Unlike some other EU countries that impose a broad wealth tax, Portugal takes a more targeted approach. This means that instead of taxing overall net worth, it levies the Adicional ao Imposto Municipal sobre Imóveis (AIMI), which applies specifically to higher-value properties. Introduced in 2017, AIMI is essentially a real estate tax based on the value or properties you own. In this article, we’ll look at how AIMI works and what it means for property ownership for Americans living in Portugal.
What is AIMI?
AIMI is a tax on properties in Portugal, applied to both individuals and businesses that own real estate. It is calculated based on the taxable value of properties, including residential and commercial assets. Property owners must pay a percentage of the assessed value of all of their properties, including, for Portuguese tax residents, properties owned in other countries.
If you’re not a tax resident in Portugal on the other hand, you only pay AIMI on real estate you own in the country.
Besides revenue generation, AIMI also aims to discourage speculative property investments. By taxing high-value real estate, it discourages keeping properties vacant or underutilized, promoting a more dynamic and accessible housing market. This approach helps balance property ownership and contributes to long-term development across Portugal.
How is AIMI applied?
AIMI applies to all property owners in Portugal whose owne real estate with a total combined value exceeding €600,000. Individuals face a rising tax rate based on the total taxable value of their properties, including their primary residences as well as vacation homes and any commercial property they own:
- 0.7% on properties valued between €600,000 and €1 million
- 1% on properties valued between €1 million and €2 million
- 1.5% on properties exceeding €2 million
Companies are subject to a flat 0.4% tax on real estate holdings, except for properties used for commercial, industrial, or service-related activities, which are exempt. However, commercial entities often have fewer exemptions than individuals. Entities based in tax havens are taxed at a much higher 7.5% rate.
AIMI vs. standard property tax (IMI)
In Portugal, property owners should distinguish between AIMI and the standard municipal property tax, IMI (Imposto Municipal sobre Imóveis). IMI is based on factors like a property’s location, size, and condition, serving as a primary source of local government funding for public services and infrastructure.
AIMI, on the other hand, functions as an additional levy on higher-value properties, calculating tax based on the total taxable value, including both the building and the land it sits on. This broader assessment reflects Portugal’s evolving approach to property taxation, ensuring that the full value of real estate holdings is taken into account.
AIMI exemptions
AIMI provides tax relief to certain property owners who meet specific criteria. Primary residences are exempt if their assessed value falls below a set threshold, ensuring homeowners are not unfairly taxed on their main residence.
Married couples and civil partners can combine their allowances, increasing their exemption to €1.2 million before AIMI applies.
Exemptions also apply to some industrial, commercial, and agricultural properties, recognizing their role in economic growth and to encourage business development and sustainability.
In some cases, legal entities that own real estate for non-commercial purposes, such as charitable organizations or cultural preservation entities, may be eligible for exemptions. Furthermore, properties under development or renovation can benefit from reductions in the AIMI tax.
These exemptions have strict eligibility requirements set by tax authorities. Property owners should review the conditions carefully to ensure compliance and benefit from the available relief.
When AIMI is paid?
AIMI must be settled in June of each year, with the payment due in one installment by September, according to the Portuguese tax authorities.
Calculating AIMI
To determine your AIMI liability, follow these steps:
- Determine the property’s tax value
This is the value assigned by the tax authorities (Valor Patrimonial Tributário – VPT), which is used to calculate both IMI and AIMI.
- Calculate the total taxable asset value
Sum the VPT of al properties you own, excluding properties exempt from AIMI (e.g., certain commercial or industrial properties).
- Apply the tax rate based on property value
The tax rate is based on the taxable value of the property, following a progressive scale for individuals and a flat rate for companies.
Final thoughts
Understanding AIMI is important for all expats owning or thinking about purchasing property in Portugal. It may influence your decision-making and financial planning strategy. By knowing how it works, whom it affects, and what exemptions are available, property owners can plan ahead better.
If you have any questions about financial planning as an American living in the EU, get in touch.
This article is for informational purposes only; it is not intended to offer advice or guidance on legal, tax, or investment matters. Such advice can be given only with full understanding of a person’s specific situation.
