In 2019, the value per square metre for real estate rose from €603 to €615 per m², an amount that had not changed since 2010. This criterion is key in determining a property’s Rateable Value (“VPT”) and consequently the value of “IMI”. The amount due is fixed by factors such as location, condition, quality, size and age of the property. These coefficients are updated every three years at which time a revaluation of the property can be requested. The final “IMI” due is determined by the tax rate established by each Municipality between 0.3% to 0.45% for urban buildings and 0.8% for rustic land.
Established in 2017, “AIMI” is a supplementary property tax assessed on higher valued properties, based on the sum of all taxable “urban” real estate (“VPT”). This incremental levy is sometimes euphemistically referred to as a Portuguese Wealth Tax. Urban properties classified as “commercial, industrial or service” and “other” are exempt.
In 2019, AIMI rates are as follows:
Companies (non-residential use by owners/directors; otherwise same as Individuals):
0.4% for total of rateable urban “VPT”s;
Individuals (for couples, double exempt value):
0.7% When the total “VPT” value of all properties is between €600,000 and €1,000,000;
1% For “VPT” real estate totals between €1,000,000 and €2,000,000;
1.5% For “VPT” total exceeding two million euros (new in 2019).
Assessment of the Additional to IMI is calculated in June referring to real estate holdings on 01 January of each year. Payment is due in September.
Staying in a hotel or local lodging accommodation in Lisbon became more expensive as of the first of the year due to the increase in the Municipal Tourist Tax from one to two Euros. The local municipality estimates additional revenues from the measure of ±_35 million in 2019.
Parents with children studying in universities in the interior of the country can receive a 40% tax credit in 2019 for expenses up to €1,000. This tax break is an increase from 30% with a maximum of €800 as compared to families whose children normally live and study from home.
Beginning in January, paper invoices will start to be phased out with transactions transmitted in real time directly to the “AT” (Tax Authority). Consumers will only receive a hard copy if requested. It is another step towards the dematerialisation of invoices as part of the Simplex + initiative. In the initial phase, merchants must install the applications to establish a direct link to the Finanças’ e-fatura system via a “QR” (quick response) code. Consumers will no longer need to give out their taxpayer number.
The ink is barely dry on changes to the Local Lodging regime and the ruling Socialist Party is moving forward with proposed amendments in the next year’s State Budget. According to the contemplated update, Local Lodging units should have a minimum coverage of €75,000 a year per claim. The recently approved legislation is vague concerning the amount of liability insurance required.
The rules governing Social Security contributions for self-employed workers are changing in January. Graduated income tax brackets will no longer be the reference point. Payments will be based on 70% of declared earnings in the previous three months, rather than on the total of sole trader income from the previous year. The rate of contributions also drops from 29.6% to 21.4%. Freelancers will have to submit a quarterly statement to determine the relevant income, which will be the basis for Social Security assessment in the following trimester.
Earned income can be adjusted by up to 25% (up or down) so that workers can elect to pay a higher or lower amount that will eventually be reflected in benefits. The new rules also establish a minimum monthly Social Security payment of €20, including periods with no recorded income, as a way to ensure on-going social protection coverage, rather than the start-and-stop method that was used in the past.
Freelancers will keep their current level of Social Security deductions until the end of 2018. In the past, October has served as the basis for updating sole traders’ contributions for the following 12 months. With the new SS regime that begins in January 2019, deduction brackets have been eliminated.
Lisboa will increase the Municipal Tourist Tax in 2019, from one to two euros per night, to strengthen urban cleaning and transportation in neighbourhoods with more pressure from tourism. Initially approved in 2014, the Municipal Tourist Tax began to be applied in January 2016 on the overnight stays in the hotel units or local accommodation, then set at one euro per night up to a maximum of seven euros.
Returning ex-residents will benefit from a 50% exclusion on earnings from salaried employment (Category A) and business and professional income (Category B). Only half of the income will be taxed under the proposed changes in IRS rules. According to the State Budget Proposal for 2019, this regime will apply for five years from the year in which the citizen meets the eligibility conditions. Any entity responsible for withholding income earned by returning former residents will be subject to a withholding tax on half of the attributed income, thus ensuring full application of the tax break.