Large companies can avoid the new council tax

  • ECO News
  • 7 November 2016

Economic groups can evade the new council tax. It all depends on how they organize it.

Large companies can avoid the new council tax, depending on how they organize their patrimony. When economic groups choose to combine their patrimony in a real estate company that, in turn, charges rents to the rest of the group, the tax can be nullified or very attenuated.

The Portuguese newspaper Jornal de Negócios explains this happens because the 2017 State Budget Draft has another provision that allows firms with rented immovables to take the additional value of the Municipal Property Tax (IMI – Imposto Municipal sobre Imóveis) from excisable rents. Although if this path is chosen, the overall amount of the IRC (Company Tax) cannot be lower than 10%. This method of selling and renting is common within the distribution industry and among firms financially large, the newspaper adds.

Yet, there are other possible scenarios depending on the way companies organize their patrimony. Those who have low valued real estate can benefit from having dispersed properties for their many firms, since they benefit from a 600 thousand euros basis exemption. But those who fall into this category and have chosen the special rules of taxation for groups only benefit from the 600 thousand euros once.

There is also the situation of parking immovables of real estate funds. Since they are not legal entities, the 600 thousand euros taxable patrimonial value exemption is not applicable. Therefore, every time a fund is managing a building or a set of buildings that surpass that limit, they must pay the additional IMI on its total.