Portugal’s Tax Authority has issued demands relating to nearly 40,000 properties whose 132,000 owners until now have been exempt from paying IMI due to a loophole.
The Tax Authority recently publicised the embarrassing loophole where automatic exemption from paying property tax (IMI) was given to property owners whose house has a valor patrimonial tax value of under €65,500 and who did not submit a tax return in Portugal, yet had registered their property as their main residence.
The Tax Authority’s system saw income as 'zero' and therefore did not issue a demand for payment.
These "situations of undue automatic exemption" for IMI has been changed for an initial 39,599 properties covering 132,433 taxpayers, said the Ministry of Finance today.
The loophole was there for non-resident taxpayers or those simply that declared no income in Portugal. The government now is after an estimated €57 million in IMI from those that have been ‘improperly exempted.’
The exemption is for those who have property for "permanent residence" with a tax value of under €66,500 and with annual income below €15,295 - this system will continue.
The Tax Authority said the loophole will be sorted out before the 2017 State Budget and staff will start to work on identifying those that really do qualify for exemption.
There were worries that the IMI exemption would disappear completely but this is not the current intention, in fact the Finance Ministry categorically denies this is its intent.
The problem is a recent one as prior to 2015, homeowners had to apply for exemption. In the 2015 State Budget, the government decided to make the exemption automatic without requiring an annual application and declaration.
Rates bills for 2015 are payable in 2016 and the taxman found that IMI revenue targets were woefully short.
Because of the ill-thought-out automation of the IMI collection system, exemptions were allocated to foreigners and immigrants with no income registered in Portugal but that had stated their Portuguese address was their primary residence.
