Categories: Taxation

Real estate investment: AIMI

There's one sure-fire way to identify the most attractive real estate markets for investment &colon; watch out for new taxes&period; Indeed&comma; a tax policy designed to bolster government coffers usually goes hand in hand with an influx of real estate investors into a country or region&comma; a gamble taken by governments that can be risky, as in the case of François Hollande's failed tax plan in 2012&comma; but that can also be welcomed if it proves moderate&period; This is the case of the AIMI that is due to come into force in Portugal&period;&NewLine;<h5 class="p1">What is AIMI&colon; </h5>&NewLine;Focused on the adoption of a new property tax in 2017 to boost the country&comma; revenues, the strategy of Portugal&comma; s new Prime Minister, Antonio Costa&comma; s&rsquo&semi;aligns with the&rsquo&semi;positive impact of foreign investment on the country&comma; particularly on Lisbon&period; M&period; Costa seems willing to encourage this trend&comma; rather than undermine it&period;&NewLine;The "Adicional ao IMI"&comma; also known as AIMI&comma; is a "surtax" on the&rsquo&semi;annual real estate tax&period; At first glance&comma; such a measure could be similar to the drastic measure initiated by M&period; Hollande in 2012 &lpar;75&percnt; tax on high incomes&comma; of over one million euros&rpar;&period; However&comma; even if the undisguised aim is to tax wealthy investors attracted by a booming real estate market and competitive prices&comma; the&rsquo&semi;tax turns out to be moderate and only brings Portugal more into line with the real estate taxation of&rsquo&semi;other European countries&period;&NewLine;S&rsquo&semi;it is approved&comma; the&rsquo&semi;AIMI tax will be applied at a rate of 0&comma;3 &percnt; of the cadastral value of&rsquo&semi;a property &lpar;on average 30 to 40&percnt; less expensive than the market value&rpar;&period; This rate of 0&comma;3 &percnt; will only apply to properties worth more than €600,000&period; For married couples or those living together&comma; the limit is twice as high&colon; the tax will only be applied to properties worth more than&rsquo&semi;1&comma;2 million euros&period;&NewLine;<h5 class="p1">A measured approach to taxation</h5>&NewLine;The new AIMI tax abolishes the 0&period;8 &percnt; stamp duty on acquisition introduced two years ago for&rsquo&semi;residential properties with a tax value in excess of 1 million euros&period; The 0&comma;3 &percnt; rate of the AIMI&comma; significantly lower than stamp duty&comma; reduces the&rsquo&semi;tax investors have to pay at the time of&rsquo&semi;purchase&period;&NewLine;This measure underscores M&period; Costa's long-term vision of creating an environment conducive to recurring revenues, as opposed to an up-front tax bludgeoning that might scare off investors and locals&period;&NewLine;<h5 class="p1">Simulation of &&num;8211&semi; AIMI tax on a T5 apartment at Santos Design &colon;</h5>&NewLine;This tax applies only to the cadastral value of the property&comma; between 30 and 40&percnt; less expensive than the purchase value of the property&period; An apartment of this property&comma; type T5&comma; has a value of 1&period;825 million euros &semi; it would be taxed on the basis of its cadastral value &colon; approximately 1,186,250 euros&period;&NewLine;To this cadastral value must be added&comma; for a single person&comma; the elimination of the 600,000 euro tax allowance&semi; the AIMI tax therefore applies to a total amount of 586,250 euros&period; the purchaser of a T5 at Santos Design would then have to pay 1,759 per year in AIMI tax&period;&NewLine;The tax allowance for a couple is 1,200,000 euros&comma; a couple investing in a Santos Design T5 would be exempt from the AIMI tax&period;&NewLine;It should be noted that the stamp duty on this property, abolished by the introduction of the AIMI, would have amounted to 14,600 euros&period; the AIMI tax therefore promises to be more advantageous for investments in prestige properties&period;&NewLine;<h5 class="p1">Lisbon&comma; a city popular with all types of investors</h5>&NewLine;This measured approach seems welcome at a time when Lisbon is the target of buyers from all over the world&comma; investors attracted by the city&surging tourist activity and the boom in the technology sector&period; Investors from the other side of the world&lpar;Brazil&comma; South Africa or China&rpar; are also lured by the Golden Visas program enabling&rsquo&semi;the acquisition of European citizenship&period;&NewLine;Retirees and second-home buyers, meanwhile, are attracted by the country's Non-Habitual Tax Resident &lpar;NHR&rpar; program, offering exemption on pensions and income from&rsquo&semi;activities carried out abroad&period;&NewLine;In addition to private buyers&comma; public investment is also helping to boost Lisbon's development&period; In November 2016&comma; Lisbon became the first city in Europe to benefit from the Juncker Plan&comma; an investment scheme launched by the&rsquo&semi;investment plan launched by the European Union&period; As part of this program&comma; the Portuguese capital will receive a loan of 250 million&semi;euros over the coming years to modernize its infrastructure and&rsquo&semi;improve its quality of life&period;&NewLine;So it's a safe bet that Lisbon won't stop attracting new investors any time soon&comma; especially as the city has plenty to offer&period; Some districts offer a very pleasant living environment and prospects of annual returns of 5 to 6&percnt;&comma; such as Mouraria&period;&NewLine;

Next wealthy taxpayers continue to move abroad".

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