Budget allows to charge more IMI for construction land

An amendment to the Municipal Property Tax Code (IMI) is coming to bring into law an internal procedure of the Tax Authority (AT) which, according to the courts, was not correctly interpreted by AT but increased the tax value of the building land.

When assessing the tax value (VPT) in 2021, the building land is always calculated using the location coefficient and the allocation for the valuation of the approved buildings that will be built in the future. In short, this is the result of a proposal to amend the State Budget (OE) for 2021, which has long adhered to the internal financial procedure, but which was considered wrong in court. The point is that the application of these new coefficients in favour of AT drastically reduces the final value of the building land and as such, the IMI to be paid by the owners.

The proposed amendment to the OE was presented by the ruling party PS and was adopted with the positive votes of the PCP (Portuguese Communist Party) and the Liberal Initiative, against the votes of the PSD and the CDS-PP and abstentions of the other parties. In its explanatory memorandum, the Socialist Party justifies the amendment as implementing a method for determining the VPT of building land in order to avoid litigation with taxpayers and reduce the tax losses of local authorities.

In practice, in its interpretation of the law, AT applied the two coefficients which integrate the VPT calculation formula: the location or position and the affect formula. The first coefficient relates to the location of the property and takes into account the services available in the area, the communication routes and the market value of the surrounding buildings; the second coefficient relates to the use of the buildings being constructed (residential, commercial, industrial). Thus, on the building plot, the land is valued, but also the building to be constructed on it, a percentage of which is attributed to the VPT of the plot.

According to the consolidated Supreme Court (STA) jurisprudence, AT accepted this in July of this year and gave the services indications to recreate the formula for the valuation of the building land.

This amendment, which will enter into force in 2021, now aims to use legislative means to achieve something that the State has lost by judicial means. This is because, contrary to what the STA case law said, the calculation coefficients doubled to the detriment of the taxpayer. This new table aims to amend the text so that AT can again calculate the VPT of the land, as it did before the judicial decisions in favour of the municipalities. In the meantime, experts admit that there will be a wave of urgent requests for reassessment in order to still use the tax procedure in force and in force after the STA decision. This is because the decisive point is the date of registration of the notification, which means that the interpretation of the law will apply to the current date and not to the new date, which will not come into force until 1 January.

Source: jornal de negócios

Source: business newspaper