Over the last months, property owners have been faced with several articles in the press, related with changes in the property tax (IMI). In fact, there will be some changes with regard to the calculation of municipal property tax (IMI), but some of the measures are favorable to families (such as the lowering of the maximum rate IMI), while others may have a punitive effect. We will try to explain what has changed recently.
What is the IMI?
IMI (Imposto Municipal sobre Imóveis – Municipal Property Tax) is a tax on the taxable value of immovable property in Portugal. This tax came into force in 2003, replacing the Council Tax, and reverts to the respective municipalities.
Who pays IMI?
The taxpayer is the property owner as of 31st December of the previous year. This means that if you bought your property at the end of 2015, you will pay the IMI for the full year. Likewise, if you sold your property at the beginning of 2016, you will still need to pay the IMI this year (2016), as it’s always related to the previous year.
How to calculate the IMI?
IMI is calculated based on the Tax Asset Value (VPT) attributed to the property to which is applied a rate set annually by the municipality (VPT x IMI rate). The way the VPT is calculated varies. The VPT is calculated on the basis of various factors such as the construction value per square meter gross floor area, location, quality and comfort and property age, updated every three years.
What will be the main changes in the IMI next year?
1.The maximum rate of the IMI will now be lower
Until last year, the authorities could charge a fee ranging from 0.3% to 0.5%, but with the state budget for 2016, the government lowered the maximum rate of IMI to 0.45%. This measure is already in place, but only when taxpayers receive in 2017 the IMI settlement note (relative to 2016) is to feel the relief. In the Algarve this will have an immediate effect on the properties located in Faro, Loulé, Portimão and Vila Real Sto Antonio, where the tax rate last year was 0.5%.
- Children give fixed discount in IMI
Anyone who has children will have a fixed discount on IMI bill. The discount amount is 20 euros for a child, 40 euros for two children and 70 euros for families with three or more children. Thus, the family discount in this tax shall be the same for all taxpayers, regardless of the taxable value of the property, but only applicable for the main residency.
- The view of the house has a greater weight in the calculation of IMI
It was one of the most recent changes and also one that has generated more controversy. The coefficient of relative location and operation – which takes into account the views and the property exhibition – now has a greater weighting in the calculation of the coefficient of quality and comfort. This means that a house with a panoramic view may suffer a slight increase in the IMI. But beware: These changes will only have effect when a new appraisal of the property is made or if the house is new.
- New location coefficients
The location coefficients is one of the variables to calculate the Tax Asset Value (VPT). These coefficients were reviewed by the tax authorities in 2015. As a result of this review, in some situations the coefficients decreased, other were aggravated. But the impact (whether positive or negative) in the final bill IMI is not automatic. The new coefficients will take effect in the calculation of the VPT in case of revaluation of the property
- The municipal council and parish councils can now also demand a property revaluation.
The revaluation of properties can be made by the Tax Office and also at by request of the owners. But since this year also the town councils and parish councils may request a reassessment of a property, if they consider that their tax value is far from the reality.
- Families in need are more protected
It has come into force this year a new measure that was designed to protect the neediest families with the necessary requirements to be exempt from payment of IMI. These families are now able to maintain this exemption even if they have tax debts. Also the elderly taxpayers with low incomes and low asset value of real estate, may keep the IMI exemption even if they live in a nursing home.
If you wish to find out whether your property tax value is accurate or if you may qualify for a tax discount, please feel free to contact us! We will be happy to discuss your personal situation, whether this is related to IMI or any other tax advice.