Municipal Tax changes

Once again the Portuguese Ministry of Finances has taken the opportunity to attack non resident property holding companies.

The Finance Ministry made an about turn in 2007 when the penalty municipal tax rate of 5%, charged on any property held by a company located in a country or territory with a “preferential tax regime” ( so called “blacklisted” companies), was reduced to a quite reasonable 1% - calculated on the tax departments own property valuation.

In the 2011 Portuguese Budget,  that 1% tax charge has been reversed back to 5% payable in 2012 in respect of the tax year 2011. The Portuguese tax year corresponds to the calendar year.

Thus any clients who continue to hold their property in  a blacklisted company during 2011 will suffer much higher municipal taxes payable in 2012 and should seek advice on altering the regime to convert the company to an acceptable jurisdiction.