Property Transfer Tax What used to be referred to as the Sisa tax (paid on transfer of properties between owners) has become subject to wide-ranging changes to the way property is taxed in Portugal . A new tax, known as Imposto Municipal sobre Transmissoes (IMT), came into force in late 2003 as part of stringent measures to combat avoidance of taxes and underpayment through false declaration of property value. Under the new regulations, all properties will be subject to a valuation according to very strict criteria, and existing properties will be systematically revalued over a period of transition. The local tax department will play a stronger role in monitoring valuations, and if they suspect a property is being undervalued, they will be able to demand a revaluation, to reflect a price more in line with the realistic market price.
The new tax is being worked out according to a rather complicated formula, but in brief, will take into account:
There will be a sliding scale of level of fees payable, ranging from 0-6%. Rustic property will have a flat rate of 5%, commercial property and land 6.5%, and property bought through an offshore company 15%. Given that particular rate, you may be persuaded to think twice about how you fund your purchase.
Other Portuguese Taxes Anyone deemed resident in Portugal will pay taxes to the Portuguese authorities. If you live in Portugal for over 183 days in any calendar year, or you have a permanent home there, you are considered a resident of Portugal . Otherwise, you continue to pay UK taxes. There is an agreement in place to avoid people paying double taxation, but you need to establish to which authorities you will be liable. If you are paying in Portugal , you need a fiscal card with a tax number ( numnero de contribuinte), from the local tax office ( Reparticao das Financas). If you have bought property in Portugal you will already have one of these.
Taxpayers have to submit their own tax returns in Portugal :
(a) Between 1 February and 15 March for earnings from employment and/or pensions.
(b) Between 16 March and 30 April for all other income.
Tax rates range from 14-40%, and there is a whole list of possible deductions you can make, including certain health payments and education. However, as financial regulations often change, you need to make sure your information is the very latest before you fill in the forms. You can get help from the local tax offices or a reputable firm of accountants.
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