Tax Benefits – Urban Rehabilitation Works

Tax Benefits – Urban Rehabilitation Works

The Portuguese State Budget approved for 2018 extends the tax benefits of IMI (Municipal Property Tax), IMT (Municipal Tax on Real Estate Transfer) and IRS (Tax on Individual Revenue) to owners who undertake rehabilitation of real estate for housing, extending these benefits to real estate throughout the country, as long as the property has more than 30 years. Until now, these tax benefits were only attributed to the real estate that was located within the urban rehabilitation zones defined by the Municipalities.

The Portuguese State Budget for 2018 has eliminated the time limit previously set, that it is no longer mandatory that the works most be completed by December 31, 2020.

The tax benefit in IMT considers the exemption of payment of IMT on the acquisition (natural or legal persons) of a property for rehabilitation and whose works begin within three years after the purchase. In addition, a new IMT payment exemption (by reimbursement a posteriori) will be made on the first transmission of the property after the rehabilitation works, if the new purchaser assigns the house to his permanent dwelling or places it on the rental market.

With regard to the payment of IMI, the Portuguese State Budget for 2018 provides for exemption during the period of three years, from the year in which the rehabilitation works of the property finish. This exemption may be renewed for a period of five years if the property is intended for permanent private housing or is placed on the rental market (excluding local accommodation).

In the IRS, property income from real estate located in urban rehabilitation areas or rehabilitated real estate subject to a phased renewal of rent is subject to a rate of 5%, and this tax rate is applied to the capital gains generated with the first transmission of the property.

Urban rehabilitation has increased significantly in Portugal in recent years, due in large part to the dynamism of the real estate market.

Autor: Ana Viegas Correia
Senior Lawyer – Lisbon Attorneys Corp
23 Janeiro de 2018