligations is crucial for maintaining a successful and compliant real estate investment in Portugal. Stay informed, seek professional advice, and ensure that you meet all your tax obligations to enjoy the benefits of property ownership in this beautiful country.
Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult a qualified professional for personalized advice based on your circumstances.
Miguel Pinto-Correia holds a Master Degree in International Economics and European Studies from ISEG – Lisbon School of Economics & Management and a Bachelor Degree in Economics from Nova School of Business and Economics. He is a permanent member of the Order of the Economists (Ordem dos Economistas)… Read more
