Tax Benefits for Real Estate Improvements - Urban Rehabilitation

The Article 45 of the EBF (Tax Benefits Statute) continues to provide access to tax exemptions on IMT (Municipal Tax on Transactions) and IMI (Property tax) in cases of Urban Rehabilitation, but there have been significant changes to its text in recent years, which have made its scope more restricted.

Its object is now limited to the verification of the following cumulative conditions:
  • Intervention on an urban building or autonomous fraction with more than 30 years or located in urban rehabilitation areas;
  • The property has been subject to a rehabilitation intervention promoted under the terms of the Legal Regime for Urban Rehabilitation;
  • The conservation status is two levels above the pre-intervention state and has at least a good level under the terms of the applicable legislation - Decree-Law no. 266-B / 2012, of 12/31 and its amendments;
  • The requirements for energy efficiency and thermal quality are complied under the terms of the applicable legislation, in particular the Decree-Law No. 118/2013, of 20/08, and its amendments.

Having fulfilled the requirements listed above, the main benefits granted are:

  • Exemption from IMI for a period of 3 years, from the year of the completion of the rehabilitation works, which can be renewed, by request of the owner, for an additional 5 years in the case of properties leased or used for permanent housing;
  • Exemption from IMT on the acquisition, provided that the acquirer starts the respective works within a maximum period of 3 years from the acquisition date;
  • Exemption from IMT in the first transmission, subsequent to the rehabilitation intervention, when destined to lease for permanent housing or, when located in an urban rehabilitation area, also for own permanent housing;

The mentioned exemptions are granted after the collection of the respective taxes, so they are always given as a refund.

According to the most recent legislative amendment - Law no. 114/2017, of 12/29 - the recognition of the rehabilitation intervention must be requested with the previous communication or with the licensing request to the competent city council, being the responsibility of the city council (or if applicable, the managing entity of the urban rehabilitation) to communicate this recognition to the Tax Authority department of the area of the property.

This communication is made within a maximum period of 20 days from the date of the determination of the state of conservation resulting from the works, or from the issue of the respective energy certification, if later.

The effective refund of the taxes paid must be made by the Tax Authority services within a maximum period of 15 days from the communication referred to above.

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