For many years the Portuguese government has been promising to reform the existing tax system in relation to properties and inheritance and gift tax, which has been subject to tax abuse for many years.
In a meeting held in Ferreira on 6th April of this year (2003), new proposals have been made which will affect the following taxes:
- Sisa = Transfer tax on properties
- Contribuição Autarquica = Rates
- Imposto de doações e sucessões = Gift and Inheritance tax.
The proposals are as follows:
" Sisa and Contribuição Autarquica will get a different name, gift and inheritance tax maybe abolished as long as it favours surviving partners, children and parents. In case other people will inherit, the existing tax will be replaced by a stamp duty of most likely 10%
" The Contribuição Autarquica will be replaced by the IMI (Imposto Municipal sobre Imóveis)
" Taxes on new properties will be reduced, whilst rates on older properties may be gradually increased.
" The Sisa will be replaced by the IMT (Imposto Municipal sobre as Transmissões) and the maximum tax will be 6% instead of the current 10%. Whilst current properties below 61.000 are exempt for paying tax this figure will be raised to 80.000.
" If the Finançes (tax department) doubt the declared value, they will carry out a valuation of the property in question, which will be binding, this in order to avoid tax evasion.
" Whilst a flat rate tax of 10% at the moment comes into effect for properties with a value of 170.000. Under the new regime the maximum of 6% will be only applicable for properties with a value of 500.000.
" However it is the intention of the government to increase the new IMT by 1% (1% point) if the property is destined as a second home or to rent out.
" As at the moment it could well be that landlords have to pay more tax than they receive in income the has government also decided to take steps to avoid that. One could be that rental will be liberalised
" The Contribuição Autarquica at the present moment is between 0, 7 and 1, 3% of the rateable value (V.T.). For new properties this will be reduced to between 0, 2 and 0, 5%. For remaining properties a tax will be levied between 0, 4 and 0, 8%.
" The government intends to lower the rates especially for properties built after the second half of the eighties, whilst older properties will see a moderate and gradual increase.
" To reach the correct figure 5 points will be taken into consideration:
Quality and comfort
Age of the property
" It is obvious that all realestate in Portugal has to be reassessed and estimates suggest this may take up to 15 years to carry out. However one is aiming to have it completed in 5 years time.
" The 1st. of January 2004 will be the new starting date for these new introductions.
" Some professional organisations, like the realestate lobby and developers have expressed concern that people now want to wait with purchasing or signing Escrituras until the new law comes info effect.
The 9th. of April 2004.
One week later;
In the last paragraph it was mentioned already that there was objection from several organisations, like builders and real-estate agent. No doubt that potential buyer would sit back and wait for thing to come.
In a declining economy and with a recession there it would not be something people are waiting for. Therefore in a swift move the government has decided to try to implement part of this ta