Municipal Property Transfer Tax Code with new rules

Some measures include updating the brackets for determining the IMT rate applicable to the transfer of urban residential buildings, including the value of active crypto assets in the IMT tax base, new restrictions on property exchange and the exemption for acquiring buildings for resale.
Articles 23/02/2023

The State Budget Law for 2023, with new rules in the scope of the Municipal Property Transfer Tax (IMT) Code, has particularly impacted the real estate investment field.

These alterations include an update to the brackets for determining the IMT rate applicable to the transfer of urban residential buildings, the inclusion of the value of crypto-active assets in the IMT taxable base, but, essentially, new restrictions on the property exchange and exemption for the acquisition of buildings for resale.

In practice, the exchange of real estate is a real estate discussion. The tax advantage of the regime of business of real estate about the purchase and sale is visible, starting with the scope of its taxation, insofar as only the declared difference in the value of the real estate (when this is greater than the difference between the taxable patrimonial values) is considered as the basis for tax liquidation.

However, the new State Budget has made access to this benefit more difficult by stipulating that if any of the property exchanged is sold within a year of the date of exchange, a 30-day period begins to run from the date of sale to pay IMT on the total value.

The State Budget has also altered the exemption regime for acquiring buildings for resale.

The purchaser who usually and habitually engages in the activity of buying and selling real estate and who used only to need to acquire a property for resale in the previous year to benefit from the IMT exemption is now required to have resold a property acquired for this purpose not only in the last year but in the two previous years.

It means a company formed this year can only benefit from IMT exemption in 2025, assuming it resells a property in both years.
What’s more, for a company to benefit from the IMT exemption to be paid on acquisitions occurring in 2023, it will always have to have already resold at least one property, both in 2021 and 2022 – which has perplexed the real estate sector, given the absence of any prior indication in this regard (this new rule did not even appear in the State Budget project) as well as the lack of provision for a transitory regime in this matter.

It should be noted that despite the reinforcement of the requirements for obtaining the exemption “ab initio”, the possibility of refunding the IMT paid in a given operation is maintained if the property acquired for resale is transferred, other than for resale, within a maximum period of three years. However, this is still a less attractive regime, interfering with the cash flow of economic agents, who must pay the tax at the time of acquisition.

These changes represent a step backwards in the tax system. Moreover, given the considerable role of real estate investment in the economy, it may even mean a decrease in the country’s economic growth.

It remains to be seen what the next State Budget has in store for the real estate sector, but given the trends over the last few years, it could be better for good news.

The content of this information does not constitute any specific legal advice; the latter can only be given when faced with a specific case. Please contact us for any further clarification or information deemed necessary in what concerns the application of the law.

Practice Areas

  • Tax Law