Do you own a property in Portugal or are you considering buying a house on the Algarve? Then you will have to deal with the Portuguese property tax: IMI (Imposto Municipal sobre Imóveis). This annual municipal tax applies to almost every property owner in Portugal.

In this blog, we explain when you pay IMI, how the tax is calculated, which exemptions and discounts are possible and how you can easily arrange the payment.

What is IMI?

IMI (Imposto Municipal sobre Imóveis) is the Portuguese property tax. This tax is levied annually by the Portuguese Tax Agency (Autoridade Tributária), with the proceeds benefiting the municipality in which your property is located.

Anyone who owns a home or other property in Portugal on 31 December is in principle liable to pay IMI for that calendar year. 

When do you have to pay IMI?

The tax is determined on the basis of the ownership situation on 31 December. You will then receive the assessment in the following year.

Depending on the amount due, the payment will be distributed as follows:

• Up to €100: one payment, in May.
• Between €100 and €500: two installments, in May and November.
• More than €500: three installments, in May, August and November.

When a property has multiple owners, the tax is automatically divided among the registered owners. 

How is the IMI calculated?

The amount of the IMI is based on the Valor Patrimonial Tributário (VPT), or the tax value of your home. This value is indicated on the Caderneta Predial, the official property document of the Portuguese Tax Agency.

Each municipality determines the IMI rate annually. For homes, this is usually between 0.30% and 0.45% of the tax value. A rate of 0.80% applies to agricultural land. Behind this link you will find an overview of all municipalities

Different rates may apply to homes that were last valued before 2004.

Because municipalities are allowed to adjust their rates annually, it is wise to check the current percentages of your municipality every year.

How can you pay IMI?

There are several ways to comply with your IMI:

• through the local tax office (Finanças);
• online through the portal of the Portuguese Tax Agency (Portal das Finanças);
• via internet banking from a Portuguese bank account with the option "Pagamento ao Estado";
• by direct debit from a Portuguese bank account (Portal das Finanças - Serviços > Débito Direto > Pedido de Adesão).

Don't have a Portuguese bank account? Please note that direct debit or payment from a foreign bank account is not always possible. You will then have to make the payment in a different way.

Can you get an exemption from IMI?

In certain situations, you may be eligible for an exemption. This applies mainly to residents of Portugal who meet specific conditions.

1. Permanent exemption

Low-income households (up to the income limit set by law) can get a permanent exemption if the home is their main residence and the tax value remains below the applicable limit.

2. Temporary exemption

Are you buying a home as a permanent home and do you meet the income and value limits? Then you may be able to apply for a temporary exemption during the first three years.

3. Renovation projects

Homes that are part of a recognised renovation project can, depending on the situation, be exempt from IMI for three to five years.

Possible discounts on IMI

In addition to exemptions, many municipalities have attractive discounts. The discounts available vary by municipality.

Common examples include:

• discount for energy-efficient homes (energy label A or higher);
• discount for homes in urban renewal areas;
• discount for buildings that generate renewable energy;
• discount for monumental or culturally valuable buildings;
• family discount for households with children;
• in some municipalities a discount for rented homes.

Because each municipality applies its own rules, it is wise to check annually which benefits apply in your municipality.

How do you apply for an exemption or discount?

An application can be submitted to the local Departamento de Finanças or online through the Portuguese Tax Agency's portal. To do this, you must of course meet the legal conditions.

We are happy to help you

The Portuguese tax system can be complicated, especially if you are not a permanent resident in Portugal. Do you have questions about the IMI, the tax consequences of a purchase or do you want to know what costs you can expect as an owner?

The team at WESTMARK Real Estate helps international buyers buy and own a property in Portugal on a daily basis. We will be happy to explain what you need to take into account and, if necessary, put you in touch with reliable tax specialists.

Are you considering buying a property in Portugal or do you have questions about your current home? Feel free to contact us. We are happy to help you.

Unique homes. Trusted advice.

Disclaimer

This information has been compiled with care and to the best of our knowledge. Nevertheless, laws and regulations, rates and procedures can change. Therefore, no rights can be derived from the content of this article.

We always advise you to have the information verified by the Portuguese Tax Agency and/or a qualified tax specialist, tailored to your personal situation.