Property owners know the Municipal Property Tax (IMI) must be paid annually. The payment schedule started in May 2024 and can be extended until November if the tax exceeds 500 euros. If you still have questions about this annual tax, we recommend reading this article to understand the purpose of the IMI payment.

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Are you familiar with the Municipal Property Tax, often referred to as IMI? If you're unsure about what it's for, how to pay it, or the best time to do so, you might have a few questions. This article will address all these points and more.

What is IMI?

The Municipal Property Tax (IMI) was established in Portugal in 2003 and has since undergone various changes. The revenue generated from this tax, paid by property owners, goes to the local councils, making it one of their primary sources of income.

The Government is responsible for setting the minimum and maximum ranges for the tax. Local councils, in turn, have the freedom to set the rate within these limits. In 2023, the minimum rate for urban properties was set at 0.3%, while the maximum rate was established at 0.45%, which can reach 0.5% in exceptional cases (applied to councils participating in local economic support or municipal adjustment programmes). For rural properties, the rate is fixed at 0.8% across all municipalities. Each local council must publish the rate applied to the Taxable Asset Value by 31 December each year; otherwise, the minimum rate will be automatically applied.

To check the rates applied in each municipality, visit the Portal das Finanças, specifying the year and the property's location (district). In the IMI section, you'll find details on the deductions available for households. The Family IMI, introduced in 2016, was created to help ease the financial burden on families with dependents.

Deductions vary based on the number of children, as follows:

• Families with one child receive a fixed deduction of €30.
• Families with two children receive a fixed deduction of €70.
• Families with three or more children are entitled to a fixed deduction of €140.

To qualify for these deductions, families must meet the following conditions:

• Own a property used as their main and permanent residence, which must be registered as the fiscal address of the owner or household with the Tax and Customs Authority (AT).
• The children in the household must be under 25 years old and have no income.
• The property must be used as the primary and permanent residence.

When should I pay the IMI?

In May, taxpayers make their first or only IMI payment. The previous month, they received a notification by registered post with the necessary bank details for payment.

The deadlines for paying the Municipal Property Tax (IMI) vary depending on the amount. In summary, the payment can be made in one, two, or three instalments, depending on the value:

• If the amount is less than €100, the taxpayer must pay the full amount in May.
• For amounts between €100 and €500, the payment can be split into two instalments, due in May and November.
• When the amount exceeds €500, the payment can be divided into three instalments, due in May, August, and November.

It is important to note that payments must be made by the last day of each mentioned month.

Property owners with a Taxable Asset Value (VPT) over €600,000 are subject to an additional tax, the Additional Municipal Property Tax (AIMI). This relatively recent tax applies to urban properties and land for construction and must be paid in a single instalment. The collection takes place in September, from the beginning to the end of the month.

How is the IMI calculated?

Calculating the Municipal Property Tax (IMI) is fairly simple. You just need to know the property's Taxable Asset Value (VPT) and the rate set by the local council. To find the VPT, visit the Tax Authority’s website. Once you have these details, multiply the rate by the VPT to work out the amount you owe.

How Does IMI Exemption or Reduction Work?

Reducing IMI

To reduce your IMI, you need to request a new property valuation, which could lead to either a decrease or increase in the amount you owe, depending on various factors. After this review by the Tax Authority, you can check if you are paying more IMI than necessary. If you think this might be the case, you can use the Tax Authority's website to estimate the Taxable Asset Value (VPT) and see if it's worth requesting a revaluation of your IMI.

Only request a revaluation if you are certain that you are overpaying. If the revaluation results in a higher value, your IMI will increase. Some online calculators can help you decide whether to ask for a new valuation from the Tax Authority.

Once you have confirmed that you might save on IMI, you should request a new valuation by 31 December each year to ensure the change takes effect the following year. You can make this request online or at a Tax Authority office.

IMI Exemption

There are two ways to obtain an exemption from the Municipal Property Tax (IMI). The first is a temporary exemption, lasting up to 3 years, applicable when the Taxable Asset Value (VPT) does not exceed €125,000 and the household income is below €153,500. The second is a permanent exemption designed for low-income families with an annual income of less than €15,295. To qualify for this lifetime exemption, the property's VPT must be €66,500 or below. If the criteria are met, the Tax Authority will automatically grant the exemption each year.

Updates on Temporary IMI Exemption

Twenty of Portugal's 308 municipalities have decided to extend the temporary IMI exemption from three to five years for first-time homebuyers or those who have carried out property renovations. This measure was adopted by only 6.5% of municipalities in the first year of the benefit.

This support aims to help offset the impact of rising mortgage interest rates. The family's gross annual income must be under €153,000, the property must be used as a primary and permanent residence, and its VPT must not exceed €125,000, to qualify for the exemption. These general conditions are the same as those for the three-year IMI exemption.

To receive an additional two years of exemption, the property must have been acquired between 2020 and 2022. So, if the initial three-year exemption ends in 2022, you can add an extra two years without paying the tax, provided the municipality has approved the extension. The same applies to properties bought in 2021 and 2022.

In the Algarve region, only four municipalities have adopted this benefit:

• Portimão
• Silves
• Lagoa
• Castro Marim

What is the IMI rate applied in each municipality of the Western Algarve?

• Aljezur – Aljezur has the minimum IMI rate of 0.3%.

• Vila do Bispo – The minimum IMI rate of 0.3% will be applied.

• Lagos – Lagos also applies the minimum IMI rate of 0.3%. Check out this 4-bedroom house near Porto Mós Beach in Lagos.

• Portimão – The IMI rate in Portimão is 0.39%. We have this riverside apartment for sale in Portimão.

• Monchique – This municipality has a minimum IMI rate of 0.3%. Explore the properties in our portfolio in the Monchique Mountains.

• Lagoa – The IMI rate here is 0.36%. Arrange a viewing of this 3-bedroom villa with a pool in Carvoeiro.

• Silves – This city has a minimum IMI rate of 0.3%. Discover a charming house for sale in Silves.

Some Algarve municipalities have introduced measures to encourage current and prospective homeowners to reside in the region. The towns of the Western Algarve are a great example, offering benefits to property owners.