Changes to IMI with revision of location quotients?

The calculation of property tax (IMI) has become another topic that promises to cause a lot of controversy in the real estate sector in Portugal. This is because the methodology for determining the value of the tax that homeowners have to pay annually to municipalities could be changed due to the revision of location factors. The government is shifting responsibility to municipalities and it is expected that the methodology for calculating the tax base (VPT) may change. We explain.

First of all, it's worth remembering what IMI is:

This is a tax that is based on the VPT assigned to homes and is calculated using several components, including a location factor. This coefficient, as the name suggests, varies''will start soon'," and that it should "necessarily be harmonized with municipalities, experts at regional and local level".

The location quotient update is not due until 2024.

Meanwhile, according to ECO, the zoning ratio update is not due to begin until 2024, or maybe later. And the work won't be completed until 2026, the year of the parliamentary elections and the completion of the Recovery and Resilience Plan (PRR).

According to the publication, the VPT update will only have an automatic impact on IMI if owners or municipalities request a revaluation of properties. However, the Ministry of Finance has rejected the intention to automatically request a VPT revision, which would result in an increase in the amount that''need to be paid under IMI. In other words, the increase will only occur if owners or municipalities petition the tax office for a new VPT assessment, which in turn, given the zoning revisions, will result in higher property values.

"When new zoning revisions are approved - which will not affect 2024 in any way - the revisions will not be directly and immediately reflected on the IMI payment, but will only be applied in cases where a new valuation of the property is made at the request of the owner," said a spokesman for the ministry headed by Fernando Medina, according to the publication.

Is it important to know what the location quotient is and how the IMI is calculated? "

What is the coefficient'. 'locations?

This is one of the elements of the formula for calculating VPT and can range from 0.4 to 3.5, and in the case of scattered housing in rural areas can be reduced to 0.35, writes Jornal de Negócios, recalling that the value varies depending on the purpose of the property (residential, commercial, etc.).

The following factors are taken into account in determining this factor:

• Accessibility (quality and diversity of roads, railroads, river and sea routes);
• Proximity to social facilities (schools, public services, commerce);
• Public transport;
• Location in areas with high market value of real estate;

"Each municipality is divided into zones, which are defined as homogeneous. 'zones to which location factors are applied. The same zone may have different coefficients depending on the purpose of the property: residential, commercial, industrial or services," the publication writes.

How is IMI calculated?

According to Expresso, IMI is calculated based on the rate (0.3% to 0.8%) that is applied to VPT, with several indicators taken into account. Namely:

• Basic value of developed plots, which refers to the average construction cost per square meter (is 665 euros);
• Total built area;
• Destination factor, which varies according to the use of the property, which can be used as industry, housing, parking,'''warehouses, commerce or services;
• Location quotient;
• Quality and comfort factor, which includes items such as pool, garage, elevators or air conditioning;
• The aging factor, which refers to the age of the building;

Thereafter, adds the publication, the IMI rate that applies in each locality is determined by the municipality at the end of each year and reported to the tax office.

There is an example: the owner of a house with a VPT of 200,000 euros in a town with an IMI of 0.3% pays 600 euros of tax per year. That's if he doesn't take advantage of the family IMI, which gives discounts on the amount of tax depending on the number of dependents.

Which properties will be subject to an increase in the coefficient''locations and therefore IMI?

The new ratios, once published, will not automatically apply to all properties, as they will only be used if the property is valued for tax purposes. This will be the case for new construction, when a building is entered into the cadastral matrix for the first time, or if a revaluation of an existing property is made, writes Jornal de Negócios.

IMI will not increase in 2024, confirms Fernando Medina

Meanwhile, in Parliament, Fernando Medina assured that IMI will not go up next year. "The state's budget for 2024 (OE2024) does not provide for an increase in IMI, nor can I prescribe it in the future," the Finance Secretary said at a hearing in the''Parliamentary Committee on Budget and Finance (COF) on the OE2024 proposal.

The minister was responding to a question from Chega MP Andre Ventura.

Fernando Medina's hearing was the first of several on the budget proposal, which will be debated in Parliament on October 30 and 31, with a vote on the final overall version scheduled for November 29.

Note: News updated on Friday (October 27, 2023) at 10:02 a.m. with Fernando Medina's statement in Parliament.