16 CONSTRUCTION

IMI - increased rate (7.5% / year)

José Freitas Jan 5, 2024

The Tax Authority recently released its interpretation of the increased IMI rate applicable to real estate owned by companies controlled or controlled, directly or indirectly, by an entity that has its tax domicile in a country, territory or region subject to a more favorable tax regime, as set out in a list approved by order of the Minister of Finance.  

In this set of documents recently made available, the Tax Authority argues that, among other cases, the increased rate is applicable even when the "entity that is tax resident in a country, territory or region subject to a more favorable tax regime" is a natural person.

In our opinion, this interpretation does not comply with the law.  

However, our recommendation is that companies that own real estate located in Portugal re-examine their corporate structures.

The Property Tax Code in Portugal provides for an increased rate of 7.5% per year, applicable to the taxable asset value, when two cumulative requirements are met: 

  • An entity owns real estate in Portugal
  • This entity is dominated or controlled, directly or indirectly, by an entity that has its tax domicile in a country, territory or region subject to a more favorable tax regime, included in a list approved by order of the Minister of Finance

For this purpose, a relationship of control is considered to exist when one entity (the dominant one) can exercise, directly or through companies or persons that meet the requirements set out in Article 483(2) of the Companies Code, a dominant influence over the other, said to be dependent.  

A company is presumed to be dependent on another if the latter, directly or indirectly: 

  • Holds a majority stake in the capital
  • Holds more than half of the votes
  • Has the possibility of appointing more than half of the members of the management body or the supervisory body

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