[BUYING AND SELLING REAL ESTATE IN PORTUGAL]
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at € 1.000.000,00, or when the purchaser, not as an individual, has office at tax haven (7.5%). VI.1.2. VAT (“IVA”) Under Portuguese law, real estate acquisitions are exempted from VAT.
VII. LEASING LEGAL FRAMEWORK VII.1. GENERAL ISSUES In Portugal, leasing is, day by day, acquiring a more relevant economic weight. On 14 August 2012, in compliance with the terms established in the memorandum of understanding executed by and between Portugal, the European Commission, the European Central Bank and the International Monetary Fund, a pack of Laws entered into force with the purpose of implementing structural reforms in the Portuguese legal framework of real estate lease to boost the market. The real estate lease is divided into two types: (i) leases for non-housing purposes and (ii) leases for housing purposes. VII.2. LEASES FOR NON-HOUSING PURPOSES The most relevant aspects of lease agreements for non-housing purposes, usually for commercial or industrial purposes, can be freely stipulated by the parties, who are, accordingly, free to agree on issues related to duration, termination, and opposition to the renewal of lease contracts, with subsidiary application of the rules regarding leases for housing purposes. However, in the first five years after the beginning of the contract, regardless of the stipulated period, the landlord cannot oppose the renewal. According to the law, the lease agreements may be entered into for fixed term or be of non-specified duration. The last option is not commonly used in the property market in recent years. If no provision is made by the parties, the contract is deemed to be concluded for a fixed term, for a period of five years. If entered on a fixed-term basis, the duration may be freely agreed between the
VI.2. PROPERTY OWNERSHIP VI.2.1. PROPERTY TAX - “IMI”
IMI is levied on a property’s taxable value and is payable by the property owners on 31 December of each year. Nowadays, IMI reaches a variable rate between 0.3% and 0.45% for urban buildings and plots for construction, a fixed rate of 0.8% for rural property, and a fixed rate of 7.5% for
owners’ resident in tax havens. VI.2.2. SPECIAL CONTRIBUTIONS
Special Contributions are required when properties are destined to the construction of new buildings and whenever the value of plots of land for construction increases significantly due to major infrastructure public works carried out (mostly in Lisbon, Porto, and their outskirts). The applicable rate varies between 20% and 30% and is levied on the aforesaid increased value. VI.2.3. TAX ON INCOME FROM PROPERTY OBTAINED IN PORTUGAL BY NON- RESIDENTS Income from property obtained in Portugal by non-residents (e.g., leases) is taxable at a special rate of 28% (applicable to individuals), or 25% (applicable to corporate entities), being in both cases subject to a 25% withholding tax.
ILN Real Estate Group – Buying and Selling Real Estate Series
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