Heads or tails: State Budget 2023 came into effect with surprises for real estate


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OE2023 came into force on January 1. Tax and legal experts analyze the strengths and weaknesses of the document.

New year, new rules in the real estate market. Last January 1st, the State Budget for 2023 (OE2023) came into force, introducing several measures and changes with direct impact on real estate. Idealista/news asked tax and legal experts to look at this document and identify some of the novelties that they consider to be a benefit or a penalty for the sector.

“We cannot say that it is a market and real estate business friendly OE2023. In a country so dependent on foreign investment in which the real estate activity has an important weight (and yes, in addition to recovering cities it also creates jobs), changes that penalize or hinder this same investment are always difficult to accept. One more turn in the sun, but one more lackluster budget”, emphasize PwC’s tax experts Diogo Gonçalves Pires and Daniela Lopes Silva. According to them, there are “few positive changes or changes that can be seen as stimulating the real estate market”.

Raquel Galinha Roque, partner at CRS Advogados, and Natacha Branquinho, associate lawyer at CRS Advogados, share the same opinion. The lawyers consider that the measures implemented “sin by limiting and in many cases preventing real estate business”, pointing out that in terms of national economic growth “there are numerous data showing that real estate is the sector that has contributed the most, whether for housing construction, rehabilitation, hotels, universities, trade, among others. “Many of the players are investors who make real estate investments in a commercial perspective and as such some of these measures will clearly discourage these investors,” they say.

In turn, the lawyer Ricardo Matos Fernandes believes that “any reduction in the transactional dynamics of the real estate market will not be due to the changes in taxation operated by the State Budget for 2023, having only impact on some operations in which the players saw their expectations of lower taxation frustrated by the use of figures and operations that the legislature wanted to avoid with the changes introduced. In the opinion of the lawyer, the “inability to anticipate by real estate operators was due to the fact that these changes were not foreseeable in 2022, as they were not part of the discussion of the initial proposal of the State Budget for 2023 nor of the approval in generality, having appeared and been approved only in speciality”.

Foto de LinkedIn Sales Solutions no Unsplash
Foto de LinkedIn Sales Solutions no Unsplash

Real Estate in the SB2023: summary of strengths and weaknesses

  • IMT

The changes introduced in terms of IMT, in the opinion of experts, are detrimental. At issue are, for example, tighter rules on the resale of property – only those who can prove that in the last two years they have resold property purchased for this purpose can benefit from IMT exemption; and the brake on technical swaps – an alternative used to pay less IMI in the exchange of property and whose change removes its fiscal interest. Both measures are seen as a penalty for the sector, and with direct impact on investment in the real estate market.

The idealist/news has prepared a detailed article about the changes in IMT that can be read here.

  • IMI

In terms of IMI, there are measures that penalize vacant buildings, such as, for example, a threefold increase in IMI rates in the case of buildings that have been vacant for more than a year or in ruins, as well as a 30% increase in the case of buildings in disrepair. “This measure may lead owners to invest in these properties or put them on the market so that they are not forced to pay more IMI,” stress CRS lawyers.

In addition, and in buildings used for local accommodation or housing located in areas of urban pressure, municipalities may now define an increase in the IMI rate of:

  • up to 100% in cases where they are used for local accommodation,
  • and up to 25% in cases where, as these properties are intended for dwelling purposes, they are not rented out for dwelling purposes or used as the taxpayer’s own permanent residence. It should be noted that this increase may be increased by 50% whenever the taxpayer is a legal person or any other tax equivalent entity.

The idealist/news has prepared a detailed article about the changes in IMI that can be read here.

  • Lease

Clélia Brás, Partner and Head of the National Real Estate Department of PRA – Raposo, Sá Miranda & Associados, highlights the “substantial and important change in what concerns leases”. According to the lawyer, the new rules “altered Article 1076 of the Civil Code, under the heading “Anticipation of Rents”, limiting the payment of anticipated rents, upon written agreement, to a period not exceeding two months, whereas previously the limitation was for a period of three months”. With the State Budget for 2023, the amounts delivered as a deposit will be limited to the amount corresponding to two months’ rent.

Foto de cottonbro studio no Pexels
Foto de cottonbro studio no Pexels

“Previously, landlords, due to the limitation of only being able to demand three months’ rent in advance, burdened tenants with very large amounts of deposit and without any relation with the rent value or with the characteristic purpose of the deposit, i.e., the guarantee of the tenant’s compliance with its obligations”, explains the legal expert. “We may thus conclude that the legislator tried, in this new wording, to make up for the impossibilities that many people may face when accessing the lease, limiting the amounts that may be requested in order to guarantee the execution of a lease agreement, as far as the tenant is concerned”.

Clélia Brás warns, however, that the measure “may have an opposite effect, namely, by discouraging landlords to place their properties in the rental market, taking into consideration the consequent rental norms that aim more and more, as I have warned, at a greater and more thorough protection of tenants to the detriment of landlords”.

  • Student housing

PwC tax experts point out as a potential positive impact on the sector the attribution of a housing subsidy/complement to displaced higher education scholarship students who have not obtained housing in a social action services residence, while property income obtained in the scope of affordable student housing programs will also be exempt from IRS and IRC.

  • PPR Reimbursements

Diogo Gonçalves Pires and Daniela Lopes Silva, from PwC, also point out the change made to Law n. Diogo Gonçalves Pires and Danela Lopes Silva also refer to the amendment made to Law no. 19/2022, of October 21, whereby it will be permitted, during the year 2023, to partially or totally refund the value of retirement savings plans (PPR), education savings plans (PPE) and retirement/education savings plans (PPR/E), “up to the monthly limit of the IAS and without penalty, when allocated to the payment of installments of credit agreements secured by mortgage on property for one’s own permanent residence, as well as installments of credit for the construction or improvement of property for one’s own permanent residence”.

  • VPT

Tiago Rosa, Associate Partner at EY, Tax Services, highlights the “non-updating of certain norms and values that potentially penalize the sector, as is the case, for example, of the non-updating of the taxable asset value (VPT) inscribed in article 46, no. 5 of the Statute of Tax Benefits (set at 125,000), which is a 2011 norm and whose updating would be timely, in order to have the proper applicability.

  • Capital Gains

In the Personal Income Tax (IRS) code, EY’s tax specialist also highlights the standardization of the taxation regime of real estate capital gains by residents and non-residents in Portugal (considering that, in the previous wording, the latter were discriminated, being subject to a special IRS rate of 28% on the total capital gain).

  • Stamp Tax

Another highlighted and potentially positive measure is the Stamp Duty exemption on the renegotiation operations of housing loans between November 1, 2022 and December 31, 2023.

  • Home loans

Potentially positive are also the reduction in withholding taxes for home loans, i.e. a discount on the IRS for families who are paying home loans, through the reduction of one withholding tax bracket; and repayment of home loans with no fees – the new law allows you to repay your home loan early at no extra cost, as often as you want, until the end of 2023.

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