IMI: REAL ESTATE TAX
The IMI tax is based on the property’s rateable value as set by the Tax Department. The rate varies from 0.3% to 0.8% annually.
Urban property: 0.3% to 0.45% | Rural property: 0.8% | Property owned by residents in certain off-shore jurisdictions: 7.5% |
ADDITIONAL IMI (AIMI)
The IMI surcharge (Adicional To IMI) is due by individuals and companies that own urban real-estate properties located in Portuguese territory. However, urban properties classified as commercial, industrial or service-providing are outside the scope of the AIMI. The AIMI is assessed on the sum of the taxable value of the urban properties owned by each taxpayer as of January 1 of each year.
INDIVIDUAL AIMI RATES
Up to €600,000: no AIMI | On the value between €600,000 and €1 million (married taxpayers and unmarried cohabiting couples who opt for an aggregated taxation are granted a deduction of €1.2 million): 0.7% | On the value that exceeds €1 million (married taxpayers and unmarried cohabiting couples who opt for an aggregated taxation are granted a deduction of €2 million): 1% |
These rates also apply when a property owned by a legal entity is allocated to the personal use of shareholders, members of the corporate bodies, or of any administrative, management or supervisory bodies (or their spouses or relatives in the ascending or descending lines).
COMPANY AIMI RATES
On the global sum of the taxable value of eligible properties (companies are not entitled to any deduction): 0.4% | Due on the global sum of the taxable value of eligible properties, whenever the company is resident in a tax haven: 7.5% |
Exemptions: Urban properties which have benefited from an IMI exemption in the previous year are excluded from the surcharge taxable basis.
Stamp Duty
Onerous or free transfers of ownership or parts thereof: 0.8% of the value of the transaction or value of the property, whichever is higher | 1. When you inherit a property; 2. When a property is a donation from someone (spouses, descending and ascending relatives who inherit property or who are the beneficiaries of a donation are exempt) 10% Stamp Duty is payable |
TAX CONSIDERATIONS WHEN LIVING IN PORTUGAL
PERSONAL INCOME TAX (IRS)
If a Portugal resident or non-resident individual receives rental income, the earnings may be taxed.
Residents: 28%* autonomous tax rate | Non-Residents: 28% autonomous tax rate |
However, if the taxpayer chooses to tax the rental income along with the rest of their taxable income, that income will be subject to the IRS’s progressive tax rates, which can go as high as 48%. In this situation, the portion of the taxable income that exceeds €80,000 or €250,000, respectively, is subject to a surtax of 2.5% or 5%. The applicable rate may be lowered to 5% if eligible urban rehabilitation works have been performed on the rented property.
CORPORATE INCOME TAX (IRC)
If a resident or non-resident company receives rental income, the sum of the rent, as well as the costs incurred in order to obtain such income, are included in the taxable result of the company.
Residents: the company will be liable to IRC in Portugal, which is due on its taxable profit at a 21% rate, plus: (i) a municipal surcharge at a rate of up to 1.5% levied on the taxable profit, and; (ii) a state surcharge on the part of the taxable profit exceeding €1.5 million, at progressive rates up to 9% | Non-residents without a permanent establishment in Portugal: 25% |
The Non-Habitual Residents Regime in Portugal
The Portuguese Government approved a new regime for non-habitual tax residents in September 2009.
It offers foreign residents and investors reduced tax rates and exemptions on some taxes. The NHRs are taxed at a flat rate of 20% on their income and are exempt from paying taxes on global income. The NHR scheme mainly applies to foreigners, but Portuguese citizens can also access NHR, provided they haven’t lived in Portugal for the previous five years before applying.
Eligibility
It is accessible to non-residents who choose to settle in Portugal, providing they haven’t paid taxes as a Portuguese resident in the five years before moving in. Individuals of other nationalities must apply for a residence permit; EU, EEA, and Switzerland residents are automatically entitled to live in Portugal.
Conditions
An individual must fulfil the requirements by becoming a tax resident of Portugal as defined by Portuguese domestic law. This means that they must either have a home in Portugal that can be regarded as their personal and permanent residence, or they must spend more than 183 days there in a calendar year. The regime is accessible for a fixed 10-year duration and is not extendable.
How does NHR taxation work?
The NHR taxation system basically differentiates between income derived from a domestic source and income derived from a foreign source (global income).
Domestic-Source Income
The regime imposes a flat 20% tax on employment and self-employment income derived in Portugal from high-value-added activities of a scientific, artistic, or technical nature. Other than these high-value-added activities, income is taxed at the standard rates applicable to resident taxpayers.
The same regulations that apply to Portuguese residents’ income in terms of rental income, capital gains, dividends, and interest also apply to income earned in Portugal.
Foreign-source income
Employment income with a foreign source is not subject to tax in Portugal if it is taxed in the country of origin in accordance with a double taxation agreement or an OECD model tax convention. In addition, income must not be considered Portugal-sourced under applicable Portuguese law.
Self-employment income obtained from high-added-value activities, royalties, rental income, and capital gains are also exempt from Portuguese tax, provided they may be taxed in the source country under a double taxation treaty or under the OECD-model tax convention. In addition, income must not be considered Portugal-sourced under applicable Portuguese law.
Occupational pension income is exempt from Portuguese tax as long as it is liable to tax in the source country under a double taxation treaty or it is deemed as not being Portuguese-source income under applicable Portuguese law.
