ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

[BUYING AND SELLING REAL ESTATE IN PORTUGAL]

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The taxable basis corresponds to the sum of the VPT of all urban properties owned by each taxpayer, reported as of 1 January of the year concerned. If the owner is an individual, an exclusion from taxation up to € 600,000 applies. Married or living in non-marital partnership taxpayers who opt to submit a joint tax return for AIMI purposes, have an exclusion from AIMI of € 1,200,000. In case of individuals, the AIMI rates vary between 0,7% and 1,5% (progressive rates). For corporate entities, the AIMI rate is 0.4% (with no exclusions on the taxable basis). The value of buildings owned by legal persons and used for the personal use of the holders of the respective capital, the members of corporate bodies or of any administrative, directing, managerial or supervisory bodies or of their spouses, ascendants and descendants, is subject to an aggravate rate of 0.7%, being subject to a marginal rate of 1% for the portion of the value exceeding € 1,000,000 and equal to or less than € 2,000,000, and to a marginal rate of 1.5% for the portion exceeding € 2,000,000. AIMI is assessed by tax authorities in June of each year, being the respective payment made in September. VI.2.3. SPECIAL CONTRIBUTIONS Special Contributions are expressly foreseen in law and are generally 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 are 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. Capital gains deriving from the transmission of Portuguese real estate by non-resident individuals are nowadays generally taxed on 50% of net capital gains (as determined by law) at the IRS general and progressive rates, varying from 14,5% to 48% for annual incomes up to €78.834,00 . Above that threshold an additional flat rate surcharge of 2,5% applies to global incomes of up to € 250,000,00 and of 5% thereafter. When obtained by companies such capital gains are to be taxed under the correspondent Corporate Income Tax applicable regime. 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.

ILN Real Estate Group – Buying and Selling Real Estate Series

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