By Ricardo Chaves

1. 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.

2. 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 2021, you will pay the IMI for the full year. Likewise, if you sold your property at the beginning of 2022, you will still need to pay the IMI this year, as it’s always related to the previous year.

3. 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.

4. What is the taxable value?

The taxable value of buildings is its value determined by assessment according to the rules of the IMI Code. This value is registered in the land register.

5. Who determines the IMI rates?

The municipalities decide each year, which tax to apply in their council. This needs to be between 0.3 and 0.45% for buildings and 0.8% for plots (rustic property). Properties with tax domicile in “offshore” are taxed at 7.5%, regardless of the type of property.

6. What are the deadlines for the payment of the IMI?

IMI is paid annually through a single billing document in May, if the tax is up to 100 euros. If the value is between 100 and 500 euros, you pay in two installments, 1st in May and 2nd in November. If the amount exceeds 500 euros, you pay it in three times (May, August and November). Please note that if you wish, you can pay the full amount in May.

7. What are the consequences of not paying the IMI on time?

If you do not pay within the period specified in the collection document, you will pay interest on arrears. If the non-payment persists your property can be seized.

8. Where can the IMI be paid?

IMI can be paid at the Tax Office, Post Office, in any ATM machine or through internet banking. If you wish, you can ask your fiscal representative to set up a direct debit from your account, to make sure you never forget to pay it.

9. Who is entitled to an IMI exemption?

Are exempt from property tax, the owners whose annual income on IRS in the previous year does not exceed 15 295 euros, provided that the book value of the property does not exceed 66,500 euros.

Also, if you bought your main residence and if the tax value of the property does not exceed 125.000€ and your yearly income does not exceed 153k, you can apply for a 3 year IMI exemption.

10. Am I entitled to a discount in the IMI due the number of children?

Since 2016 the law considers the possibility of each municipality, to offer a family discount, based in the number of children. It’s determined by each council and the maximum discounts are: 10%, 15% and 20%, for one, two or three (or more) children.

11. I am paying too much IMI, can I reduce my IMI bill?

It may be possible to reevaluate your property and reduce your tax liability. We have successfully submitted requests to the local tax departments to reduce the tax values of our clients’ properties, thereby saving many on the IMI property tax bills. However please note that any reassessment only takes effects on the following year, as you will only pay IMI for 2022, in 2023.

Please note that if you did not receive your IMI bill, this could be because you have not submitted a tax return in 2020 and incorrectly registered as having no income. This is a mistake and can cost you a lot of money. In this case, please contact us to rectify the situation, avoiding interest or fines.

By Ricardo Chaves

Tax calendar: dates you need to put in your diary for 2022

We wish all readers a healthy year of 2022, and it is our desire that the new year is much easier to everyone than the year we just said goodbye to. Below you can find some of the dates that you need to put in your diary, concerning taxes in Portugal.

Please remember that before you submit your IRS you need to perform some tasks as per the new habits acquired in the previous years: tasks like validating or registering invoices at the tax portal, are now procedures that became part of the routine of any taxpayer. Your role is important in determining your IRS deductions, therefore check the tax calendar, to make sure you don’t lose any deduction or pay any fines.

January

If you have a business activity which was VAT exempt under article 53, but in 2021 you exceeded the VAT threshold, then you need to change your VAT status until the 31st of January. Likewise, if you were paying VAT but did not exceed the threshold in 2021 and wish to become exempt, the same deadline applies.

If you have a rental contract and are not obliged to issue monthly rental receipts, you have until the 31st of January to declare the yearly rental income for 2021.

February

Each taxpayer has until the 25th of February to query, report and verify invoices. To do this you should access the e-Factura portal and access to your personal page, where you should verify if all your invoices have been properly communicated. If you find any failure, or any invoice is not recorded, you can add these invoices to your file. It is also important to check in which category your invoices are recorded and move them into the appropriate section (ie health, education, etc) otherwise the deduction will not be accepted. These procedures need to be performed for each household expenditure holder, including dependants.

It is also important to update or register your household for tax purposes, before 15/02. Please note that this can be very important, not only for tax purposes, but for other related matters, such as inscription at schools, kindergarten, etc and or other tax benefits you may be entitled to.

March

If you became resident in Portugal in 2021 and want to apply for the Non-Habitual Residency scheme, you have until the end of March to submit your application at the tax portal.

During March, you also need to check your e-fatura page at the tax portal and if you feel the information is not correct, you can challenge the calculations made by the Tax Authorities. In other words, your tax deductions will be summarized here, under family general expenses, healthcare expenses, training and education expenses, charges with property for permanent residence, invoices VAT and costs with foster homes; if your total invoices is not consistent with the one totals shown in the portal, you have this two weeks window to contest it. Please note that it’s necessary to check this for each taxpayer.

April

You can submit your IRS (Personal Income Tax) declaration for 2021, from the 1st of April, until the end of June. This means that all declarations can be submitted during these three months, irrespective of your income category (employment income, pension income, self-employment income, rentals, etc.)

Please note that all residents, include Non-Habitual Residents, need to submit a tax declaration, even if they’re income is only pensions, and tax exempt, they still must fulfil this obligation.

All non-residents that have income from Portuguese source (i.e. property rentals, sale of a property, etc) also need to submit a yearly declaration.

May

Payment of the first instalment of the IMI council tax. If in your case, the council tax is lower than 100€, this will be the only payment date you need to remember. If is higher, please look for other instalment dates in August and November.

June

Do not forget to submit the IRS (Personal Income Tax) for 2021 by the end of June. Please remember that if you do not deliver your IRS on time, or if you fail to meet some of the deadlines above, you may lose some or all your tax deductions. Late delivery of your IRS may also cancel your IMI (Council Tax) exemption.

July

If you have IRS tax to receive, the settlement must be made by 31st of July. This is the deadline for the Tax Authorities to refund you.

August

If you have IRS tax to pay, you should make the payment no later than the last day of August, providing you have delivered the tax return within the time limits. If the tax return was submitted after the deadline, payment may be made until 31st of December (fines and interest will apply).

The second instalment of the IMI council tax is due this month. This is applicable for all those where the yearly IMI payment is higher than 500€ per taxpayer.

September

If you have AIMI (additional council tax) to pay, this needs to be paid by the end of September. Remember that are liable for AIMI payment all properties owned by companies. Individual owners are only exempt from AIMI, in the first 600 thousand Euros worth of property (based on the tax value and not in the commercial value).

November

Payment of the third and last instalment of the IMI council tax. This is applicable for all those where the yearly IMI payment is higher than 100€ per taxpayer.

Recurring dates

Please remember that if you have a business activity, you need to report your sales file by the 12th of each month. This also includes business income from AL (rental) license holders.

Each month you also need to issue your monthly rental receipts in case you have a rental contract registered.

The car tax needs to be paid by the last day of the month when the car was registered. Please do not forget this as the fines are high in this case.

If you have a business activity, please remember that each quarter you need to submit a social security declaration, to ascertain how much social security you will pay each month in the following quarter.

If you have any questions, please feel free to contact us; tax planning is critical and you and your company, cannot afford surprises. Contact our office to discuss your personal situation and avoid any unnecessary fines.

By Ricardo Chaves

Each month we receive different questions from our readers, although some of these questions are related to specific situations, sometimes the answer may help you to better understand the tax system in Portugal and answer the queries from other readers.

Q: I am a UK citizen and sold my property in Silves last year with a significant gain. This was our holiday home and we never rented it, only used it for our family and friends. How much tax will I pay and when? Should I pay the tax in Portugal, even when I am tax resident in the UK?

Irrespective of your tax domicile, if you sold a property located in Portugal you need to declare it to the Portuguese tax authorities. This is mandatory regardless of if there was a gain or not, so even when you make a loss, you still need to submit an IRS declaration.

The tax declaration is normally made in the months of April to June of the year following to the sale, in case of individual ownership, or within 30 days after the sale, in case of corporate ownership (companies without activity).

Any tax due will be paid in August of the year following to the sale.

As you are non-resident for tax purposes, the tax applicable to your capital gain, will be 28%. However, Portugal is not following the EU rules as tax residents pay tax just on half of the gain. In face of this discrimination, it’s possible to challenge the tax authority’s decision and pay tax just on half of the gain – 14% of total!

Anyone that paid 28% within the last 4 years on a similar situation, can still issue a formal complaint and receive a tax refund on half of the tax paid. If you wish to know how this can be done, please contact us.

Please be aware that any property transaction performed in Portugal is also reported to the Tax Authorities by the notary that executes the deed. This means that when you declare the sale on your tax declaration, the tax authorities already know of it, so if you fail to include this on your declaration, the taxman will be after you. Don’t try to hide from the tax authorities as they will contact you in the country where you live and the collection can be made by the HMRC for instance.

Please feel free to send us the questions you may have to ricardo@allfinance.pt. We will select some of these to be published.