Based on the proposal of State Budget for 2017 one of the relevant matters, at least for the companies and persons with real estate investments in Portugal, is the creation of an additional tax on top of the existing Real Estate Ownership Tax (IMI).

The proposal of State Budget for 2017 includes the following:

• Taxation at a fixed rate of 0.3% on the sum of Tax Registration Value (TRV) of all the urban property owned and located in Portugal, with the exception of real estate for industrial purpose or licensed for tourism;

• Applicable to the sum of all TRV of the real estate held by the same owner (individual or legal entity) exceeding € 600,000, excluding from the taxable amount the TRV of real estate to which had an IMI exemption during the previous year;

• This deduction of € 600.000 is not applicable for example in case of:

1.Companies whose properties not related to its activity (commercial, industrial or agricultural) represent more than 50% of the value of its total assets;
2.Companies whose activity is buying and selling of real estate;
3.Entities with tax debts to the Portuguese Tax Authorities or to the Social Security;
4.Entities located in jurisdictions with more favourable tax regimes (as defined by Portuguese law).

Even though the draft of the State Budget for 2017 has been approved in its generality, it is publicly known that in the following phase some changes have been proposed to the respective wording, from which can be highlighted:

• Increase of the fixed rate of 0.3% to 0.7% applicable to the sum of TRV between € 600,000 and € 1,000,000 and to 1% on the exceeding amount;

• Further to the real estate with industrial and tourism purpose, a tax exemption further includes all properties with commercial, industrial and services purposes.

Once the final State Budget for 2017 is published in the Official Gazette, it will be possible to confirm which changes have in fact been introduced to the wording of the Law.