Ownership

“Full Ownership” (direito de propriedade) is the most common and the strongest form of ownership title over real estate in Portugal. The full owner of a property is entitled, within the limits of the law, to exclusive rights of use, fruition and disposal of the property, such ownership being unlimited in time (full ownership would be equivalent to a “freehold” in common law systems and to the French concept of “droit de proprieté”).

A real estate property can be held individually or by more than one person or entity (co-owners), which is less common. Co-owners jointly exercise the rights deriving from the ownership title, and they participate proportionally (by reference to their quotas in the ownership) in the benefits and encumbrances of the property.

Surface Right

“Surface Right” (direito de superfície) entitles the respective titleholders to build or maintain a construction, perpetually or temporarily, on or below a land owned by a third party. It is a right in rem (and not only a contractual arrangement) that can be transferred and may also be used as collateral.

In case the Surface Right is granted on a temporary basis, the construction built over the land shall revert to the land owner upon expiration of the Surface Right. In such case, unless otherwise agreed, the Surface Right holder is entitled to receive a compensation corresponding to the value added to the land as a result of the construction.

The parties may agree that the remuneration due for the Surface Right is payable through a single payment or through periodic payments.

Condominium

The “Condominium Regime” (propriedade horizontal) allows the segregation of buildings (or groups of buildings that are functionally interconnected) into different and independent units, resulting in a condominium structure whereby each unit can be separately owned by a different individual or entity. The Condominium Regime confers to unit owners a full ownership right over one or more units and a co-ownership right over the common areas of the building (such as the lobbies, hallways and stairs). Both rights are indivisible as they cannot be transferred separately. A Condominium is normally established by means of a notary deed and is registered with the Land Registry. A Condominium can only be set if the relevant units (frações autónomas) are independent and isolated from one another and have separate exits to a common area of the building or directly to a public road.

Co-owners bear all costs emerging from the management, maintenance and works of the common areas by means of a contribution charged and collected by the condominium, determined on a proportional basis taking into account the weight of each unit in the building (each unit has a relative value expressed by a percentage or per mileage mandatorily determined in the Condominium constitutional deed). Whenever commercial lease agreements are entered into regarding a condominium unit, condominium costs may be transferred to the tenants.

Municipal Property Tax ("IMI")

Municipal Property Tax (known in Portugal as “IMI”) is a municipal tax which focuses on the ownership of a property located in Portuguese territory. Municipal Property Tax is due by the registered owner of the property as at December 31st, according to the Property Tax Value (known in Portugal as “VPT”).

The Property Tax Value is determined according to a formula foreseen in the Municipal Property Tax Code which takes into consideration the nature and characteristics of each type of property. Municipal Property Tax is applicable according to the following tax rates:

Urban Properties: 0.3% to 0.45% (variable according to each municipality);
Rural Properties: 0.8%;
Properties owned by entities resident in blacklisted jurisdictions (as detailed on the Ministerial Order 150/2004, of February 13, as amended): 7.5%; and
Properties owned by companies that are controlled, directly or indirectly, by entities resident in blacklisted jurisdictions (as detailed on the Ministerial Order 150/2004, of February 13, as amended): 7.5%.

Additional to Municipal Property Tax (AIMI)

Pursuant to the State Budget Law for 2017, a new tax, the Additional to Municipal Property Tax (known in Portugal as “AIMI”), was enacted and is effective as from January 2017 onwards. The new tax replaces the Stamp Duty (known in Portugal as “Imposto do Selo”) previously applicable to properties with a Property Tax Value greater than € 1 Million.

Additional to Municipal Property Tax is levied only on urban properties for residential purposes and plots for construction located in Portugal. Urban properties classified for "trade, industry, or services" or as "other types of property" are excluded from Additional to Municipal Property Tax.

The taxable amount corresponds to the sum of the Property Tax Value of the urban properties and construction plots held by each taxpayer reported on January 1st of each year.

Deductions/Exemptions

In the case of individuals and undivided estates, a deduction of € 600,000 is applied to the taxable amount, prior to the application of the Additional to Municipal Property Tax;
Married taxpayers or taxpayers under a civil union (união de facto) are entitled to a deduction of € 1.2 million on the sum of the Property Tax Value of the properties owned;
The Property Tax Value of the properties that are exempt of, or not subject to, Municipal Property Tax in the previous year is excluded from the taxable amount subject to Additional Municipal Property Tax.

Applicable tax rates

For corporations, the Additional to Municipal Property Tax rate is 0.4% of the taxable amount. Properties exclusively allocated to the personal use of the corporation’s board or their spouses, descendants or ascendants, are subject to an Additional Property Tax rate of 0.7%. For taxable amounts in excess of € 1 Million, the marginal rate is 1%, and for taxable amounts in excess of € 2 Million, the marginal rate is 1.5%;
For individuals, the Additional Municipal Property Tax rate is 0.7% of the taxable amount after the abovementioned deductions (€ 600,000 or €1.2 million). For taxable amounts in excess of € 1 Million, the marginal rate is 1%, and for taxable amounts in excess of € 2 Million, the marginal rate is 1.5%;
For properties owned by entities resident in a blacklisted jurisdiction (as detailed on the Ministerial Order 150/2004, of February 13, as amended), the rate is 7.5%.

Recovery or Deductibility for Corporate Income Tax purposes

The Additional to Municipal Property Tax may be deducted in the computation of the Corporate Income Tax (known in Portugal as “IRC”). Taxpayers may elect either to deduct the Additional to Municipal Property Tax as a general deductible expenditure or as a specific deduction against the Corporate Income Tax due. In the latter case, the deduction is limited to the portion of the Corporate Income Tax directly linked with income generated from properties used for leasing or accommodation activities and insofar as such properties are subject to Additional to Municipal Property Tax.