Properties subject to rehabilitation works are exempt from IMI and IMT

Did you know that properties subject to rehabilitation works can benefit their owners in tax terms? The advantages are several and affect several taxes.

Advantages in the IRS

In the sale of a property, which has undergone rehabilitation works by the owner (resident in Portuguese territory), the minimum rate (5%) will be applied in the calculation of the Personal Income Tax-IRS to the resulting capital gains. This tax benefit is only valid for properties located within the Urban Rehabilitation Areas and is expected at least until 2020.

Advantages at IMT

Likewise, properties acquired and subject to rehabilitation works may be exempt from payment of the Municipal Tax on Transactions - IMT for a period of 5 years. This period can be extended for another 5 years after the end of this period. This benefit is important to the extent that, the properties that need works often have a Book Value - VPT higher than the value of the purchase transaction.

On the other hand, as long as the property purchased is located in one of the Urban Rehabilitation Areas and is intended for the buyer's own and permanent home, the buyer will benefit from an exemption from IMT in the first sale transaction.

Finally, the purchase of properties classified as of national interest, public interest or municipal interest benefits from exemption from IMT.

Advantages in IMI

Likewise, you can also benefit from an exemption from IMI on an urban building, provided that the buyer starts the works within a maximum period of 3 years, after the date of purchase. The exemption from IMI for properties within the Urban Rehabilitation Areas is 5 years after the end of the works, and can be renewed for another 5 years, if they introduce significant energy improvements. If the property is outside the ARU, the exemption has a term of 3 years.

In terms of IMI, buildings classified as national monuments or of municipal interest benefit from a more favorable regime, being automatically exempt from IMI, without the need to demonstrate rehabilitation.

Reduced VAT

VAT at a reduced rate of 6% completes the range of tax benefits in urban rehabilitation. In the case of buildings located within the ARU, the applicable VAT rate is 6%, which represents a significant advantage by reducing the effective cost of investments by 17%.

In most cases, VAT paid at the standard rate of 23% on construction is non-deductible and increases the effective charge on materials and labor. Outside the ARU, the law provides for a reduced rate of 6% VAT only for residential properties and subject to a maximum of 20% with the total value of the materials compared to the total cost of the work.

According to the VAT Code, the reduced VAT rate may benefit works contracted by the Institute for Housing and Urban Rehabilitation, or financed by its programs. In addition to these cases, the reduced rate of 6% is limited to rehabilitation works contracted by public bodies and works carried out by housing and construction cooperatives.

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