If you are currently rehabilitating a home or may be looking to invest in a rehabilitation project, please know that you may qualify for exemption from IMI. Find out how it works and how you can you apply for this benefit.
Recently the Portuguese Government extended the program “Reabilitar para arrendar” (Rehabilitation for Rent) which aims to create affordable housing for individuals and announced the Financial Instrument for the Rehabilitation and Urban Revitalization (IFRRU 2020), under the Portugal 2020 investment program.
In recent years, urban renewal gained some tax benefits, including exemption from payment of IMI (Council Tax). There are two kind of IMI exemptions available, but these cannot be combined, so get to know these two benefits to choose what best suits your personal situation.
- IMI exemption for three years
According to the law, are exempt from IMI, urban buildings that have been object of urban rehabilitation, for a period of three years following the year of issuance of the respective city council license. “This exemption is dependent on recognition after completion of rehabilitation works and its urban and energy certification”. It means that even though the period of exemption start in the year that is issued the building permit, shall not take place until the local authority has inspected the works and issued the respective habitation license and the energy certificate has also been issued.
Once you have completed this assumption, the city council has 30 days to report to the Local Tax Office the recognition of exemption. The Tax Authorities have then 15 days to cancel the settlement of IMI and to refund the tax that has already been paid.
- IMI exemption for five years
The law also provides exemption of IMI to buildings falling within the approved urban rehabilitation area (ARU), but whose works have already finished. Ie the exemption begins in the year in which they conclude the works and depends on the resolution of the Municipal Assembly. This exemption is valid for five years following the year in which it is concluded the rehabilitation works, but can be renewed for a further five years.
What is the urban rehabilitation area
It is up to the municipal assembly to delimit the areas of urban renewal (ARU). The approval of an ARU gives the area a number of tax benefits associated with municipal taxes on wealth, the IMI and the property transfer tax (IMT). In Tavira for instance, the area of urban development and the Urban Renewal Strategy was defined in April 2014.
Can I choose both incentives?
No the law is quite clear: “The regime provided for in this Article is not cumulative with other tax benefits of a similar nature, not harming, however, opting for the most favorable”. The Tax Authorities have clarified this, stating that “while operating at different times, because they are aimed at creating incentives for urban renewal, have the same nature, and therefore not cumulative.”
And if selling the property?
If you sell the property the exemption remains. Exemptions “are granted in respect of buildings, regardless of the quality of its members,” can be read in the Tax Authorities recent statement. “In appreciation of the respective assumptions, it is irrelevant any change of ownership of the buildings,” concludes the clarification. This means that the benefit is provided to the property and not the taxpayer, so if you decide to sell after being rehabilitated, the new owner can enjoy the same exemption.
If you are looking to invest in Urban Rehabilitation, now might be one of the best times to do it! Besides the IMI Exemption and depending on the region you are investing, there may be other tax incentives, which can make your investment very attractive. Please feel free to visit us for a friendly chat and find out more about the tax incentives available, and also the funding options specially designed for urban rehabilitation.