Tax on the sale of property (IMT*) will start to disappear as from 2017 with a one-third reduction, followed by the scrapping of the tax in 2018, according to a new, refreshing and welcome law published on Friday.
IMT will be replaced by Stamp Duty but before readers start grinding their teeth in annoyance, this will be at half the rate that the current IMT which it replaces.
The IMT tax reduction law in fact is a year late in being enacted and local councils are still incandescent that their revenues will be slashed while central government revenue will rise.
The Finance Minister said today that the new duty will be at half the current IMT rate which will 'lose' an estimated €460 million but should boost the number of property transactions.
The National Association of Portuguese Municipalities (ANMP) disagrees with the elimination of IMT, primarily as council income will be damaged. This is the main reason the government has introduced this seemingly taxpayer-friendly change, i.e. to move the income from property transaction tax from councils to central government.
There was a study into the potential impact of the tax change, commissioned by Portugal’s councils, which unsurprisingly concluded that "the ANMP clearly disagrees with the elimination of IMT without the replacement of municipal revenue."
Simply put, the government is ending IMT, which currently benefits councils, with a lower rate of stamp duty (IMT by any other name) which all will go to the Treasury.
* Imposto Municipal sobre a Transmissão Onerosa de Imóveis
Current exemptions:
Acquisition of properties for resale by Real Estate companies
Acquisition of real estate by Open-end Real Estate Investment Funds
Acquisition of real estate by Real Estate Investment Funds for Residential Letting (FIIAH)
Operations of concentration or cooperation (such as mergers and demergers)
Acquisition of an urban property, object of urban rehabilitation
Acquisition of buildings classified as of national / public / municipal interest
