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Newsletter | Articles PORTUGUESE PROPERTY TAX CHANGES SISA tax will be replaced by a new tax called Imposto Municipal sobre Transmissões - IMT which will have lower rates than the current tax. Thus, the maximum rate will be 6%, instead of 10% as before, and the exemption limit has been increased. Purchase of agricultural land will have a rate of 5% instead of 8%, and purchase of shops and plots of land for construction will be subject to a rate of 6.5% instead of 10%. Also, instead of the tax being calculated on the declared price of the property, hitherto it will be calculated on the market value of the property. For that, the Finance Department is re-evaluating all the existing properties and new property will be evaluated taking under account several aspects, like location, size and construction costs. However, if a property is to be purchased by a company based in one of the black-listed territories stated in Law nº 1272/2001 the rate of SISA will be 15%. Because of pressure from builders and local councils, which feared a freeze in sale of properties until the new law has been in effect, new SISA rates have been introduced according to what is stated above. Contribução Autárquica will also be replaced by a new tax called Imposto Municipal sobre Imóveis - IMI, which is expected to be higher. As referred above, there will be an evaluation of all properties and the new tax will take under consideration this evaluation. At the moment, properties have a rateable value witch is quite lower than the market value. There is no mention of any changes in the rate of 2% charged to property held by offshore companies, and it should be expected that these properties will be subject to a higher rate under the new law, as they are now. There is also no mention of changing the special charge of 1/15 of the rateable value, so it would seem that this charge to be kept. Gift and Inheritance tax will disappear, at least when property is given away to direct family members, but gifts of property to third parties will be subject to tax at a flat rate of 10%. A big question mark lies over the full implementation of the new laws however. The Government says that the re-evaluation of all the existing properties should take about 10 years. In practice it is likely that the tax that replaces SISA will be lower as long as a property is purchased by individuals of by companies which are not included in the black list, but the annual tax will be higher. More information from Paulo Réfega at ILS Lisbon on +351 21 3300457 (paulo.refega@ils-world.com).