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IMI Exemptions: the most recent changes, their motives and controversy

The Portuguese Property Tax (Imposto Municipal sobre Imóveis, IMI) is a direct tax on the value of urban and rural properties, paid by the holder of their right, but there are some reductions and exemptions. Regardless of all arguments, fiscal benefits are synonymous with less tax revenue, and therefore they should have a welfare-generating purpose to compensate the lack of government expenditure or of a public good.

In the past few months, there have been some changes to the Property Tax Law, connected with the 2016 State Budget, all of which come into effect through a Decree-Law from August 2016. For example, there will be an exemption of this Municipal Tax for families with gross income up to 11570€ per year, the effect of the number of children on a family’s IMI contribution has changed, and the maximum rate went from 0,5% to 0,45% of the estate’s valuation.[1] Most recently, an increase in the weight of the “relative location and operationality” coefficient is to change the value of some properties, and consequently, the taxes to be paid for them.[2]

Fiscal benefits include tax reductions and exemptions, and they have always been a part of the IMI Law, such as those for rural property corresponding to areas covered by forest intervention zones, for companies that realize relevant investments, and even urban properties considered as a permanent place of residence.[3]

In Portugal, the Law of Religious Freedom states that religious collective persons are exempt from any tax or contribution on places exclusively for religious activities, teaching of religion and estate being used by Particular Institutions of Social Solidarity (IPSS)[4]. Particularly, the Catholic Church has an agreement from 2005 with the Portuguese State about Tax Exemptions (called the Concordata), including the difference between IMI exemption for religious and social benefit properties, but not properties used for profit of the Church.[5]

This year, however, parishes have begun receiving warnings from the Tax Authority to pay this tax on certain properties, which has caused a public opinion stir. On one hand, the reaction of the cardinal patriarch of Lisbon, was that he only “expected the agreements and the Law to be upheld, rejecting any further privilege”[6], days after the Ministry of Finance had declared that neither the law of religious freedom, the Concordata, or any of the other documents that regulate this tax had been subject to changes.[7]

The consequences of a change in tax exemptions to a considerable amount of properties are still a matter to be studied, considering that this tax is complex in itself and small changes can have a big impact. Besides, the toll of this burden on institutions for Social Solidarity would also need to be considered and researched. Still, this case appears to have been a misunderstanding, as there is no legal proof of changes in these exemptions, yet. In the Bible, it is mentioned often that the worst job to have is tax collector, and in Portugal it seems that way once again, no matter how tax policy is designed.


Ana Paisana Belo










Author: studentnovasbe

Master student in Nova Sbe

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