The Municipal Tax on Real Estate Transfer (IMT) Code has long included an IMT exemption for the purchase of real estate for the purpose of resale[1]: essentially, no IMT shall be levied if, in the purchase deed of the property, the purchaser expressly states that such purchase is made with the intent of reselling the same property.
Naturally, for this exemption to be fully applicable, a number of criteria must be met, such as the purchaser being registered with the Tax Authority as a real estate purchaser for the purpose of resale (either if the purchaser is a company or an individual). Until the past year, and notwithstanding this registration, the exemption may not be granted in advance, and the purchaser may still be subject to IMT, the levied amount being reimbursed afterwards – only in cases where the purchaser has carried out such activity on a regular basis for the last two years, will he be granted the exemption in advance. Also, if the property is resold within three years counting from the first purchase, even though the second purchaser pays the corresponding amount of the levied IMT, such amount may be returned upon request.
However, Law no. 24-D/2022, of 30 December, which approved the 2023 State Budget, brought about a slight alteration to this regime (specifically to paragraph 3 of Article 7 of the IMT Code), which may entail an increased difficulty for companies or individuals who are in the business of purchase and resale of real estate in accessing this exemption. According to this Law, for a company or individual to be deemed to carry out the activity of purchase and resale of real estate on a regular basis (therefore being able to access to the IMT exemption immediately and in advance) it must now have carried out such activity for the preceding two years, as opposed to one year.
Also, this Law imposes another change in the wording of the same paragraph: it states that, in order to benefit from the exemption in advance, in each of the last two years, the purchaser must have resold properties – in the previous wording, paragraph 3 stated that the purchaser could access the exemption in advance if, in the last year, he had acquired real estate properties with intent to resell. The new Law resorts to different criteria – what previously was a requirement to having acquired property (for resale) in the past year, is now a requirement to having effectively resold real estate in each of the two preceding years.
These seem to be only two slight changes to applicable regime, but which may affect players operating in the real estate sector. Even though the change in the regime may be perceived as a single, isolated modification of the applicable rules, to my mind, and considering the very statements of some of the political actors which supported and approved this initiative, an ultimate purpose seems to underlie this legislative intervention: to tighten the rules of the exemptions to be granted to the real estate business operators, somewhat hindering the access of these operators to tax benefits, in times of heavy real estate speculation and rocketing housing costs.
José Miguel Saraiva
January 2023
[1] Article 7 of the IMT Code