Only 20 municipalities have extended the IMI exemption to five years. See if it's your municipality

Only 20 of the 308 municipalities in Portugal have joined the measure, included in the More Housing package at the proposal of the PAN, which allows the extension of the temporary exemption from Municipal Property Tax (IMI) from three to five years to those who bought their first home for their own and permanent residence or made rehabilitation works, according to data sent by the Ministry of Finance to ECO. This means that only 6.5% of municipalities have decided to release their citizens from this taxation for another two extra years, in what is the first year of the benefit.

Lisbon and Porto are not on the list of chambers that have extended the exemption period , as well as most district capitals, with the exception of Leiria and Santarém.

In addition to these requirements, the extension for another two years requires that the acquisition of the building must have taken place between 2020 and 2022. In other words, properties purchased in 2020 and that have already enjoyed the three-year exemption — which ended in 2022 — will be entitled to another two years without paying the tax, if the municipality where it is located has approved the mechanism in a municipal assembly. The same applies to the houses sold in 2021 and 2022.

Law no. 56/2023, of October 6, which approved Mais Habitação, expressly states that the benefit "applies to buildings or part of urban residential buildings whose construction, expansion, improvement or acquisition for consideration has taken place in the year 2022 or that, having occurred at a previous time, have benefited from the exemption provided for" in the Statute of Tax Benefits (EBF) in 2022, in which cases the years already elapsed will be deducted from the duration of the exemption".

Deloitte's tax expert, Renato Carreira, explains that "the count of the three normal years of the exemption is done as follows: the property acquired in 2020 is entitled to the tax benefit in 2020, 2021 and 2022". However, "the owner only starts paying in 2024, because the IMI to be paid always refers to the previous year subject to taxation, that is, 2023", he stresses. If it is now granted two more years of exemption, for 2025 and 2026, it will only pay tax to the municipality again from 2028, with reference to 2027, the year in which it loses the additional exemption.

In the circumstance that the property was purchased in 2022, the three regular years of the tax benefit apply in 2022, 2023 and 2024, plus two extra, relating to 2025 and 2026, it means that this owner will only start paying tax in 2028, for the year 2027, since the IMI settlement always takes place in the year following the year subject to taxation, as in the IRS.

Properties acquired to be placed on the rental market are also eligible for IMI exemption for five years, provided that the contract is for own and permanent housing, and the requirements already indicated in relation to the ceilings for the landlord's annual earnings are met,  patrimonial value of the house and date of disposal, in accordance with article 46 of the Statute of Tax Benefits (EBF).

Thus, and according to the wording introduced by Mais Habitação, the EBF indicates that "the exemption period to be granted is three years, applicable to urban buildings whose taxable patrimonial value does not exceed 125 thousand euros, extendable for two more, by resolution of the municipal assembly, which must be communicated to the Tax and Customs Authority, by electronic data transmission, by December 31, to be in force the following year".

City councils have the power to propose to municipal assemblies the extension of the exemption period from three to five years , which can then approve or reject the benefit. Lisbon and Porto are not on the list of chambers that have extended the exemption period, as well as most of the district capitals with the exception of Leiria and Santarém.

Central region concentrates more chambers that extended the exemption period

The central region has the largest number of municipalities that have extended the tax benefit. In all, there are eight, namely Estarreja, Vila Nova de Foz Coa, Vila Nova de Paiva. Alvaiázere, Leiria, Pombal, Rio Maior and Santarém.

In second place, the north and south are tied, with four chambers each approving the measure, namely Paços de Ferreira, Santo Tirso, in the district of Porto, Vila Verde, in Braga, and Valpaços, in Vila Real. In the district of Faro, Castro Marim, Lagoa, Portimão and Silves also advanced with support.

The municipality of Porto revealed to ECO that it chose not to move forward with this instrument, "because, since December 4, 2018, the Regulation of Municipal Tax Exemptions of the Municipality of Porto has been in force", which provides for "the reduction of 50% of the IMI for a period of five years, extendable for another five, for leased urban buildings, provided that the amount of rent practiced complies with the legal rules applicable to conditional rents (Law No. 80/2014, of 19 December)".

"This tax measure, a municipal initiative, has an objective aimed at rent-conditional rentals, integrated in the executive's strategic objective of promoting affordable housing in the municipality's area, thus not being intended for all housing subject to lease, as recommended" in the More Housing law, "which applies to most leases, regardless of the value of the rent practiced", justifies the municipality, led by Rui Moreira. In fact, landlords who enter into lease contracts for permanent housing can benefit from the extension of the IMI exemption, regardless of the amount of the rent, under the Statute of Tax Benefits.

In the Greater Lisbon area, only Cascais, Vila Franca de Xira and Moita have decided to extend the IMI exemption to five years. It should be noted that, in the case of the Cascais municipality, led by the social democrat Carlos Carreiras, the support "was proposed by the PAN, in prior consultation within the scope of the municipal budget", an official party source told ECO.

As for the number of families who are benefiting from the exemption for another two years in the municipality of Cascais, an official source from the municipality said that "it was not possible, on this date, to have information on the number of households covered by this measure". "This information will only be made available by the Tax Authority in 2026", he added.

Lisbon and Sintra were also questioned by ECO but did not respond, and the municipality of the capital, chaired by Carlos Moedas, referred to news on this matter for later.

In Alentejo, only Vila Viçosa, in the district of Évora, approved the extension of the IMI exemption for another two years.

Lack of disclosure by the previous Government and lack of knowledge of the chambers

The poor adherence of municipalities to the extension of the IMI exemption to five years is due to "the lack of disclosure by the previous Government", of António Costa, and "the lack of knowledge" of municipalities, concludes Inês de Sousa Real, leader and sole deputy of the PAN, in a reaction sent to ECO.

"I remind you that we are talking about a measure that, after being approved, was not the subject of any disclosure by the previous Government and a proposal that, although important, deserved little attention by the media when it was approved. This lack of disclosure by the Government and the lack of knowledge on the part of the municipal councils was what led to there not being as many adhesions as expected", writes the spokeswoman for the party that authored the proposal that gave rise to the tax benefit.

Although only 6.5% of the municipalities have advanced with the non-taxation of properties for another two years, "the figures in question reveal that this PAN measure has managed to reach areas of the country where the housing crisis is felt with great intensity, such as the municipalities of Cascais, Vila Franca de Xira and Moita or the Algarve region (with four municipalities adopting the measure)", he stresses.

Aware that this tool "would have a gradual implementation in the 308 municipalities of the country", the PAN proposed "a transitional rule that allowed the inclusion in the scope of this exemption" the first homes purchased since 2020, recalls Inês de Sousa Real. In this way, she explains, "the municipalities will be able to welcome this measure and the inclusion of a greater number of families is guaranteed, even if it is not in this first year of the measure".

"Due to the potential for tax relief for families associated with this measure", the PAN understands that "it is essential that the Government, at the beginning of what is the last half of the year and at a stage when municipal budgets for 2025 are beginning to be prepared, make an effort to disseminate this instrument to the municipalities, using the Directorate-General for Local Authorities for this purpose", he argues.

In this sense, the PAN also proposed a resolution that was approved by Parliament and published in the Official Gazette, in early July, which recommends to the Government "a greater disclosure of the possibility of extension, for two years, exemption from Municipal Property Tax on the purchase of a home".

In addition, "it is essential that the Tax Authority ensures greater public dissemination of this instrument among citizens, revealing in a simplified way its existence and the municipalities where it is in force", he stresses. The PAN leader considers that "the knowledge of this possibility by citizens may generate greater pressure on city councils to ensure its adoption".