Portugal Tackles Housing Crisis: Young Taxpayers Exempt from IMT and Stamp Duty
Starting from the 1st of August 2024, the Portuguese government has introduced a new measure aimed at addressing the ongoing housing crisis in Portugal.
This measure specifically targets young professionals up to and including the age of 35, offering tax exemptions from IMT and stamp duty on their first home purchase, provided it is their primary residence.
To assist you in comprehending the eligibility criteria for these tax exemptions and their mechanisms, we have delineated the essential details below.
Understanding IMT and Stamp Duty Taxes
IMT, short for Imposto Municipal sobre as Transmissões Onerosas de Imóveis in Portuguese, is the Municipal Property Transfer Tax in Portugal. This tax is levied on real estate transactions, such as buying and selling, and is payable to the Portuguese state.
The IMT rate is not standardised and can vary based on individual circumstances. The applicable rate depends on the nature of the property—whether residential, commercial, or rustic—and its intended use, such as whether it will serve as a primary residence or for another purpose.
The Stamp Tax applies to every contract, document, act, and legal instrument listed in the General Stamp Duty Table. This table outlines every scenario where the stamp duty tax is applicable and the corresponding rate to be paid. For instance, this tax is levied on transactions such as insurance policies and lease agreements.
In this specific case, property buyers are required to pay the stamp duty tax as a percentage of the property's purchase price.
Who Qualifies for IMT and Stamp Duty Exemptions?
The IMT and Stamp Tax exemptions are available to individuals up to and including 35 years of age at the time of the property purchase. In the year of the acquisition of the property, these individuals must not be classified as dependents for personal income tax purposes, even if they reside with their parents until the property purchase is completed.
To qualify for the exemption, individuals must not have been homeowners, either fully or partially, at any time during the three years preceding the property acquisition. This includes ownership through purchase or inheritance; all such situations are considered when determining eligibility.
Does the IMT and Stamp Duty Tax Exemption Also Apply to Young Foreign Residents?
Yes, the tax exemption is available to all individuals who meet the eligibility criteria, regardless of nationality. Therefore, foreign residents in Portugal can also take advantage of this initiative designed by the Portuguese government for young taxpayers to combat the housing crisis.
Which Properties Are Exempt from IMT and Stamp Duty Taxes?
Full exemption from IMT and stamp duty tax applies to properties with a purchase price of up to 316,772 euros. For properties priced above this threshold, the exemption covers up to 316,772 euros, with taxes due only on the portion exceeding this amount, provided the total price of the real estate does not surpass €633,453.
Properties purchased for more than 633,453 euros do not qualify for exemption from IMT and stamp duty taxes.
The IMT and stamp duty tax exemptions are exclusively available for properties intended as the first and primary residence of individuals aged 35 or younger. The property must serve as the new tax address. Exemptions do not apply to properties purchased for other purposes.
Are There Income Limits for Young People to Qualify for Exemptions from IMT and Stamp Duty Taxes?
No, there are no income limits for accessing the IMT and stamp duty tax exemptions. As long as the young taxpayer meets all the required conditions, they can benefit from the exemption regardless of their income level.
If a Couple Buys a House Together and One of Them is Over 35, Do They Lose the Right to IMT and Stamp Duty Tax Exemptions?
In cases where only one member of a couple meets the legal requirements, the exemption will apply solely to that individual's share of the property, which in this instance would be 50%
If a Couple Buys a House Together for Their Permanent Residence, and One of Them Already Owns a Residential Property, Will They be Entitled to IMT and Stamp Duty Tax Exemptions?
When only one person in a couple meets the eligibility criteria, the exemption will be applied solely to the portion of the property that person acquires, which, in this situation, will be 50%.
If the House Ceases to be a Permanent Residence, Can the IMT and Stamp Duty Tax Exemptions be Revoked, and the Taxes Repaid to the State?
The applicability of the exemption depends on specific circumstances. If the owner benefits from the IMT and stamp duty tax exemption, they are required to maintain the property as their permanent residence for a period of six years from the date of acquisition.
There are specific exceptions to this rule where the property may cease to be the primary residence without incurring penalties:
- Property Sale: When the house is sold, the exemption will not apply to any subsequent property purchases.
- Household Changes: If there are changes in the household, such as marriage, divorce, or the addition of new dependents, the exemption remains valid as long as the property continues to serve as a residence.
- Employment Relocation: If there is a workplace relocation more than 100 kilometres from the property, the exemption is maintained provided the property remains used for residential purposes.
This new tax exemption represents a significant step in addressing Portugal's housing crisis, particularly for young residents. By reducing the financial burden of first-time home purchases, the government aims to make homeownership more accessible. As with any major financial decision, potential buyers should carefully consider their individual circumstances and seek professional advice when necessary.
We trust this overview clarifies the eligibility criteria for the IMT and stamp duty tax exemptions for those interested in purchasing property in Portugal. Should you have any questions about real estate acquisition or require legal advice in this regard, please do not hesitate to
contact us. Our team is ready to assist you with expert guidance and support.
