Portuguese Tax Authority Mandates IMT Payment for Subdivided Resale Properties
The Portuguese Tax and Customs Authority (AT) has issued a binding ruling that significantly impacts real estate developers, stating that the division of a property acquired for resale into multiple units under a horizontal property regime will nullify the initial exemption from the Municipal Property Transfer Tax (IMT). This decision requires the developer to pay the full tax amount, plus interest, if the subdivision leads to an increase in the property's taxable value. The AT's position is grounded in the legal framework established by the 2023 "Mais Habitação" (More Housing) package, which aimed to address housing market challenges. The authority considers the act of subdividing a property a deviation from the originally stated purpose of a straightforward resale, thereby triggering the tax liability that was previously deferred. This interpretation is expected to have considerable financial implications for developers who specialize in acquiring older buildings to refurbish and sell as separate apartments, a common practice in cities like Lisbon and Porto.
According to the report from Jornal de Negócios, the core of the issue lies in the change of the property's fiscal status. When a developer acquires a property for resale, they are granted a temporary IMT exemption. However, by creating a horizontal property regime, they are fundamentally altering the asset, often increasing its collective market value. The AT now formally considers this a trigger for the tax to become due. Tax professionals have noted that this will force a recalculation of project viability for many ongoing and future developments. "The financial model for many urban rehabilitation projects relied on that initial IMT exemption. Now, developers must either absorb this cost or pass it on to the final buyer, potentially affecting property prices," commented a fiscal consultant interviewed by the newspaper. The measure is seen as an attempt by the state to ensure that tax benefits are correctly applied and to capture revenue from the value generated by property development.
This fiscal clarification arrives as the country grapples with housing pressures from another angle. A separate report highlighted by Público reveals that court-ordered evictions have risen by 14% in the first five months of the year compared to the same period in 2024. A total of 659 repossession orders were issued, signaling growing difficulties for tenants. Tenant associations have voiced alarm, stating the official statistics likely underrepresent the true scale of displacement, as a significant portion of the rental market operates informally without registered contracts. These groups describe a crisis of a "very frightening dimension," pointing to a disconnect between rising rents and stagnant wages. The increase in evictions underscores the social challenges that the "Mais Habitação" program and other government initiatives are intended to mitigate, though their effects are still unfolding. The convergence of stricter tax rules for developers and rising housing insecurity for tenants illustrates the complex and often conflicting dynamics currently shaping the Portuguese real estate landscape.
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