IMT change in 2020 according to Portugal's Stage Budget approval 

In February 2020 Portugal's State Budget has passed and a change to the calculation of the Portuguese property purchase tax (the Imposto Municipal sobre a Transmissão Onerosa de Imóveis, also called IMT) has been approved. The IMT tax is a transfer tax payable when buying Portuguese property and it is the first time since 2014 that a change has been made to the IMT rates. The change in 2020 is related to transfer taxes on properties with purchase prices over €1 million, this so-called municipal tax on onerous property transfers (IMT), will go from 6% to 7.5% for properties purchased above the value of € 1 million in 2020. This is both for properties purchased as a main residency and properties purchased as a second home. All other rates and regulations remain the same. 

HOW IS THE IMT CALCULATED? 

The Portuguese IMT is calculated based on:

1) the purchase price (excl. price for furniture) 

2) the ultimate use of the property 

3) if you are buying the property as your main residency or as a second home and 

4) if the property is located in Portuguese mainland or in the region of the Azores or Madeira islands as these last two regions have a different table.

NOTE: if the purchase price is lower than the tax value of the property (in Portugal called "Valor Patromonial") than the IMT is calculated over the tax value instead of the purchase price. The highest of the two is being used for the calculation. The tax value, or Valor Patrimonial, is registered in the property document named "Caderneta Predial" which is issued by the local tax authority. 

The calculation for urban properties located on the Portuguese mainland, is done by the following IMT table : 

IN SUMMARY THE VARIOUS RATES APPLICABLE 

• for urban properties the IMT rates vary between 0% and 8% and a deductable amount is mentioned for each rate to calculate the payable IMT (according to the table above) 
• for agricultural (rural) properties a fixed rate of 5% is applied, in Portugal agricultural land is classified as "rústica".
• for other properties, a fixed rate of 6,5% is applied (this is for properties not being urban and not being agricultural), for example, a property with a touristic license (instead of a habitation license) or a property with a "casa do campo" license are both classified under "other". 
• for properties located on Madeira Islands and the Azores a different table is used. To see all existing tables on the official document, click here. 

Example 1: 

You are buying a detached house in the mainland of Portugal for € 300.000, with the purpose of being your second home, the property has a habitation license from the townhall and the land is solely classfied as urban land; the sum to calculate the IMT will be: 

€ 300.000 x 8% - € 11.035,25 = € 12.964,75 total IMT to pay (which is ultimately 4% of the purchase price). 

Example 2: 

You are buying a detached house in the mainland of Portugal for € 300.000, with the purpose of being your second home, the property has a habitation license from the townhall and the land has two registered articles, one being urban and another one being rustic; first it needs to be established what the value of the urban part is and what the value of the rustic part is and then you can calculate the sum of the payable IMT. Imagine the rustic part has a value of € 40.000 and the urban part has a value of € 260.000, the calculation for IMT is:  

€ 260.000 x 7% - € 8.163,12 = € 10.036,88 IMT to pay for the urban part 

and 

€ 40.000 x 5% (flat rate for agricultural land) = € 2.000 IMT to pay for the agricultural part 

total of € 12.036,88 IMT to pay for this purchase (which is 4% of the purchase price) 

note: if you buy a property in Portugal inclusive of furniture, you can contribute a value to the furniture and deduct this value from the sales price for the calculation of the IMT. Do note that capital gains to be paid when in the future you sell the house are being calculated between the purchase price excluding the value appointed to furniture and your future sales price. Read more on capital gains in this article. 

WHO IS RESPONSIBLE FOR THE PAYMENT OF THE IMT? AND WHEN? 

Payment of the IMT is the responsibility of the buyer, or their legal representative, and has to be paid before the actual transaction takes place. A proof of payment is taken to the notary to complete the title deed.