Property tax: change with location quotients?

The calculation of property tax (IMI) has become another topic that promises to cause a lot of controversy in Portuguese real estate. This is because the way in which the tax that homeowners have to pay annually to municipalities is calculated could be changed due to the revision of location factors. The government holds municipalities responsible and it is expected that the way the tax base (VPT) is calculated may indeed change. We explain.

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

is a tax based on the VPT assigned to homes, which is calculated by taking into account several components, including a location factor. The latter, as the name suggests, varies according to location,''where the property is located, and allows to differentiate between geographical areas in terms of market value.

Recently, in an interview with Jornal de Negócios, Secretary of State for Financial Affairs Nuno Felix said that there is a "mismatch between the VPT of real estate and the reality of the market." The politician noted that "every day revaluations are requested to reduce IMI taxation" and that "there is a commission at this level, which is the National Commission for the Valuation of Urban Buildings, with the participation of the tax office, representatives of municipalities, appraisers and various stakeholders who now have to do the work in this area with regard to the reworking of zoning." "But also in terms of the average cost of construction,'' he added.'''Nuno Felix emphasized that this is "a work that the National Commission for the Evaluation of Urban Buildings will soon begin" and it "must inevitably be coordinated with municipalities, with experts at regional and local level".

The location quotients will not be updated until 2024.

Meanwhile, according to ECO, the zoning coefficient update is not due to begin until 2024, and may start later. The work won't be completed until 2026, the year of the legislative election 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 reassessment of properties. The finance ministry, however,''rejected the intent to automatically request a VPT reassessment, which would result in an increase in the amount to be paid under IMI. That is, the increase would only occur if owners or city officials requested a new VPT assessment from the tax assessor's office, which in turn, with the zoning revision, would result in an increase in property values.

"At the time new zoning is approved - which will never have an impact in 2024 - the revisions are not directly and immediately reflected in the IMI payment, but only apply when a new property valuation occurs, particularly at the request of the owner," said a ministry spokesperson quoted by the publication.

It is important to know what the coefficient is''location and how is IMI calculated?

What is the location quotient?

This is one of the elements of the formula for calculating the 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 house, commercial property, 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 institutions (schools, public services, commerce);
• Public transport;
• Location in high market areas;
'cost.

"Each municipality is divided into zoning, which consists of defining homogeneous zones to which location factors are applied. The same zone may have different ratios depending on whether the property is designated for residential, commercial, industrial or services," the publication writes.

How is IMI calculated?

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

• Basic value of buildings, which refers to the average construction cost per square meter (665 euros);
• Total construction area;
• Utilization factor, which''varies by property use (industrial, residential, parking, warehousing, commercial or service);
• Location factor;
• Quality and comfort factor, including items such as pool, garage, elevators, or air conditioning;
• The aging factor, which refers to the age of the building;

Thereafter, the publication adds, 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, located in a municipality with an IMI rate of 0.3%, pays 600 euros of tax per year. If he cannot benefit from the IMI family deduction, which provides discounts on the amount of tax in''depending on the number of dependents.

Which properties will be affected by the increase in the location factor and therefore IMI?

The new ratios, once published, will not automatically apply to all properties as they will only be used when valuing a property for tax purposes. This will happen for new construction, when the building is first entered in the cadastre, or if there is a revaluation of an existing property, writes Jornal de Negócios.

IMI will not increase in 2024, confirms Fernando Medina.

Meanwhile, in Parliament, Fernando Medina has assured that IMI will not go up next year. "The state's budget for 2024 (OE2024) does not include an increase in IMI, and I cannot