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Parliament approves tax exemption for first-time buyers

On Wednesday, the Parliament approved the government's bill to exempt young people under the age of 35 from Municipal Property Transfer Tax (IMT) and Stamp Duty when buying their first home.

In addition to the PSD and CDS-PP, the Chega, Liberal Initiative and PAN voted in favour of the proposal. PS and Bloco de Esquerda abstained. PCP and Livre voted against.

The Government's proposal for legislative authorisation had been discussed in plenary on Tuesday, where Chega had already admitted that he would support the proposal put forward by the Executive led by Luís Montenegro, even though he considered that "the ceilings are clearly insufficient". The measure generated criticism, with the left arguing that it "benefits those who don't need it" and the right criticising the age limits.

The measure provides for an exemption from IMT on house purchases up to around 316,772 euros, the equivalent of the fourth tax bracket. Houses between this value and 633,000 euros (the lower limit of the 6th bracket) will continue to be exempt, but only on the first 316,772 euros, with an 8% tax on the other portion

In Tuesday's debate, the Minister for Youth and Modernisation, Margarida Balseiro Lopes, said that the difficulty young people have in buying a house "is a trigger" for them to leave the country, stressing the need to stop this "haemorrhage".

Margarida Balseiro Lopes recalled that this type of exemption already exists in different municipalities of various political colours, which proves "that this measure doesn't have a party label".

Property taxes in Portugal

On buying a property in Portugal, you are charged a transfer tax Imposto Municipal sobre Transmissôes Onerosas de Imóveis (IMT). The rates vary depending on whether it is a main home or not, but in both cases, the progressive rates range up to 8%. 

A stamp duty (Imposto de Selo) of 0.8% is also applied.

VAT is charged at 23% (on the mainland) if the property is not purchased from an individual.

You are then subject to the Portuguese equivalent of UK council tax – Imposto Municipal sobre Imóveis (IMI) – of between 0.3% to 0.8% annually depending on the type, location and age of the property (7.5% where ownership is deemed to be based in a ‘tax haven’ jurisdiction).

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