New year, new life! At least when it comes to the tax rate for municipal property tax - IMI. In many municipalities, the IMI rates have changed. Even in Lagos, the tax has been reduced from 0.34% to 0.32%, which is very close to the minimum allowed. Lagos has also decided to grant tax relief to its residents in 2022 on their Personal Income Tax - IRS.
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Do you understand what a property tax is? What is it for, how it is paid, and when may you pay it? We rounded up all of the facts here so that you may understand why everyone who owns a home is required to pay this tax.
IMI was established in 2003 and has undergone several constitution revisions since then. The revenue generated from this tax, paid by all property owners, reverts to the Municipal Councils, and it is one of the main sources of financing.
The government is the entity that annually sets the maximum and minimum limits for this tax. The municipalities decide on the percentage of the final rate for each city. For 2021, the minimum rate for the urban property was 0.3%, and the maximum rate was 0.45% or 0.5% in exceptional cases. For rural properties, the rate was 0.8%. Each municipality must disclose the rate applied to the Tax Registration Value – VPT by 31st December each year. Otherwise, the minimum rate is automatically applied.
This year, the rates of the 308 municipalities in Portugal have already been announced. If you still do not know how much you will pay in 2022, you should consult the Finance Portal by entering the year 2021 in the date field and the region where the property in question is located. Here, you will also see if there is a deduction per family. In this case, municipalities can only choose whether or not to apply this deduction, and the values are fixed (€20 for one dependent, €40 for two dependents and €70 for three or more dependents). You should also check the amount of IMI applied to the VPT depending on whether you own an urban or a rural building.
As for deductions per family, you should know that Lagos will not apply this deduction but has a significant tax cut. The city ranks second as the municipality with the lowest tax rate in the Algarve region. In the municipality of Vila do Bispo, the minimum rate set by the government applies, as well as the application of deductions per family. In the neighbouring town of Portimão, the rate has been reduced from 0.43% to 0.42% and deductions per family are also applied.
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In May, taxpayers make their first or one-off payment of IMI, having been informed the previous month by a letter with the bank details.
The payment dates for municipal property tax depend on the amount you pay. In other words, you can pay the IMI in one, two or three instalments. If the amount does not exceed €100, the taxpayer must pay the entire amount in May. If the amount is more than €100 but less than €500, the taxpayer can pay in two instalments in May and November. If the amount exceeds €500, the payment can be made in three instalments: in May, August and the in November. Payments must always be made until the last day of the respective month.
Property owners with a Tax Registration Value - VPT of more than 600,000 euros are liable to a second tax, the additional municipal property tax - AIMI. This is a newer tax that affects municipal buildings and building land.
The municipal property tax - IMI is calculated straightforwardly. All you need to know is your property's Tax Registration Value - VPT and the tax rate of the municipality where your property is located. All you have to do to find out your property's VPT is go to the Finance Portal. Once you have these two figures, multiply the tax value by the VPT to get the total amount to pay.
If you have never asked for this review, you may be paying more IMI than you should. If you think you are in this situation, you can simulate the VPT on the Portal das Finanças to understand whether it is worth applying for a revaluation of IMI. Remember that you should only apply for this revaluation if you are sure that you are paying more than you should. If the reassessment results in a higher score, you will pay more IMI. There are online simulators to help you find out if you should ask the tax office for a revaluation.
Once you have confirmed that you can save on IMI, you can request a new assessment by December 31st each year, taking effect in the following year. You can do this online or at a tax office.
Another option to avoid paying this tax is if the household's annual gross income is less than 15 295 euros and the house's VPT is less than 66 500 euros. The exemption is automatically granted by the Finance Ministry if these conditions are met.
Although we are still in the grip of a pandemic in which all revenues are essential to municipalities, 37 other municipalities have cut their participation in the IRS. The City of Lagos was among those that participated in this initiative, part of the programme "Lagos Apoia – Programa de Apoio às Famílias e Economia Local". The City Council resolved to cut the percentage of IRS involvement for taxpayers from 3% to 1.5%. The municipality of Vila do Bispo agreed to waive 5% and refund this value to inhabitants. The 5% is used for the municipal treasury in Portimão.
What exactly does this support mean? Every year, the government provides each municipality with 5% of the total revenue from IRS collected in that municipality. Since 2008, the municipal assemblies decide what percentage goes into their vaults. If they decide on less than 5%, the balance is refunded to the city taxpayers. In Portugal, 171 municipal councils decided in 2022 to return this revenue to their citizens.
These are the data for municipal property tax (IMI) and personal income tax in the Western Algarve region (IRS). See our recommendations for Algarve real estate.
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