There are various government and municipal incentives in Portugal aimed at the rehabilitation of urban areas, buildings and even apartments that are either located in designated neighbourhoods or else have been built more than 30 years ago and are in need of rehabilitation work. Such rehabilitation is encouraged in Portugal by a legal framework which, among other measures, provides for the following:
This paper briefly describes these official incentives, particularly from the point of view of prospective real estate investors in Portugal. This is a description of a general nature and cannot preclude specialised technical advice in connection with specific situations.
Buildings and apartments that are eligible to benefit from the rehabilitation incentives programmes are essentially those located in neighbourhoods specifically designated by the relevant municipality or else that have been built more than 30 years ago and are in need of rehabilitation work.
Regardless of whether or not the same property use is kept, the benefits are granted on the condition that the rehabilitation work results in a property preservation condition that is at least “two levels” above that existing before the work, as certified by the local municipality before and upon the conclusion of the rehabilitation work.
In order to qualify, the rehabilitation work has to comply with the following main requirements:
Each municipality has its own rehabilitation specific programmes and special procedures, but in general it can be said that they have all enthusiastically embraced the urban renovation opportunities afforded by the national programme. The municipality of Lisbon, for example, designated almost all of the city’s neighbourhoods as urban rehabilitation areas eligible to benefit from the tax incentives.
Under a law passed in 2012, rehabilitation works benefit from a simplified and quick planning permission procedure based on a system of prior communication by the developer to a single body appointed by the municipality to oversee rehabilitation works. Under this system, the developer’s technical expert (qualified architect and/or engineer) assumes responsibility for the conformity of the planned works to existing regulations, and planning permission is automatically granted within 20 days of the communication, unless the municipality decides to oppose the plan within this time frame, which it can only do on certain specific grounds. Likewise, upon conclusion of the works, the property usability and, if applicable, its division into separately-owned apartments, will be speedily licensed by the municipality on the basis of a communication by the expert who took responsibility for the works.
Old Tenancy Rights
With a view to encourage rehabilitation works in rented properties, a law was passed in 2012 that provides for some fundamental changes to the rights of long term tenants, notably the following:
The most relevant tax incentives to property rehabilitation are shown in the following table.
* - Materials that exceed 20% of the total contract value will not benefit from the reduced VAT rate.
** - The taxpayer may choose to renounce this special rate and to include the income/gains in his/her overall taxable income.
There are several programmes aimed at financing rehabilitation works. As an example, Caixa Geral de Depósitos, a State-owned bank, offers the following.
Term – up to 15 years.
Amount – up to 90% of the value of the rehabilitation works, excluding planning costs, subject to a minimum project value of €40,000 and a minimum loan amount of €20,000.
Interest rate – either a variable rate indexed to the 6-month Euribor rate or a fixed 2, 3, 5, 10, 15, 20, 25 and 30-year rate, in either case with an added spread of at least 3.5 percentage points. This spread may be reduced for customers who subscribe to certain other products offered by the bank.