Proposed changes to tax valuation of property

As part of the 2012 Portuguese Budget there is to be a review on council tax charges. This is based on the reform laid out in 2003.

The 2003 changes established a 10 year period to achieve a general revaluation for tax purposes of all property in Portugal. The Government made various alterations to the IMI Code (CIMI) in order to regulate the general revaluation of urban property including alteration to the body responsible for achieving this.

As from 1^st January 2012 the previous rules established to value existing property will be revoked and there will be a general revaluation of all properties that have not been revalued since 01.01.2004 and any that are not undergoing revaluation under the CIMI scheme as at 1^st December 2011.

This revaluation will be led by the Finance Department (DGCI) assisted by other authorities and the local Câmaras who will be obliged to send property plans either electronically, or in paper format, to the Financas to assist with valuation. It will not be obligatory for the property to be visited to be revalued and the newly calculated values will come into effect on 31.12.2012 for payment of IMI in 2013.

There will be some changes to the existing formulas used to value property and the levels of those should have been established by 30.11.2011.

Notification of the new values will be made electronically where possible and by registered post where not.

There will be a period of 30 days in which an appeal can be lodged and a second valuation requested at a cost to the owner/taxpayer of not less that €204. This second valuation must be made within 60 days of original notification of the valuation.

It is not really possible to give a simplistic overview of the increases as it is the complete basis of the IMI tax which is being changed. Historically, the “Valor Patrimonial” (rateable value) of a property was based on the amount for which the property could be rented out.

Under the new CIMI scheme which was introduced in 2004, the VP is calculated using several different criteria: Location, size, age, quality of construction and extra amenities (e.g. swimming pool). Location seems to be the most important factor, as every area in the country has been given a co-efficient and the higher the co-efficient, the higher the VP will be. For example, locations in the centre of large cities such as Lisbon, or coastal locations with sea views will have a higher co-efficient, so a higher VP. If there are 2 properties very similar in size, but one is in a rural location and the other by the sea, the one by the sea will have a higher VP.

Until now the Finanças has generally not had time to do the revaluations, other than on new properties, change of ownership or where a property has had major alterations done which needed planning permission. The revaluation has been based on the submission of a form IMI1, but this will no longer be required from December 2011. The Finanças will base their revaluations on the information they already hold and information supplied by the local authorities.

Sovereign comment:

Many properties that have been registered with the same title holder for many years including those held by companies could see a dramatic increase in the tax value and consequently in the municipal tax payable. In addition, the “capping” system introduced in 2003 to prevent a tax payer suffering large increase in municipal taxes payable, will no longer apply.

Fortunately there has been a “capping” limit written into the legislation whereby any increase in the IMI payable for the years 2012 and 2013 is limited to the greater of either €75 or 1/3rd of the difference between the IMI payable following the general valuation and that paid due for the year 2011. What happens after 2013 we wait to see!

Whilst every effort has been made to ensure that the details contained herein are correct and up-to-date, this information does not constitute legal or other professional advice. We do not accept any responsibility, legal or otherwise, for any error or omission.

14th January 2011

Sovereign - Consultoria Lda.
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8400-431 Lagoa
Portugal
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www.sovereigngroup.com/portugal