New property tax laws 2004

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For many years, the Portuguese government has been promising to reform the existing tax system in relation to private estate (Patrimonium), inheritance, and gift tax.

During the last couple of months a new tax reform was presented to Parliament and approved and part of it, the new Sisa (transfer tax) now called I.M.I. has become affective already as from 1-6-2003.

The changes concern the following taxes.

  1. Sisa = Transfer tax on properties

  2. Contribuição Autarquica = Rates

  3. Imposto de doações e sucessões = Gift and Inheritance tax.

The changes are the following:

  • Sisa and Contribuição Autarquica will get a different name, gift and inheritance tax will be abolished as long as it favours surviving partners, children and parents. In case other people inherit, a stamp duty (Imposto de Selo) of 10% will replace the existing tax.

  • The Contribuição Autarquica will be replaced by the IMI (Imposto Municipal sobre Imóveis)

  • Taxes and Rates on new(er) properties will be reduced, whilst rates on older properties will most likely suffer an increase especially when their rateable value is historically low.

  • The main intention of the law is to bring these values of V.T. (Valor Tributável) more in line with present market values as at this stage there is a big discrepancy between those figures.

  • The Sisa has been replaced by the I.M.T. (Imposto Municipal sobre as Transmissões) and the maximum tax will be 6% instead of the current 10%.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.

  • Whilst a flat rate tax of 10% in the past (before 1-6-2003) was applicable for properties with a value of € 170.000 and higher, under the present regime (since 1-6-2003) the maximum of 6% will be only applicable for properties with a value of € 500.000.

  • If the Finançes (tax department) doubts the declared value, they may carry out a valuation of the property in question, which will be binding. In addition, the local town hall will have first option to purchase for the declared price if they feel the declared price is too low.

  • The Contribuição Autarquica at present and still over 2003 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% if already valued under the new scheme of the CIMI) On other and remaining properties a tax will be levied between 0,4 and 0,8% over a corrected V.T. value. The percentage will be published by the local tax department before the end of this year.

  • It is the intention of the tax departments that all existing properties will receive a new value of V.T. before the end of this year. This figure will be reached by multiplying the present V.T. by an inflation correction factor (monetary index) , which could be between 1 en 44 times the existing value depending on when it was last done.

  • The government intends to lower the rates especially for new properties. This will be achieved by lowering the percentage whilst the figure of the V.T. for never properties will remain unchanged or only will undergo a small correction.

  • However, there will be a limit to the yearly increase for individual owners in case the value comes out much higher.

An example: The V.T. value of a property is now € 50.000 and the local rate percentage is 1,3% (like in Lagos and Lagôa). The yearly tax to be paid will be € 650

In case the new value will be € 150.000 and the percentage charged by the individual town council will be 0,7% the rates to be paid should be € 1.050.

However there is a clause in the new law (Cláusula de Sa

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