The Portuguese Tax and Customs Authority (AT) clarified a query raised by taxpayers who purchased land to build their first home. Published on Tuesday on the Finance Portal, the AT specified that buying an “urban property type land for construction” is not eligible for the “IMT-Young” tax benefit.
This applies even if there is ongoing residential construction on the land, explained the tax authority, through information provided by its tax management services.
The IMT exemption, known as IMT-Young, is available to young individuals who purchase their first permanent residential property before they turn 35. This benefit applies if the property costs up to 324,058 euros, offering a complete exemption with a 0% tax rate. For properties priced above this amount but not exceeding 648,022 euros, a 0% rate applies up to 324,058 euros, with an 8% rate on the excess. The exemption does not apply to properties over 648,022 euros.
In the case of the taxpayers who inquired with the tax administration, the AT determined that because the owners purchased land intended for construction, this transaction does not meet “the cumulative requirements for the exemption grant.”
The AT stated that the first purchase must be an “urban building or an autonomous unit of an urban building intended exclusively for primary permanent residence.” In this instance, the purchase was land.
In response to these taxpayers, the AT emphasized that they “did not acquire an urban building or [an] autonomous unit of an urban building intended exclusively for their primary permanent residence,” but rather “an urban property type land for construction.”
The AT noted that the IMT rate applicable to land is 6.5%, a rate distinct from the table for residential buildings, as defined in the tax code.
According to the AT, the fact that construction on the land had begun “at the time of the deed” does not entitle a taxpayer to the exemption, since the code prescribes the applicable rate for land purchases, rendering the construction start “irrelevant.”
In previous guidance issued in September, the AT clarified the implications for the tax incentive when young individuals purchase their first home and subsequently decide to sell it.
The AT indicated that such individuals would not be required to return the IMT-Young benefit to the State. The clarification stated that selling the property gives “a different purpose” to the residence, which “in itself” is “enough to terminate the benefit” if the sale occurs within six years of the acquisition date. However, the IMT Code provides for several “exceptions,” with “sale” being “the first” of these conditions.
