Urban regeneration is not only in vogue, it's here to stay. It’s a sector that has also introduced a new dynamic to the Portuguese real estate market. In fact, there are tax exemptions, benefits and discounts for all those who decide to give a new life to an old house, especially in large urban centres. We show you what they are.
Before starting work, it’s best to be aware of this support. As far as general incentives are concerned, it is important to talk about the Municipal Property Tax (Imposto Municipal sobre Imóveis or IMI), from which renovated properties will be exempt for a period of five years, and the Municipal Property Transfer Tax (Imposto Municipal sobre Transmissões Onerosas de Imóveis or IMT), from which a rehabilitated property is exempt for its first transfer but only when it is destined for use as one’s own permanent residence. According to the Lisbon City Council (Câmara Municipal de Lisboa or CML), six other benefits should be added to the list.
The first of these is the IRS (Imposto sobre o Rendimento das Pessoas Singulares, a tax on citizens’ income), which allows a deduction of 30% of the expenses assumed by the owner related to the renovation, up to a limit of 500 euro. Secondly, there is capital gains tax (mais-valias in Portuguese), which provide for taxation at a reduced rate of 5% where these are entirely derived from the sale of rehabilitated buildings. In the case of refurbishment works, an exemption is granted in the IRC on returns obtained from real estate investment funds, earned between 1st January 2008 and 31st December 2013, and when at least 75% of their assets are real estate subject to certified refurbishment actions.
Also noteworthy is the fact that participation in real estate investment funds are taxed at 10%, within the framework of the IRS, IRC and capital gains.
Finally, it is necessary to include VAT in this list of tax benefits. A 6% reduction is applied in the following situations:
- Urban regeneration works carried out in buildings or public spaces located in the Urban Rehabilitation Area (Área de Reabilitação Urbana), or in the area of requalification and rehabilitation operations of recognised national public interest.
- Rehabilitation, renovation, reformation or conservation works on buildings destined for housing, excepting cleaning works, maintenance of green spaces and works in buildings that cover all or part of the following elements: swimming pools, saunas, tennis courts, golf or minigolf courses or similar installations.
Incentives in Lisbon
In Lisbon, there is a programme called RE9 through which the CML creates the conditions to offer nine advantages for the rehabilitation of properties located in the urban rehabilitation area of Lisbon, which represents around 92% of the city's real estate assets. These include easier access to architectural and engineering projects, access to financing with special conditions (partnership established with Montepio) or the possibility of obtaining construction products and materials at the best prices. There are more benefits, which you can consult here.
Incentives in Porto
Porto Vivo - SRU (Sociedade de Reabilitação Urbana) has created the Viv'a Baixa Programme "which aims to contribute to the revitalization of the physical renovation operations of buildings implemented in the Priority Intervention Zone". This programme can be used by owners and tenants in the historical centre, and its conditions are available in Portuguese via this link.
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