FLASH NEWS

Tax Changes for 2019

Following the publication of the state budget law for 2019, some provisions were amended and others added to the main tax codes in force. Given its importance, we will highlight three measures approved for the Personal Income Tax Code (“PIT”) and the Municipal Tax on Real Estate (“IMI”).

1. CAPITAL GAINS

The first innovation is regarding the regime for real estate capital gains. From now on, the income derived from a real estate sale is to be fully considered when calculating the tax due, assuming that i) there has been granted non-reimbursable State financial support when purchasing, constructing or carrying out of conservation works on the property, ii) the total amount of the financial support granted is 30%, or more, of the VPT (real estate’s taxable value) and iii) it is not sold within 10 years of the date of acquisition, construction or carrying out of works. Not only will this capital gain be taxable, regardless of reinvestment in a new main and permanent home, as it will be fully considered for tax purposes (as appose to the previous benefit of 50% exemption).

2. TAX REGIME FOR EX-RESIDENTS

The state budget law for 2019 created, as expected, a tax regime that aims to motivate the repatriation of people who emigrated abroad in the past recent years. Thus, if the taxpayer: i) has not been a tax resident in Portuguese territory in any of the previous 3 years, ii) was deemed as resident before the 31st of December, 2015 and iii) has his tax status regularized, he may benefit, for a period of 4 years, from a 50% exemption on employment income as well as business and professional income received.

The application of this exemption is granted if the taxpayer becomes a resident in Portugal in the year of 2019 or 2020.

It should be noted that this regime does not overlap with the non-habitual resident (NHR) status, so it will be necessary to carry out a case-by-case analysis to assess the benefits obtained with both regimes.

3. MUNICIPAL TAX ON REAL ESTATE

Under the new surtax of the Municipal Tax on Real Estate, a new taxable band was created for natural persons. Consequently, the taxation of real estate assets, after the application of the deductions foreseen, will follow the following table:

Up to €1.000.000

0,7%

€1.000.000,01 to €2.000.000

1%

€2.000.000,01 or over

1,5%

The same rates apply in the case of real estate owned by legal persons for the personal use of their owners, of the members of the corporate bodies or of any administrative, management or supervisory bodies, as well as of their respective spouses, parents or children.

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.

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