Since August 1, measures are in force to promote access to housing for young people, with a view to strengthening personal and family stability, leading to wealth creation and the country’s economic and social development, as they also hope to attract highly-qualified people.
The Municipal Tax on Property Transfer (IMT) is a tax charged whenever a house is purchased. This is applied to the Tax Patrimonial Value (VPT) or the value declared in the deed and is applied to the higher of these two values.
However, young people up to 35 years old may benefit from exemption from this tax, as long as the tax asset value (VPT) or the value declared in the deed does not exceed €316,772, which corresponds to the 4th tax bracket of IMT.
The Imposto do Selo (IS, or Stamp Duty), charged on the value of the deed, will also be exempt under the same conditions as the IMT.
Under the measures in force, exemption from IMT and IS applies to young people up to the age of 35 on the date of the deed of sale, provided that they are not considered to be dependents for Personal Income Tax purposes in the year of purchase.
This exemption does not apply to taxpayers who hold ownership rights, or partial ownership rights, in an urban residential building at the time of the transfer or at any time during the previous three years.
The benefits also do not apply if the property is used for purposes other than those for which the benefit was granted, within a period of six years from the date of acquisition, except in the event of sale, change of household or change of place of work at a distance of more than 100 kilometres from the property.
The exemption from IMT is granted to property with a value of € 316,772 or less. If the property has a value higher than € 316,772 and equal to or less than € 633,453, the IMT will only be calculated on the remaining value, taking into account the rates set out in the IMT Code. The exemption is partial between €316,772 and €633,453.
This measure applies to all young people who meet the requirements, regardless of nationality.
In addition to the previously mentioned tax exemption rules, the current scheme also allows the State to grant a personal guarantee to credit institutions, to enable permanent housing loans to be granted to young people up to the age of 35.
Under the terms of the legal regime, the guarantee may be granted to credit institutions where the following cumulative conditions are met for the first purchase of a permanent home:
- the borrower is aged between 18 and 35
- is resident in Portugal for tax purposes
- taxpayers whose taxable income is not comprised within the 8th tax bracket of the Personal Tax Income (€81,199 annually or around €5,800 per month)
- does not own an urban building or a self-contained fraction of an urban residential building
- has never been personally guaranteed by the State
- the value of the transaction does not exceed €450,000
- the State’s personal guarantee does not exceed 15% of the transaction value of the urban property or the autonomous part of an urban property
- the State’s personal guarantee is intended to enable the credit institution to finance the entire transaction price of the urban property or the autonomous part of an urban property.
Finally, the registration of the first purchase of a permanent home and the registration of a voluntary mortgage to guarantee the loan granted, the value of which does not exceed €316,772, are exempt from duty.
These measures can be applied simultaneously but, depending on the particular aspects of each situation, it may be that only one of them can be applied since, given the requirements set out, there may be situations that are eligible for the granting of a guarantee but not eligible for exemption from IMT and IS.
By Dr Eduardo Serra Jorge
|| features@algarveresident.com
Dr Eduardo Serra Jorge is founding member, senior partner and CEO of lawyers firm Eduardo Serra Jorge & Maria José Garcia – Sociedade de Advogados, R.L., created in 1987.
In his column, he addresses legal issues affecting foreign residents in Portugal.
Faro office at Gaveto das Ruas Pedro Nunes e José de Matos, 5 R/C
289 829 326
