In a challenging context for the rehabilitation of buildings in our cities, the revitalization of residential centers has become essential for public policies. In this scenario, the tax regime plays a decisive role.

The Tax Benefits Statute (EBF), aware of the importance of urban requalification, establishes a comprehensive set of benefits to encourage the acquisition of properties for rehabilitation, promoting the improvement of their state of conservation and contributing to the sustainable development of urban areas.

Property Taxes

Within the scope of the tax regime applicable to urban rehabilitation, the first benefits appear at the level of property taxes. Properties over 30 years old or located in Urban Regeneration Areas (ARU) may access relevant tax advantages.

Let us consider an old building in a historic area that, after rehabilitation works carried out in accordance with the Legal Regime of Urban Rehabilitation, improves by two levels in its state of conservation. This building, now with a minimum state of conservation rating of Good (Level 4), may benefit from several tax exemptions, including:

• IMT Exemption: When acquired for rehabilitation, provided that works start within a maximum period of three years after acquisition.
• IMT Exemption on Subsequent Transfer: On the first transfer after intervention, the exemption applies if the property is used for permanent residential rental or, if located in an urban rehabilitation area, as permanent own residence.
• IMI Exemption: Granted for three years from the completion of the works, renewable for a further five years if the property is used for permanent residential rental or permanent own residence.
• 50% Reduction in Evaluation Fees: Related to the evaluation of the state of conservation of the property carried out after rehabilitation.

These benefits, however, are not automatic. The request for recognition of the rehabilitation intervention must be duly submitted, otherwise the right to them will be lost. It should be noted that the IMT and IMI exemptions do not interfere with the normal assessment and collection of these taxes, with the tax authorities being responsible for cancellation and refund after notification of recognition.

Reduced VAT Rate

Urban rehabilitation works carried out on properties or public spaces located in urban rehabilitation areas, for which an urban rehabilitation operation has been previously approved, benefit from the reduced VAT rate of 6%, as well as those integrated into redevelopment and rehabilitation operations of recognized national public interest. The same reduced rate also applies to works contracted directly for the National Building Rehabilitation Fund, as well as those carried out under special financial or tax support schemes for rehabilitation.

Deductible Expenses

For IRS purposes, 30% of the costs incurred by the owner in relation to the renovation of properties, both those located in urban renewal areas and those leased under the New Urban Lease Regime (NRAU), are tax deductible up to a limit of €500.

This diverse set of tax benefits serves as a catalyst for urban transformation, encouraging property rehabilitation and promoting the sustainable development of urban areas. However, the application of these tax benefits is far from straightforward. The lack of specialized support often leads to the loss of incentives due to mere formalities. Specialized guidance is therefore essential to ensure that the benefits are correctly applied and maximized, avoiding tax contingencies that could compromise the success of the investment.