The tax is payable by property owners and not by tenants. Property tax is based on the fiscal or rateable value ( valor tributavel) of a property as shown in the fiscal register ( matriz predial). Previously the fiscal value of a property was well below its actual value, although there have been a number of re-valuations in the last decade and fiscal values are now closer to actual values. A property’s fiscal value is based on its market value, location and the standard of local services.
Property is valued under three classifications: urban property ( prédios urbano), rural property ( prédios rustica) and a mixture of these two ( prédios misto). For urban property the tax rate is between 0.7 and 1.3 per cent of a property’s fiscal or rateable value (valor tributavel). Therefore, if you own a property with a fiscal value of €100,000 situated in a town, your property tax will be between €700 and €1,300. For rural property (i.e. non-building land outside an urban site and houses and buildings used strictly for agriculture and rural activities) the tax rate is a flat 0.8 per cent of the fiscal value (€800 for a property worth €100,000).
Note that under a new law introduced in 2002 property in Portugal owned by entities resident in a jurisdiction with a more favourable tax regime than Portugal, e.g. offshore companies, is subject to property tax at a fixed rate of 2 per cent. Therefore a property with a fiscal value of €100,000 situated in a town will be liable for €2,000 property tax annually.
You should receive a notification of the amount payable between January and April from the Direcção das Contribuiçães e Impostos of the Ministry of Finance in Lisbon. If you don’t receive a notification you should contact your local tax office, as it may not have been sent or been lost in the post. Property tax is usually invoiced in arrears and payable in two instalments, the first in April and the second in September. Therefore in September 2002 you would be invoiced for the second instalment of property tax for 2001. Payment can be made at your local tax office ( finanças), a main post office and at designated banks. Always ensure that you receive a receipt.
If you’ve purchased a property and paid SISA, you may be exempt from paying property tax for up to ten years, depending on the property’s fiscal value. To qualify the property must be occupied within six months of signing the deeds, the owner must be a permanent resident and the property owned in the name of a private individual (not a company).
An application for exemption must be made to the local tax office within 90 days of the completion of the sale. If you make a late application or pay property tax when it isn’t due, you cannot claim a refund or extend the exemption period, which runs from the date of completion. If you sell within the exemption period, a subsequent owner can also claim an exemption from property tax.
This article is an extract from Buying a Home in Portugal.