Madeira Island attracts expat investors for its beauty, safety, and lifestyle. However, understanding property tax in Madeira is essential before committing to real estate. Explicit knowledge helps avoid penalties and ensures maximum benefit from available exemptions.
Municipal Property Tax (IMI)
Firstly, all property owners in Madeira must pay IMI, the municipal property tax.
- Rural properties face a fixed rate of 0.8%.
- Urban properties are taxed between 0.3% and 0.45%.
In contrast, properties held by entities in blacklisted jurisdictions pay a much higher rate of 7.5%.
Municipalities define their exact rates annually, which means amounts vary across Madeira.
Declaring and Registering Property
Secondly, buyers must file the IMI Model 1 declaration within 60 days of acquiring property. This step ensures the tax authority registers the property correctly.
In addition, owners must declare renovations, extensions, or reclassifications. If they fail to update the registry, they risk penalties and incorrect assessments.
IMI Payment Schedule
Next, property tax in Madeira must be paid in one, two, or three instalments, depending on the amount due.
- Below €100: one instalment in May.
- Between €100 and €500: two instalments, in May and November.
- Above €500: three instalments, in May, August, and November.
Alternatively, owners may pay the full amount in May for convenience.
Deductions for Families
Furthermore, municipalities in Madeira may grant deductions for dependent children. Families can benefit from reductions of up to €140 annually.
Therefore, expats with children should ensure their tax residence is updated to access this relief.
Exemptions from IMI
In addition, several exemptions reduce the property tax burden. Newly acquired primary residences may qualify for up to three years of exemption. In some instances, the benefit extends to five years.
Similarly, properties built or renovated for rental purposes may also qualify.
Low-income households can request additional relief.
However, some exemptions require owners to apply within 60 days.
Additional Municipal Property Tax (AIMI)
Besides IMI, investors may face AIMI, the Additional Municipal Property Tax. This tax applies to the combined value of urban residential properties and building plots.
Individuals enjoy a €600,000 allowance. Couples filing jointly can double this amount.
AIMI rates range from 0.7% to 1.5%, while companies pay 0.4%.
However, entities in blacklisted jurisdictions face a punitive rate of 7.5%. Authorities assess AIMI in June and collect payment in September.
Special Benefits and Incentives
Moreover, Madeira rewards investors who renovate properties, improve energy efficiency, or restore historical buildings. These benefits reduce or eliminate IMI.
Consequently, such incentives make property tax in Madeira attractive to expats focused on long-term investment. Yet, compliance with tax and social security rules is essential to enjoy these benefits.
Final Thoughts
Understanding property tax in Madeira is vital for expats seeking real estate opportunities. Investors benefit from relatively low rates, deductions, and exemptions.
Therefore, careful planning ensures compliance and unlocks Madeira’s potential as a secure and rewarding investment place.
This article is provided for general informational purposes only and does not constitute legal or tax advice. The information reflects the rules and practices in force at the time of publication, which may change without prior notice. Readers should not act upon this information without seeking professional advice tailored to their individual circumstances. Madeira Corporate Services accepts no responsibility for any loss or damage arising from reliance on this content.
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